Yesterday’s news that UiPath had secured a new funding round valuing it at an extraordinary thirty-five billion dollars was just the latest sign of the robotic process automation (RPA) mania that is sweeping the tech industry.
While this investment represents the most recent — and, by far, the largest — jaw-dropping valuation, it is not the only one. The entire RPA sector is basking in the glow of investor love and adoration.
It begs the question, “Is RPA eating the world?”
With apologies to Marc Andreessen, the question he set out to answer in the aftermath of the dot com crash seems equally relevant in the context of this RPA mania: is this yet another bubble, or another “dramatic and broad technological and economic shift”?
It’s a question whose answer is critical to tech company and enterprise leaders alike as it will dictate the direction and magnitude of both their strategies and investments.
Matching Ambitions to Valuations
Regardless of which side of that question you’re presently on, the one clear thing is that the major RPA vendors have ambitions equal to those valuations.
Automation Anywhere’s official vision statement says, “We strive to liberate humans from mundane, repetitive tasks, allowing them more time to use their intellect and creativity to solve higher-order business challenges and perform knowledge work. We see a world where every employee will work side by side with Digital Workers, taking the robot out of the human, making them exponentially more productive and far more fulfilled.”
UiPath and Blue Prism — not to mention a whole host of other RPA players — all espouse similarly lofty visions.
A far cry from their roots in some screen-scraping automation, right?
These ambitions, however, put the entire RPA sector on a collision course with a whole spectrum of technology classes, including digital process automation (DPA), traditional business process management (BPM), and the also nascent and exploding low-code sector.
The predictable result is a massive amount of market confusion about where one technology ends and the next begins. And, in a classic tech industry response, a new term is bubbling up to supposedly address the confusion: hyperautomation.
Of course, the challenge is that the RPA sector now needs to live up to these mind-blowing valuations, so don’t expect the vision encroachment to end anytime soon.
But the real question is whether or not they can sufficiently distinguish themselves from the adjacent technology spaces with which they’re colliding and live up to the visions they’re peddling.
The Truth Behind the Unicorn Expectations
Amid all this frothiness, it’s essential to note that this is still a nascent market.
The broader sector that I loosely refer to as intelligent automation (which includes most of the RPA, DPA, modern BPM, and low-code sectors, plus other elements of AI-powered automation tools) is just getting started, and there’s plenty of room across the board to shake things up.
As simple proof, I estimate that the three largest RPA vendors’ current annual revenue to be just less than one billion dollars combined, with another analyst firm projecting the entire RPA market to be less than two billion dollars in 2021.
These numbers are in a global enterprise IT market of over one trillion dollars.
It is, therefore, hard not to wonder why these valuations are so high when enterprise tech companies as varied as Salesforce, Dell, Adobe, IBM, SAP, Cisco, Oracle, VMware, Workday, and ServiceNow all individually have revenue that exceeds the entire RPA market — most of them, many times over.
The reason, of course, is that investors believe or hope that these RPA vendors are on their way to joining the ranks of the tech giants.
And there is at least some foundation for this hope.
The type of automation represented by RPA (and, I’d argue, much of the broader intelligent automation space) promises huge and fast returns on investment. There is plenty of low-hanging fruit in the form of technical debt and fragile enterprise business processes from which RPA can render outsized results.
And whoever decided that they should add the term robotic to process automation should get a couple of houses in Malibu as their reward, as this stroke of brilliance has cemented RPA as a futuristic, progressive investment.
Moreover, the technology is showing that it can have a meaningful and measurable impact beyond just raw productivity gains, particularly in the form of organizational agility during this past pandemic-riddled year.
Martin Giles, editor of the CIO Network at Forbes, reported, “Dominic Cugini, divisional CIO and senior director for service digitization at Cleveland, Ohio-based KeyBank, which has over $170 billion of assets, says bots have helped it cope with huge spikes in demand for loan forbearance and mortgage refinancing triggered by the pandemic’s impact. The bank was automating two to three processes a month using bots in 2019; now it’s running at an average of 15 a month and plans to lift that number to 22 in the second quarter of the year.”
But the question remains, are these sorts of wins enough?
RPA is Only Part of the Answer
UiPath wasn’t the only one making valuation waves yesterday.
Just a few minutes after the UiPath announcement, Databricks shared its own investment news. The company reported that it had raised another cool billion, increasing its valuation to a whopping twenty-eight billion dollars.
These joint investment announcements are instructive because, together, they paint a clear and compelling picture of the future — and it’s one that both tech company and enterprise leaders should take to heart.
These two mega-investments are, in many ways, two sides of the same coin.
The future of the enterprise will come down to two essential elements: automation and data — and these two elements must be fused to create a layer of intelligence that organizations can place in the service of their customers and employees.
In UiPath’s vision, this results in what it calls the fully automated enterprise. But whatever you call it, the reality is that it’s going to require boatloads of both data and automation to pull it off.
And this leads us back to our question, is RPA eating the world?
I think the answer is a solid “sort of.” It’s definitely not a bubble insofar as it solves real problems in a very real way.
But it is also not the magic elixir that the RPA vendors might have you think.
To transform themselves for the future, enterprise leaders will need to invest in a whole bevy of automation technologies and deploy them on top of a robust and scalable data architecture. There is no one piece of technology that is going to do this for them.
Moreover, to be genuinely transformative, automation will need to extend far beyond the internally-facing business processes that are the bread-and-butter of the RPA go-to-market playbook.
So, RPA will unquestionably be part of the enterprise pathway to the future. Still, it will need to be part of a much larger and holistic approach that encompasses many types of automation and which all work in concert.
I’ll leave it to you to decide if that justifies the valuations, but one thing is for sure if you’re an enterprise leader: the only sure pathway to a bright future will be the one you build for yourself.
Originally published here.
Founder & Institute Fellow
Charles Araujo is a technology analyst and internationally recognized authority on the Digital Enterprise and Leadership in the Digital Era who advises technology companies and enterprise leaders on how to navigate the transition from the Industrial Age to the Digital Era. Having spent over thirty years in the technology industry, he has been researching Digital Transformation long before it became the uber-buzzword of today, and is now focused on helping Digital Era Leaders prepare themselves and their organizations as the macro trends of the primacy of the customer and the primacy of the algorithm collide, ushering us into what he calls The New Human Age.
Principal Analyst with Intellyx, founder of The Institute for Digital Transformation, author of three books, and most recently the co-founder (with his wife) of The MAPS Institute, he is a sought-after keynote speaker and has been quoted or published in CIO, Time, InformationWeek, CIO Insight, NetworkWorld, Computerworld, USA Today, and Forbes.