Author: AnilVijayan

Is It Open Season for RPA Acquisitions? | Blog

Robotic Process Automation (RPA) is a key component of the automation ecosystem and has been a rapidly growing software product category, making it an interesting space for potential acquisitions for a while now. While acquisitions in the RPA market have been happening over the last several years, three major RPA acquisitions have taken place in quick succession over the past few months: Microsoft’s acquisition of Softomotive in May, IBM’s acquisition of WDG Automation in July, and Hyland’s acquisition of Another Monday in August.

These acquisitions highlight a broader trend in which smaller RPA vendors are being acquired by different categories of larger technology market players:

  • Big enterprise tech product vendors like Microsoft and SAP
  • Service providers such as IBM
  • Larger automation vendors like Appian, Blue Prism, and Hyland.

Recent RPA acquisitions timeline:

RPA Robotic Process Automation

Why is this happening?

The RPA product market has grown rapidly over the past few years, rising to about US$ 1.2 billion in software license revenues in 2019. The market seems to be consolidating, with some of the larger players continuing to gain market share. As in any such maturing market, mergers and acquisitions are a natural outcome. However, we see multiple factors in the current environment leading to this frenetic uptick in RPA acquisitions:

Acquirers’ perspective – In addition to RPA being a fast-growing market, new category acquirers – meaning big tech product vendors, service providers, and larger automation vendors – see potential in merging RPA capabilities with their own core products to provide more unified automation solutions. These new entrants will be able to build pre-packaged solutions combining RPA with other existing capabilities at lower cost. COVID-19 has created an urgency for broader automation in enterprises, and the ability to offer packaged solutions that provide a quick ROI can be a game-changer in this scenario. Additionally, the adverse impact of the pandemic on the RPA vendors’ revenues, which may have dropped their valuations down to more realistic levels, is making them more attractive for the acquiring parties.

Sellers’ perspective – There is now a general realization in the market that RPA alone is not going to cut it. RPA is the connective tissue, but you still need the larger services, big tech/Systems-of-Record and/or intelligent automation ecosystem to complete the picture. RPA vendors that don’t have the ability to invest in building this ecosystem will be looking to be acquired by larger players that offer some of these complementary capabilities. In addition, investor money may no longer be flowing as freely in the current environment, meaning that some RPA vendors will be looking for an exit.

What can we expect going forward?

The RPA and broader intelligent automation space will continue to evolve quickly, accelerated by the predictable rise in demand for automation and the changes brought on by the new entrants in the space. We expect to see the following trends in the short term:

  • More acquisitions – With the ongoing market consolidation, we expect more acquisitions of smaller automation players – including RPA, Intelligent Document Processing (IDP), process orchestration, Intelligent Virtual Agents (IVA), and process mining players – by the above-mentioned bigger categories as they seek to build more complete transformational solutions.
  • Services imperative – Scaling up automation initiatives is an ongoing challenge for enterprises, with questions lingering around bot license utilization and the ability to fill an automation pipeline. Services that can help overcome these challenges will become more critical and possibly even differentiating in the RPA space, whether the product vendors themselves or their partners provide them.
  • Evolution of the competitive landscape – We expect the market landscape to undergo considerable transformation:
    • In the attended RPA space, while there will be co-opetition among RPA vendors and the bigger tech players, the balance may end up being slightly tilted in favor of the big tech players. Consider, for instance, the potential impact if Microsoft were to provide attended RPA capabilities embedded with its Office products suite. Pure-play RPA vendors, however, will continue to encourage citizen development, as this can unearth low-hanging fruit that can serve as an entry point into the wider enterprise organization.
    • In the unattended RPA space, pure-play RPA vendors will likely have an advantage as they do not compete directly with big tech players and so can invest in solutions across different systems of record. Pure-play RPA vendors might focus their efforts here and form an ecosystem to link in missing components of intelligent automation to provide integrated offerings.

There are several open questions on how some of these dynamics will play out over time. You can expect a battle for the soul (and control) of automation, with implications for all stakeholders in the automation ecosystem. Questions remain:

  • How will enterprises approach automation evolution, by building internal expertise or utilizing external services?
  • How will the different approaches automation vendors are currently following play out – system of record-led versus platform versus best of breed versus packaged solutions?
  • Where will the balance between citizen-led versus centralized automation lie?

Only time will tell how this all plays out.

But in the meantime, we’d love to hear your thoughts. Please share them with us at [email protected], [email protected], and  [email protected].

On-demand Payroll: A Holy Grail for Employees and Employers?

When you think of payroll, the last thing that probably comes to mind is “flexibility.” For longer than anyone reading this blog can remember, payday has come on the same day(s) of the month for most employees. This puts a significant portion of the global workforce in a bind; they live paycheck to paycheck, and find it difficult to make ends meet, pay down debt, and save money.

However, in today’s world of increasingly instant gratification, those days could be ending.

Enter “On-demand Payroll,” an emerging area within payroll that gives employees the freedom to decide how and when they want to get paid, and provides them some level of safety should an unexpected expense pop up that wasn’t on their radar.

Benefits for Workers

Benefits of On-demand Payroll

Increase in flexibility: One of the key benefits is that it enables employees to choose their pay schedules and stay on top of their finances or react to sudden expenses.

“Payrolling” the gig-economy: With the world moving towards the gig-economy, an on-demand payroll system has the potential to overcome the limitations of the current payroll process for contingent workers and freelancers.

Financial wellness: This will help workers better plan and budget their expenses, preventing them from running into cash flow problems. Additionally, it will help them stay away from predatory lenders and payday loan products that can lead to added fees and greater financial burdens.

Expedited payroll for unexpected situations: In cases of missed payroll deadlines or an employee’s unexpected departure, an on-demand payroll framework can eliminate any delay and proceed with the payment instantly.

All this results in better employee engagement and satisfaction, leading to an overall increase in the employee experience.

Employers will also benefit. Given the strong link between financial stress and employee health, on-demand payroll will result in reduced absenteeism and increased employee productivity and retention.

On-demand Payroll Solution Ecosystem

Payroll service providers and FinTech companies are developing capabilities to support enterprises’ desire to move to on-demand payroll. For example, there’s been a rise in financial wellness platforms that help employees budget, plan, and track their expenditures and savings. And digital wallets and pay cards can serve as alternatives to banks by acting as vehicles for direct deposit and allowing payments for purchases, and can facilitate faster payroll payouts.

Two Most Common On-demand Payroll Scenarios

Earned wage payments –The employee uses the on-demand payroll platform to request payment for hours/shifts worked, choosing to receive the payment in a wallet, on a pay card, or into a selected bank account. The deduction is calculated into the employee’s regular cycle payroll payment, whether it was for the full or partial amount.  For this to work effectively and seamlessly, the enterprise needs to have an integrated system that can access all the relevant information needed for payroll processing, such as work hours data, tax related information, and employee data.

Advance payments – The employee asks for a salary advance (the maximum amount may be limited by company policies.) Although this scenario does not require a sophisticated and integrated system, enterprises must carefully track these transactions to make sure they’re properly accounted for, and to avoid running into cash flow issues.

Questions to Consider

Just like all other innovative approaches, on-demand payroll also comes with its fair share of challenges. So, here are several questions you should ponder before making the move.

Will there be an impact on my enterprise’s cash flows?

While employers may embrace a heightened role in their employees’ financial wellness, changes in pay schedules can mean disruption to cash flow management and forecasting, as well as added administrative burdens.

Will this impact tax calculations and payments to the government?

Due to the personalized nature of payments, employees may be withdrawing cash during non-standard financial cycles. Enterprises need to take into consideration whether it will impact the various mandatory reporting mechanisms, government payments, and filings.

What commercial model should be employed when a platform is used?

The most appropriate commercial model will be jointly determined by the on-demand payroll platform provider and the enterprise. Points to factor into the decision include whether or not the employees will be charged for using the platform, and whether a bank must be involved in advance salary requests.

How will the system be implemented?

Enterprises will need to integrate the various components required for a seamless transition to the new system, including time and attendance, the payroll platform, etc. They must pay particular attention to how the relevant data will be accessed, processed, and reported.

On-demand payroll forms a crucial part of the broader concept of “Employee Experience Suites.” Our upcoming three-part research series will cover these, practical ways to improve the employee experience, and some of the startup trailblazers disrupting this area.

Is your enterprise planning to reimagine the payroll process? Have you successfully implemented on-demand payroll? We’d love to hear from you about your experiences, questions, and concerns. Please connect with us directly at:

[email protected]  and [email protected].

Ascender’s Acquisition of NGA’s ANZ Business: Consolidation in a Maturing Market | Sherpas in Blue Shirts

On 31 January 2017, Australia-based Ascender and NGA Human Resources announced that Ascender had acquired NGA’s Australia and New Zealand business. Part of the agreement is a partnership between the two companies to deliver payroll and HR services solutions for the ANZ region, ensuring a seamless solution for NGA HR’s global payroll and HR clients. The deal makes Ascender one of the largest HR and Payroll providers in the ANZ and APAC region.

What are the implications of the deal?

For NGA:

  • Global deals with ANZ components will continue unaffected, as Ascender will serve as a partner provider in the region with no disruption to existing operations
  • NGA will aim to use a partnership-based approach for multi-country deals originating in the ANZ region. It will no longer be active in the single country payroll market in ANZ.

For Ascender:

  • Its single country capability and reach in the ANZ region will get a boost with the addition of NGA’s services delivery and technology capabilities, specifically the Preceda and PS Enterprise HCM platforms
  • It will have access to a new set of clients in ANZ, with an opportunity to sell into other regions of APAC through the newly acquired client portfolio. This could potentially increase its multi country payroll outsourcing (MCPO) market penetration in the APAC region.

Of course, as with any deal of this type, there are numerous things those in the region should watch out for.

First, NGA and Ascender will be looking to forge a partnership in a way that is beneficial to both parties beyond the immediate operational need. The scope and extent of this new partnership will evolve and take shape as the dust settles. It remains to be seen what form it will take, especially in light of Ascender’s recent entry into the Europe-based Payroll Services Alliance, wherein eight major payroll service companies have bundled their services into a unified offering that consists of strong local expertise and services, supplemented by coordination and integration at an international level.

As far as technology is concerned, with NGA’s PS Enterprise and Preceda HCM platforms coming into Ascender’s fold as part of the acquisition, Ascender will likely seek to integrate the different system capabilities under one brand over time. As with a lot of private equity-backed acquisitions, since the focus will be on improving margins, we are likely to see more investment in consolidating and improving technology, driving automation, and increasing self-service functionality.

Although the APAC market continues to experience relatively high growth rates – 7-9% in single country payroll outsourcing and 23-25% in MCPO – the region is fairly complex, and each country requires a distinct strategy to ensure sustainable growth. For instance, while India requires a heavily price-sensitive services sales approach, a technology-driven approach works better in Australia.

With the APAC region requiring a great deal of management attention and local presence to drive continued success, global providers’ APAC arms tend to be private equity acquisition targets. Indeed, while Western economy-based global players don’t necessarily have the focus to negotiate the uniqueness of the APAC region’s HR services and payroll requirements, private equity can certainly help bring that focus to the table. For example, Ascender is backed by a private equity-led consortium, and just two years ago, private equity firm Everstone Capital bought out Aon Hewitt’s APAC business, (renamed Excelity Global).

While not all will be private equity-driven, we do anticipate more acquisitions and consolidation in this space in the APAC region as the market matures, particularly in geographic markets that are fragmented, with no clear leader in sight.

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