How hot has Summer 2018 been around the globe? Red hot…but not as hot as the RPA marketplace. The speed of evolution in this industry segment is almost without precedent. Firms that had revenues worth tens of millions of U.S. dollars just a couple of years ago are talking about reaching a billion in revenue in just a couple of more years.
So why all the excitement? Some chalk it up to Robotic Process Automation being a clever product idea and others to the even cleverer marketing of sexy robots.
But the reality is that it’s the perfect storm – or heat wave – of innovation and capital intersecting at just the right time.
Of course, it doesn’t hurt that enterprises have already captured most of the potential value from offshore labor arbitrage. But when you combine the need for a new source of cost savings with the acute shortage of labor in the U.S. and Europe, you have a market condition in which enterprises are screaming for automation that allows continued productivity improvements for less money, with less human labor-based effort.
These four keys make up the RPA virtuous circle: More sophisticated software platforms, real value propositions, significant capital infusion, and aggressive buy/build decisions. Let’s unpack each one to get the full story.
More sophisticated software platforms – the software platforms underlying RPA are not new; some of them have been around for many years. But as interest and revenues in the segment grow, the vendors are investing in better software and getting invaluable real-life implementation experience. And great use cases and robust feedback loops will drive enhanced software innovation.
Real value propositions – while a great idea is always fun to talk about, the story quickly fades if the economics are insufficient. In RPA’s case, enterprises are finding real savings and, probably most important, operational improvement. What makes this such an exciting story is that RPA doesn’t apply to just one aspect of the enterprise – it applies anywhere human resources are being deployed for labor-intensive services. So not just G&A functions, but also core business operations.
Significant capital being infused – where there is monetary value creation, Wall Street and Silicon Valley will certainly be found nearby. In the RPA segment, multiple investments in excess of US$100 million have been made. In total, we have seen more than a half billion dollars in investments in just the past six months. These are huge flows of capital, especially considering that in many cases they far exceed current revenues.
Aggressive buy/build decisions – of course, when that much capital is deployed, there’s tremendous pressure to take action to generate real, quantifiable results. The most obvious is to deploy larger sales/account teams to support the growth. But, there will be also significant development needs as use cases expand. We also anticipate that RPA firms will go on a buying spree of niche competitors or companies that increase automation functionality for items like OCR, machine learning, artificial intelligence, and natural language processing.
Right now, the velocity of the Virtuous Circle is increasing…better software, increased enterprise value propositions, and another round of investments.
To learn more about Everest Group’s take on RPA, view the replay of our popular August 8 webinar on the latest developments and implications for enterprises. By registering, you will also receive a a copy of the presentation and deck for download after the webinar.
“Max, please send our new terms and conditions’ letter to all our Prime current account holders,” said Louise, a customer contact manager in a retail bank.
“I will ask Alf to do it. Is there anything else I can do for you today Louise?” Asked Max, the personal virtual helper on Louise’s desktop computer.
“Yes, please tell Alf to update Elsa.”
You may have guessed that Alf and Elsa are robots too – one processes letters for mailshots, the other makes records for regulatory compliance.
Are colleagues going to be electric? Everest Group data indicates that by 2021 there will be as many Robotic Desktop Automation (RDA), attended robots running on users’ desktops, assisting agents, and employees, as there are people currently delivering contact center outsourcing services globally; that means about three million attended robots by 2021.
There will also be a huge rise in the number of virtual workers or unattended Robotic Process Automation (RPA) robots, running on servers in data centers and delivering end-to-end process automation without the need for employees to activate them. Exhibits 1 and 2 highlight the projected rise of both attended and unattended robots through to 2021. These estimates are for robots purchased on license from independent third-party RPA software vendors. They exclude robots provided by vendors at no charge for proof of concepts, and training, etc.
Exhibit 1 – Attended robots
Exhibit 2 – Unattended robots
Our calculations are based on data from multiple Everest Group databases including but not limited to:
Everest Group analysis indicates that many colleagues will indeed be electric by 2021, a shift that will impact enterprises, not only in operations but also in terms of HR policies, recruitment, succession planning, process knowledge and other skills development, process and program document management, IT investment, management and maintenance, and business and IT continuity.
Sarah Burnett will be discussing this topic and other RPA trends during her talk at Symphony Venture’s Robotic Operations Centre Launch in Krakow, Poland on June 27.