Gartner recently reported that robotic process automation (RPA) software revenue grew 63.1% in 2018 to $846 million, making it the fastest-growing segment of the global enterprise software market. Gartner analysts also expect RPA software revenue to reach $1.3 billion this year alone.
But despite this robust growth, the technology is often misunderstood within the broader enterprise automation community. Oftentimes RPA is still mistakenly associated artificial intelligence.
According to Deloitte, RPA is, “the automation of rules-based processes with software that utilizes the user interface and which can run on any software, including web-based applications, ERP systems, and mainframe systems.” But what exactly does this mean? In this post, I’ll analyze the applications of RPA, the most significant market players, and the emerging trends that will shape the industry’s future.
What is RPA?
It’s important to note that the “robotic” in robotic process automation is slightly delusive. That’s because RPA is a software-based solution; it does not take a physical form. And although artificial intelligence (AI) software can work in tandem with RPA, they are two very different technologies.
Why companies are exploring RPA
Continuous improvement and automation are top strategic priorities for organizations exploring RPA. In comparison to expensive AI solutions, bots are typically low-cost and easy to implement, requiring no custom software or deep integrations. As such, they remain an accessible piece of IT infrastructure.
These platforms aim to automate repetitive, low-value activities such as processing insurance claims, payroll, filling forms, and executing calculations. Removing these mundane practices from employee workflows gives employees more time for high-value tasks such as strategic planning and corporate governance.
There are also cost-saving opportunities associated with robotic process automation. For example, a company can apply RPA to reduce its internal hiring needs and/or reliance on outsourcing, which can cut down costs significantly and boost employee productivity.
Beyond these benefits, RPA promises technical improvements. For one, automating processes helps to eliminate human error. RPA can also ensure a higher standard of compliance through embedded regulatory and legal requirements. Finally, RPA allows for the monitoring of events during various workflows, including customer service activities and technical support.
In a comprehensive assessment, Gartner found that the top-five RPA vendors controlled 47% of the market in 2018. Further highlighting robust growth in the industry, the vendors ranked sixth and seventh achieved triple-digit revenue growth between 2017 and 2018. As the first ranked industry player, UiPath raised $568 million in a series D round of funding at a $7 billion valuation last year.
This funding was led by hedge fund Coatue Management, with participation from Alphabet’s CapitalG, Sequoia, Accel, Madrona Venture Group, IVP, Dragoneer, Wellington, Sands Capital, and funds advised by T. Rowe Price & Associates.
Also last year, second-ranked Automation Anywhere raised $300 million from SoftBank at a $2.6 billion valuation. As venture capitalists continue to make substantial investments in the industry, the potential for future growth remains the primary motivator. Many investors see RPA as the fundamental shift necessary to drive global digital transformation across virtually every industry.
As a result of this ongoing capital investment, the RPA industry continues to evolve rapidly. Within this dynamic environment, we’re seeing a couple of prominent trends emerging.
1. Several industries are leading RPA. Although robotic process automation is seen across all industries, some lead in RPA adoption. Banks, insurance companies, telcos, and utility companies have all shown higher rates of investment. Because RPA solutions readily integrate with legacy systems, these organizations can build on past technology investments while accelerating their digital transformation initiatives.
2. RPA is a gateway to smarter tech. As mentioned, RPA and cognitive technologies such as AI remain distinctly different, yet they can create immense value when used together. For many organizations, robotic process automation initiates the beginning of their digital transformation. That is, RPA acts as a gateway to further cognitive automation exploration. Highlighting this trend, Deloitte found that 28% of those implementing and scaling RPA are also implementing cognitive automation. Only 6% of those that have not implemented RPA are pursuing cognitive automation.
The future of RPA
As RPA continues to attract substantial investment, IT industry heavyweights have begun to take notice. Large software companies like IBM, Microsoft, and SAP are actively partnering with or acquiring RPA vendors. As a result, the technology has begun to reach an even broader consumer base. These conditions have given emerging RPA vendors a clear path forward as they start to roll out capabilities for specific digital business demands. As momentum continues to grow in the enterprise automation market, the associated transformative changes appear all but certain.
Howard Chau is a Partner at Silicon Valley-based Acorn Pacific Ventures.