>> From theCUBE studios in Palo Alto in Boston,
bringing you data driven insights from theCUBE and ETR,
this is "Breaking Analysis" with Dave Vellante
>> In its early days,
robotic process automation emerged
from rudimentary screen scraping,
macros and workflow automation software.
Once a script heavy and limited tool
that largely was used to eliminate mundane tasks
for individual users, and by the way still is,
RPA's evolved into an enterprise-wide mega trend
that puts automation at the center
of digital business initiatives.
Hello and welcome to this week's Wikibon CUBE Insights,
powered by ETR.
In this breaking analysis, we present our quarterly update
of the trends in RPA and automation
and share the latest survey data
from enterprise technology research.
RPA has grown quite rapidly
and the acronym is becoming a convenient misnomer in a way.
I mean the real action in RPA has evolved
into enterprise-wide automation initiatives.
Once exclusively focused really on back office automation
and areas such as finance,
RPA has now become an enterprise initiative
as many larger organizations especially,
move well beyond cost savings
and outside of the CFO's purview.
We predicted in early "Breaking Analysis" episodes
that productivity declines in the US and Europe especially,
would require automation
to solve some of the world's most pressing problems.
And that's what's happening.
Automation today is attacking not only the labor shortage
but it's supporting optimizations in ESG,
supply chain, helping with inflation challenges,
improving capital allocation.
For example, the supply chain issues today,
think about what they require.
Somebody's got to do research,
they got to figure out inventory management,
they got to go into different systems,
do prioritizations, do price matching,
and perform a number of other complex tasks.
These are time consuming processes.
Now the combination of RPA and machine intelligence
is helping managers compress the time
to value and optimize decision making.
Organizations are realizing that a digital business
goes beyond cloud and SaaS,
and puts data, AI and automation at the core
leveraging cloud and SaaS
but reimagining entire workflows and customer experiences.
Moreover, low code solutions are taking off
and dramatically expanding the ability of organizations
to make changes to their processes.
We're also seeing adjacencies to RPA
becoming folded into enterprise automation initiatives.
And that trend will continue
for example Legacy software testing tools.
This is especially important
as companies SaaSify their business
and look for modern testing tools
that can keep pace with their transformations.
So the bottom line is,
RPA or intelligent automation
has become a strategic priority for many companies.
And that means you got to get the CIO involved
to ensure that the governance and compliance edicts
of the organization are appropriately met.
And that alignment occurs across the technology
and business lines.
A couple of years ago, when we saw
that RPA could be much much more
than what it was at the time,
we revisited our total available market or TAM analysis.
And in doing so, we felt there would be a confluence
of automation, AI, and data
and that the front and back office schism would converge.
That is shown here.
This is our updated TAM chart, which we shared a while back
with a dramatically larger scope.
We were interested that,
just a few days ago by the way
Forrester put out a new report, picked up by Digital Nation,
that the RPA market would reach 22 billion by 2025.
Now, as we said at the time
our TAM includes the entire ecosystem
including professional services
as does Forrester's recent report
and the projections they're in.
So see that little dotted red line there,
that's about at the 22 billion mark.
We're a few years away
but we definitely feel as though this is taking shape
the way we had previously envisioned.
That is to say a progression from back office
blending with customer facing processes
becoming a core element of digital transformations
and eventually entering the realm
of automated systems of agency
where automations are reliable enough
and trusted enough to make realtime decisions at scale
for a much, much wider scope of enterprise activities.
So we see this evolving over the 2020s
or the balance of this decade
and becoming a massive multi hundred billion dollar market.
Now, unfortunately for later investors,
this enthusiasm that I'm sharing around automation
has not translated into price momentum
for the stocks in this sector.
Here are the charts, the stock charts
for four RPA related players
with market values inserted in each graphic.
We've set the cross hairs
approximately at the timing of UiPath's IPO.
And that's where we'll start.
UiPath IPOed last April
and you can see the steady decline in its price.
UiPath's Series F investors got in at $30 billion valuation,
so that's been halved, more than half.
But UiPath is the leader in this sector
as we'll see in a moment.
So investors are just going to have to be patient.
Now, you know the problem with these hot tech companies
is the cat gets let out of the bag before the IPO
because they raise so much private money,
it hits the headlines and then,
at the time you had zero interest rates,
you had the tech stock boom during the pandemic,
so you're just going to have to wait it out
to get a nice return if you got in sort of post IPO.
You know, which...
I think this business will deliver over the long term.
Now, Blue Prism is interesting
because it's being bought by SS&C Technologies
after a bidding war with Vista.
So that's why their stock has held up pretty reasonably.
Vista's PE firm, which owns TIBCO
and was going to mash it, Blue Prism that is,
together with TIBCO.
That was a play I always liked
because RPA is going to be integrated across the board.
And TIBCO is an integration company,
and I felt it was in a good position to do that.
But SS&C obvious said, "Hey, we can do that too."
And look, they're getting a proven RPA tech stack
for 10% of the value of UiPath.
Might be a sharp move, we'll see.
Or maybe they'll jack prices and squeeze the cashflow,
I honestly have no idea.
And we shelled the other two players here
who really aren't RPA specialists.
Appian is a low code business process development platform
and Pegasystems of course,
we've reported on them extensively.
They're a longtime business process player
that has done pretty well.
But both stocks have suffered pretty dramatically
since last April.
So let's take a look at the customer survey data
and see what it tells us.
The ETR survey data shows a pretty robust picture frankly.
This chart depicts the net score
or customer spending momentum on that vertical axis
and market share or pervasiveness
relative to other companies and technologies
in the ETR dataset, that's on the horizontal.
That red dotted line at the 40% mark,
that indicates an elevated spending level
for the company within this technology.
The chart insert you see there
shows how the company positions are plotted
using net score and market share or Ns.
And ETR's tool has a couple of cool features.
We can click on the dot
and it allows you to track the progression over time,
in this case going back to January, 2020
that's the lines that we've inserted here.
So we'll start with Microsoft
and we'll get that over with.
Microsoft acquired a company called Softomotive
for a reported a hundred million dollars thereabout,
it's a little more than that.
So pretty much a lunch money for Mr. Softy.
So Microsoft bought the company in May
and look at the gray line
where it started showing up in the October ETR surveys
at a very highly elevated level,
typical Microsoft, right?
I mean, a lot of spending momentum
and they're pretty much ubiquitous.
And it just stayed there and it's gone up and to the right,
just really a dominant picture.
But Microsoft Power Automate
is really kind of a personal productivity tool
not super feature rich like some of the others
that we're going to talk about,
it's just part of the giant Microsoft software estate.
And there's a substantial amount of overlap
between, for example, UiPath's
and Automation Anywhere's customer bases
and Power Automate users.
And it's speaking with the number of customers.
They'll say, "Yeah, we use Power Automate,"
but they see enterprise automation platforms
as much more feature rich and capable
and they see a role for both.
But it's something to watch out for
because Microsoft can obviously take a bite
out of virtually any platform
and moderate the enthusiasm for it.
But nonetheless, these other firms
that we're mentioning here, the two leaders,
they really stand out, UiPath and Automation Anywhere.
Both are elevated well above that 40% line
with a meaningful presence in the data set.
And you can see the path that they took
to get to where they are today.
Now we had predicted in 2021 in our predictions post
that Automation Anywhere would IPO in 2021.
So we predicted that in December of 2020
but it hasn't happened yet.
The company obviously wasn't ready,
and it brought in new management.
We reported on that,
Chris Riley as the Chief Revenue Officer,
and it made other moves to show up their business.
Now let me say this about Riley.
I've known him him for years,
he's a world class sales leader,
one of the best in the tech business.
And he knows how to build a world class go to market team,
I guarantee that's what he's doing.
I have no doubt he's completely reinventing his sales team,
the alliances, he's got a lot of experience of that
when he was at EMC and Dell and HPE,
and he knows the channel really well.
So I have a great deal of confidence
that if Automation Anywhere's product is any good,
which the ETR data clearly shows that it is,
then the company is going to do very well.
Now, as for the timing of an IPO,
look, with the market choppiness, who knows?
Automation Anywhere, they raised a ton of dough
and it was last valued around...
In 2019, it was just north of 7 billion.
And so if UiPath is valued at 15 billion,
you could speculate that Automation Anywhere
can't be valued at much more than 10 billion,
maybe a little under, maybe a little over.
And so they might wait for the market volatility
to chill out a little bit before they do the IPO
or maybe they've got some further cleanup to do
and they want to get their metrics better,
but we'll see.
Now to the point earlier about Blue Prism,
look at its position on the vertical axis, very respectable.
Just a finer point on Pega.
We've always said that they're not an RPA specialist
but they have an RPA offering
and a presence in the ETR data set in this sector.
And they got a sizeable market cap
so we'd like to include them.
Now here's another look at the net score data.
The way net score works is ETR asks customers,
are you adopting a platform for the first time?
That's that lime green there.
Are you accelerating spending on the platform by 6% or more
relative to last year,
or sometimes relative to some other point in time,
this is relative to last year.
That's the forest green.
Is your spending flat or is it, that's the gray,
or is it decreasing by 6% or worse?
Or are you churning? That's that bright red.
You subtract the reds from the greens and you get net score
which is shown for each company on the right
along with the Ns in the survey.
So other than Pega,
every company shown here
has new adoptions in the double digits, not a lot of churn.
UiPath and and Automation Anywhere
have net scores well over that 40% mark.
Now, some other data points on those two,
ETR did a little peeling of the onion in their data set
and I found a couple of interesting nuggets.
UiPath in the Fortune 500 has a 91% net score
and a 77% net score in the Global 2000.
So significantly higher than its overall average.
This speaks to the company's strong presence
in larger companies and the adoption
and how larger companies are leaning in.
Although UiPath's actually still solid
in smaller firms as well by the way but...
Now the other piece of information is,
when asked why they buy UiPath over alternatives
customers said a robust feature set, technical lead
and compatibility with their existing environment.
Now to Automation Anywhere.
They have a 72% net score in the Fortune 500,
well above its average across the survey,
but 46% only in the Global 2000
below its overall average shown here of 54.
So we'd like to see a wider aperture in the Global 2000.
Again, this is a survey set, who knows,
but oftentimes these surveys are indicative.
So maybe Automation Anywhere just working that out,
more time, figuring out the go to market in the Global 2000
beyond those larger customers.
Now, when asked why they buy
from Automation Anywhere versus the competition
customers cited a robust feature set, just like UiPath,
technological lead, just like UiPath, and fast ROI.
Now I really believe that
both for Automation Anywhere and UiPath,
the time to value is much compressed
relative to most technology projects.
So I would highlight that as well.
And I think that's a fundamental reason,
one of the reasons why RPA has taken off.
All right let's wrap up.
The bottom line is this space is moving
and it's evolving quickly,
and will keep on a fast pace
given the customer poll,
the funding levels that have been poured into the space,
and, of course, the competitive climate.
We're seeing a new transformation agenda emerge.
Pre COVID, the catalyst was back office efficiency.
During the pandemic, we saw an acceleration
and organizations are taking the lessons learned
from that forced March experience,
the digital I sometimes call it,
and they're realizing a couple things.
One, they can attack much more complex problems
than previously envisioned.
And two, in order to cloudify and SaaSify their businesses,
they need to put automation along with data and AI
at the core to completely transform into a digital entity.
Now we're moving well beyond automating bespoke tasks
and paving the cow path as I sometimes like to say.
And we're seeing much more integration across systems
like ERP and HR and finance and logistics et cetera,
collaboration, customer experience,
and importantly, this has to extend into broader ecosystems.
We're also seeing a rise in semantic workflows
to tackle more complex problems.
We're talking here about
going beyond a linear process of automation.
Like for instance, read this, click on that, copy that,
put it here, join it with that, drag and drop it over here
and send it over there.
It's evolving into a much more interpreter of actions
using machine intelligence to watch, to learn, to infer,
and then ultimately act
as well as discover other process automation opportunities.
So think about the way work is done today.
Going into various applications, you grab data,
you trombone back out,
you do it again, in and out, in and out,
in and out of these systems, et cetera, NASM,
and replacing that sequence
with a much more intelligent process.
We're also seeing a lot more involvement
from C-level executives, especially the CIO,
but also the chief digital officer, the chief data officer,
with low code solutions enabling lines of business
to be much more involved in the game.
So look, it's still early here.
This sector, in my view,
hasn't even hit that steep part of the S-curve yet,
it's still building momentum
with larger firms leading the innovation,
investing in things like centers of excellence and training,
digging in to find new ways of doing things.
It's a huge priority
because the efficiencies that large companies get,
they drop right to the bottom line
and the big ER the more money that drops.
We see that in the adoption data
and we think it's just getting started.
So keep an eye on this space.
It's not a fad, it's here to stay.
Okay, that's it for now.
Thanks to my colleagues,
Stephanie Chan who helped research this week's topics
and Alex Myerson on the production team
who also manages the Breaking Analysis Podcast,
Kristen Martin and Cheryl Knight,
helped get the word out on social.
Thanks guys.
Your great teamwork, really appreciate that.
Now remember, these episodes,
they're all available as podcasts,
wherever you listen just search "Breaking Analysis Podcast".
Check out ETR's website at etr.ai.
And we also publish a full report every week
on wikibon.com and siliconangle.com.
You can get in touch with me directly,
david.vellante@siliconangle.com is my email.
You can DM me @dvellante or comment on our LinkedIn posts.
This is Dave Vellante for theCUBE Insights, powered by ETR.
Have a great week, stay safe, be well,
and we'll see you next time.
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