When UIPath filed its S-1 last week, it was a watershed moment for the robotic process automation (RPA) market. The company, which first appeared on our radar for a $30 million Series A in 2017, has so far raised an astonishing $2 billion while still private. In February, it was valued at $35 billion when it raised $750 million in its latest round.
RPA and process automation came to the fore during the pandemic as companies took steps to digitally transform. When employees couldn’t be in the same office together, it became crucial to cobble together more automated workflows that required fewer people in the loop.
When UIPath raised money in 2017, RPA was not well known in enterprise software circles even though it had already been around for several years. The category was gaining in popularity by that point because it addressed automation in a legacy context. That meant companies with deep legacy technology — practically everyone not born in the cloud — could automate across older platforms without ripping and replacing, an expensive and risky undertaking that most CEOs would rather not take.
RPA has enabled executives to provide a level of workflow automation, a taste of the modern. It essentially buys them time to update systems to more modern approaches while reducing the large number of mundane manual tasks that are part of just about every industry’s workflow.
While some people point to RPA as job-elimination software, it also provides a way to liberate people from some of the most mind-numbing and mundane chores in the organization. The argument goes that this frees up employees for higher level tasks.
As an example, RPA could take advantage of older workflow technologies like OCR (optical character recognition) to read a number from a form, enter the data in a spreadsheet, generate an invoice, send it for printing and mailing, and generate a Slack message to the accounting department that the task has been completed.
We’re going to take a deep dive into RPA and the larger process automation space — explore the market size and dynamics, look at the key players and the biggest investors, and finally, try to chart out where this market might go in the future.
Meet the vendors
UIPath is clearly an RPA star with a significant market share lead of 27.1%, according to IDC. Automation Anywhere is in second place with 19.4%, and Blue Prism is third with 10.3%, based on data from IDC’s July 2020 report, the last time the firm reported on the market.
Two other players with significant market share worth mentioning are WorkFusion with 6.8%, and NTT with 5%.
Blue Prism, which claims to have invented the term RPA, has been a public company since 2016. Automation Anywhere has raised over $800 million while private. Most recently, it raised $290 million at a $6.8 billion valuation in 2019, a fraction of the value of UIPath a year later, but still a hefty amount.
WorkFusion has raised over $341 million, while NTT is a legacy vendor founded in the 1970s.
UiPath’s IPO filing suggests robotic process automation is booming
At the other end of the market are myriad smaller players like open-source entry RoboCorp, Kryon and Catalytic. Another startup, Signavio, out of Berlin, was acquired by SAP late last year for $1.2 billion.
That acquisition was part of a trend we saw last year as larger enterprise software vendors began to notice the category and wanted a piece of the action. They entered the market with some of their own in-house tools and combined those with some acquisitions to fuel high-speed entry into the space.
Here’s a sampling of those deals:
- ServiceNow bought Intellibot, an RPA startup based in India, earlier this month.
- IBM acquired Brazilian RPA vendor WDG Automation last July.
- PegaSystems snagged OpenSpan, an RPA software company, also in July.
- Microsoft acquired Softomotive last May with plans to combine it with its own RPA tool, PowerAutomate.
PegaSystems joins NICE and NTT as a legacy vendor in the space. You could also include Abbyy and Kofax, a couple of scanning and workflow vendors, to round out the market. There are undoubtedly other small vendors across the world trying to get a piece of this automation action like the ones ServiceNow and IBM acquired.
It’s also a safe bet that other large enterprise vendors like Salesforce and Oracle could get involved. While Salesforce hasn’t entered the RPA market directly, its venture arm Salesforce Ventures was the lead investor in Automation Anywhere’s 2019 $290 million round.
Who’s investing?
When you look at the sheer dollars being invested in RPA, it’s clear that venture firms see a market ripe for growth and expansion. As such, the space has attracted many of the top private enterprise investors out there.
IDC has data to prove that the growth is real: Its July 2020 report estimates that the standalone RPA market will reach around $2 billion in 2021. The research firm expects total RPA revenue to reach $5.9 billion by 2024 with a brisk CAGR of 36.1% for the five-year period between 2019 and 2024.
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The RPA market has attracted a range of brand name firms, including early UIPath investors Accel, Sequoia Capital and Kleiner Perkins. Automation Anywhere investors include Goldman Sachs Growth Equity, Softbank and General Atlantic, along with strategics Workday Ventures and Salesforce Ventures. Newer entry RoboCorp’s early investors include Benchmark and individual investor Bret Taylor, president and COO of Salesforce. Catalytic’s investors include Boldstart Ventures, Intel Capital and In-Q-Tel.
As the space expands, you can expect other investors will try to find new RPA startups as well as firms trying to expand in other areas of workflow automation.
The future looks bright
While RPA is useful unto itself and has developed as a software category, it is probably not sustainable as a long-term, standalone category. As firms eventually take on-premises legacy systems offline and replace them with cloud solutions, the workflow requirements will change, and companies will subsequently begin looking for more advanced workflow solutions.
That’s why the industry is expanding into a broader intelligent process automation category that includes other modern workflow and no-code solutions — something that UIPath acknowledged in its S-1 filing last week. Another reason for the expansion is that the size of the RPA market, while growing at a reasonably rapid clip, is still modest compared to other enterprise software categories such as CRM, which closed 2020 in the $42 billion range, according to Statista.
In fact, IDC sees RPA as a subcategory of the labor-centric automation market, which itself is a submarket of the intelligent process automation (IPA) software market. The firm predicts that the larger IPA software market will reach $30.5 billion in 2024 with a five-year CAGR of 13.3%. Statista was more optimistic, predicting $74 billion, although the two firms could be defining the categories differently.
RPA has attracted a lot of money, and UIPath’s public debut will mark the second startup from this category to achieve an IPO. UIPath certainly gets that it needs to grow outside the limits of RPA, as evidenced by its announcement earlier this month that it was buying Cloud Elements, a company that allows it to move into APIs to expand the platform’s coverage and give it access to other enterprise applications for workflow purposes.
Whether pure-play RPA will survive as a category remains to be seen, but it will likely be around for a long time under the intelligent process automation umbrella — a market with lots of expansion opportunities and plenty of room for new startups to come in and shake things up.
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