Is the RPA market the new dot-com bubble?

Will 2020 see the RPA market burst and start declining?

This is a contributed article by Steve Haighway, COO Europe, IPsoft

The RPA market has been rapidly growing over the past couple of years, with analysts predicting it will exceed $2.9B by 2021 (the Everest Group), reflecting the staggering valuations of some of its key players like UiPath, which was valued at $6.4bn earlier this year.

However, these valuations are ultimately unsustainable due to the limited ability for RPA to drive business outcomes. The level of satisfaction just doesn't measure up: while teams may be reducing the time to complete a process from 21 days to 18, it won't give the company a competitive positioning in the market. And if a process changes, so too must the bot…

But it appears that the cracks in this over-hyped market are now beginning to show. In October, the market was shaken when UiPath announced that 400 employees would be laid off.

So, is this a sign that the RPA market is a bubble - and is it bursting?

The dot-com crash of the 2020s?

While good at automating processes, RPA will never drive genuine business transformation. It's for this reason that the immense valuation growth in the RPA market this year has led me to make comparisons to the dot-com bubble of the nineties.

Back in the dot-com boom between 1995 and 2000, the soaring prices of internet start-ups created a speculative investment bubble where investors were encouraged to pour money into ".com" businesses. A mass of e-companies ensued, with investors looking for new ‘hot' stocks. The hype was so great that some companies were even pushed onto the stock exchange and traded with high valuations despite being cash negative.

Of the tech companies that were launched during this period, a few survived to become the technology giants they aspired to, like the Google and Amazons. This was typically because while tapping into the hot trend of internet-led business, they failed to drive true value to their customers or help them gain a competitive advantage.

This is why the current RPA market is reminiscent of the dot-com boom: the firms that were listed on the stock exchange in that period did little more than consume vast amounts of investor cash despite showing little prospect of achieving profit. The current expectations for the RPA market are similarly unrealistic.

RPA got swept up into the artificial intelligence (AI) movement - and as soon as you talk about AI you put a valuation bubble on it due to its immense promise to deliver true digital and intelligent transformation. As a result of this generous association, traditional metrics of performance in the RPA market are once again being overlooked and big marketing and big spending are being seen as a sign of rapid progress. Once again, this should raise serious questions as to what investors are getting for their money: technical or marketing capabilities...

Stop focusing on business process - it's about business functions

In its 2020 predictions, Gartner highlighted that there will be a significant shift from technology-literate people to people-literate technology. This exemplifies the limitations of RPA and where the true potential for business automation lies. 

RPA is designed to be static in nature. Unlike true AI, it does not learn from its experience to improve processes. As a result, when a process changes - whether that's due to new regulations, compliance considerations, or new business objectives - the bot's process needs to be rewritten. This means that technology-literate people will constantly need to alter the RPA environment in a dynamic business.

The true opportunities for driving return on AI (ROAI) investment will be achieved where systems are able to understand context, intent and natural language, and use this knowledge to interact with users as well as execute on their requests. With these advanced capabilities, the automations are delivered by people-literate technology. The solutions constantly learn from their human interactions to deliver against the evolving user demand, meaning that businesses are no longer limited to automating specific processes - but are capable of transforming entire business functions. 

Hot stock or not?

Despite the hype, RPA on its own will be a roadblock to business transformation. Process automation must be part of a comprehensive solution that will evolve with the business to avoid a constant cycle of rip-and-replace bots.

The only hope to avoid another dot-com burst for the RPA market will be for investors to become savvy to the limitations of this technology, with valuations that truly reflect the ability of these solutions to deliver business value.

 


 

Steve Haighway is COO for IPsoft Europe. He previously worked for BT Global services, where he rose to PMO Director, followed by Wipro, where he was Head of business, Sales & Strategy Operations. Haighway prides himself on his dedication for continuous improvement and empowering clients to take data-driven decisions. His expertise lies in Business, Sales Strategy, Operations and Leadership.

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