SAP faces a balancing act in burgeoning RPA market

Robotic process automation has mushroomed since SAP first announced its RPA product a year ago. But big application vendors may find it tough to grow into a shifting market.

With its Intelligent Robotic Process Automation product, SAP's customers would, Chief Innovation Officer Juergen Mueller promised, be able to achieve the high automation level necessary to become an intelligent enterprise. Regardless of how the "intelligent enterprise" is defined, the SAP's plan for RPA, announced in October last year, would have to succeed in a crowded market.

RPA is a field in which designers create software bots to automate tasks which usually require information from more than one application by screen-scraping data - matching an invoice with a purchase order, for example. In the year since SAP announced it was joining the market, the independent RPA vendors have been booming. The market grew 63% in 2018 and is set to reach $1.3 billion in 2019, according to Gartner. Vendors already well established include UiPath, Automation Anywhere and Blue Prism (see box).

But SAP is not new to automation. Sebastian Schroetel, Head of Intelligent RPA, says the applications software giant's first forays began during his time in the machine learning group.

"In 2015, we wanted to achieve business process automation. We provide apps, so the first step is to embed automation inside the applications themselves. When buying a new solution, [ERP software] S4 Hana or [HR application] Success Factors, we don't want people to purchase automation on top of that. We want the applications to run automated by themselves."

Automation in the app

To this end, SAP has been working on reducing the number of clicks to perform tasks, simplification of interfaces, and integrated workflow management: all things that require AI, Schroetel says. "We embed the AI function in application to automate business process."

But SAP is not blind to the problems its customers face. Although it would like them to upgrade to the latest SAP software, in reality, most large organisations exist with a mishmash of old and new applications: it is simply too costly and disruptive to upgrade applications as often as it would like.

Schroetel says SAP began to work on RPA due to customer demand. "They were asking, ‘why do you not provide RPA? We want in our landscape'. The answer is clear. Why should let them down."

Shortly after SAP announced its intention to join the RPA market, it bought Contextor SAS, a European vendor already making RPA technology. In May, it announced its product SAP Intelligent Robotic Process Automation.

RPA and the application upgrade cycle

But there is a problem for SAP. Does RPA dissuade users from upgrading their software by offering the efficiency of automation without shifting to new applications? Schroetel says, no, it could help them find the time to get more strategic solutions in place.

"RPA can help current applications. If customers have a mixed application landscape, of course, they should use RPA and make it as efficient as possible. That gives them room to breathe to further develop their application plans. If they are firefighting, then it can be tough to find finances or the management bandwidth to go the next level and upgrade," he says.

But RPA has its limits. Schroetel says that it does not tolerate change to the application landscape, as alterations to the user-interface can make bots fail. "If you only have the interface, you can only automate things you don't want to change. That is why it's a diverse picture. There are different tools, and RPA is one of the tools. But it does not solve all automation problems."

Despite such pragmatism, SAP and other applications giants will find it hard to buy their way into a market when the leading independent vendors are so highly priced, says Neil Ward-Dutton, Vice President, AI and DX European Research Practices, IDC. At the same time, users may be resistant.

"It's like middleware: when companies look at integration, they like to choose an independent provider. They want Switzerland; a neutral third party. We've seen this through waves of integration, and it's a roadblock for companies like Oracle and SAP," Ward-Dutton says.

RPA solutions becoming more permanent

While there is a logic to limiting RPA, and building automation into upgraded applications, many organisations find pragmatism makes it a more permanent solution. "In an ideal world, it is sticking plaster. Customers that have done a lot of RPA intend to come back in a year and fix the job properly. But they find it hard to justify a strategic approach because it is more expensive."

Challenges like this put application vendors pushing RPA in a tough spot. They are trying to convince customers to eventually upgrade to a new platform and educate them in the customisation and new workflow that will involve, Ward-Dutton says. "With S/4Hana, SAP has got a big challenge in re-educating customers and partners in how to implement it. If it is also going to really push RPA as a key tool, it is a very complicated thing to do right."

Earlier this month [October 10], SAP talked to customers about RPA and upgrading to its flagship application suit at its TechEd conference in Barcelona. In another year, the market might know if it has found the right balance between these two parallel priorities.

Dominant players in the RPA market

According to Alex Blair, Robotic Process Automation (RPA) expert at PA Consulting, application vendors are recognising the need for automation solutions, both as an addition to their core product or integrated into their increasingly cloud-based offerings. "This is in response to the growth in independent RPA providers who are key enablers of the digital workforce and are experiencing exponential growth year on year."

In the market for independent RPA vendors, the leaders are UiPath, Automation Anywhere and Blue Prism, Gartner says.

Uipath

In April, UiPath closed a Series D round of $568 million suggesting a valuation of $7 billion. Not bad for a company founded in Bucharest in 2005.

Mike Giesler, Vice President, Strategic Alliance at UiPath says application vendors have embraced RPA and co-operation with UiPath. "Oracle, SAP and Google they have all been very open to working with us, as they see the value, for customers. Customers want to automate."

Automation Anywhere

Founded as Tethys Solutions, Automation Anywhere operates in 10 countries and has established a strong base in financial services, business process outsourcing, healthcare, technology, and insurance companies.

James Dening, Vice President and Chief Evangelist Europe at Automation Anywhere says: "The vast majority of organisation built an IT stack over time with M&As and new business lines playing a part. They can make it work together through IT transformation, but RPA quicker and robust. Business doesn't care. It just wants the outputs, assuming the robustness is there."

Blue Prism

Blue Prism has around 1,500 customers around the world using its Digital Workforce technology. UK retailer John Lewis uses the technology to address unique retail challenges that include fraud detection and price matching.

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