The forerunners of robotic process automation have been around for well over a decade in various forms such as Lean, Six Sigma and business process automation. But the leading companies in these fields didn’t really catch the attention of most observers. The same narrative is not being written for RPA — quite the opposite, in fact, as RPA is becoming one of the hottest segments in technology.

In the latest example, UiPath Inc. today announced a fresh Series D round of financing, which raised an additional $568 million. Including that, the company has raised about $1 billion since its inception. As part of the announcement, UiPath disclosed that it has grown from $8 million to $200 million in annual recurring revenue in the last 24 months. Based on this latest round, the valuation for the company is now reportedly $7 billion.

How is it that this company has become such a rising star? What is propelling its massive fundraising rounds and valuation upticks? What is so compelling about the company’s marketplace and does UiPath have a unique and sustainable competitive advantage?

To find out, SiliconANGLE recently interviewed UiPath Chief Marketing Officer Bobby Patrick (pictured) and posed several questions to understand the dynamics of this market, why investors are so enthused and what the future holds for the company, its customers and the marketplace. We also talked to MIT’s Andrew McAfee and Erik Brynjolfsson on the impact of AI and RPA on jobs, as well as a number of UiPath customers for further perspective on the ground. (* Disclosure below.)

Conversation with Bobby Patrick

Q: How is it that this company has become such a rising star so fast?

A: Our founder would say culture. He wants to build a company founded on four principles: Be Humble, Be Bold, Be Fast, Be Immersed. He wants every employee to enjoy coming to work. He does not want to hire arrogant people. Of course, it helps that we have built technology that is really easy-to-use by nontechnical people; i.e., they can automate their own tasks easily without code. And, it helps that our robots look at a screen with almost the exact accuracy of a human… which is difficult when your process spans a SaaS app, Excel and then a Citrix emulation session. And, often these processes span a dozen such interactions. Having perfect accuracy with a complete audit trail. This gives IT and Finance a total compliance trail.

Author’s comment: 1) Many scoff at culture but a company’s culture is vital to its success. 2) Automations can become very complex. RPA works especially well for legacy use cases and applications that are well-understood and are part of a process that works well and doesn’t encounter constant change.  

Q: What is propelling UiPath’s massive fundraising rounds and valuation upticks?

A: It’s all driven by real growth in customer adoption and annual recurring revenue. Our investors like to make a multiple calculation off of ARR. Some of the best public examples include Atlassian and Zoom. We are growing even faster… so that is definitely attracting interest. But, it speaks to a more important reality. Customers like this technology and they are just getting started. We have a very high renewal rate, over 95%. But, more importantly, not a single customer of ours is over 1% penetrated in the potential of software robots to augment their workforce. We are just getting started.

Author’s Comment: A company that starts out with an ARR model is gold to investors. Predictable, consistent with an inherent focus on keeping customers happy so they renew (versus living off a maintenance stream). As well, not having to make the transition from “perpetual-license heroin” to deferred revenue is attractive. In addition to Atlassian and Zoom, Slack just released its S1 and is an interesting comparison.

Q: What is so compelling about the company’s marketplace? What’s UiPath’s total addressable market and how fast is it growing?

A: When we are asked about TAM, we often point to Forrester, which has a view of a $3.1 billion market in 2021. But the reality is also the addictive nature that companies fall into when they realize that robots can do the work that employees hate. There is an “aha” moment at every organization. And when your realize that software robots actually make it easier to bring in new emerging technologies, such as AI, IoT and blockchain, the reality is that real market opportunity is so much higher. This is why we have so many investors behind us… from the top VC’s of Silicon Valley (Accel, CapitalG, Sequoia, Kleiner Perkins and IVP) and now the top public institutional investors (T. Rowe Price, Coatue, Dragoneer, Wellington, Sands Capital).

Author’s Comment: The Forrester numbers way undercount the TAM. Its reminiscent of when Frank Slootman took ServiceNow public and Gartner said Help Desk was a dying market that was only worth a couple billion dollars. What everyone missed at the time were the other use cases and opportunities to apply workflow automation to improve business lines. RPA — if made simple enough — will be the next big “Land and Expand” market. Add in Services and this will be a $10 billion marketplace by 2023.

Q: Does UiPath have a unique and sustainable competitive advantage relative to the competition and what are these advantages specifically?  

A: We have many and it is the sum of all collectively that makes the difference:

Open Innovation. We have long fostered a community (now over 400,000) that has free access to our software and training; and can freely share their automations anytime without us directly monetizing those efforts. Our platform is also open with APIs for an ecosystem to build around. This has been part of our product for years… and it’s new to our competitors. Our platform is the combination of amazing best-of-breed capabilities and our own innovation. We embed Elastic Search for massive meta-data storage. We build our own Computer Vision AI to easily understand an image or terminal emulator session.

Robots Learning New Skills. We are committed to keeping our robots relevant through the addition of new skills that we build, our partners build or our customers build. Today, we are adding new skills around Visual Understanding, Document Understanding, Process Understanding and Conversational Understanding. With UiPath Go!, our customers can share their own skills. The main goal here is that robots are moving from mimicking people to augmenting them — a strategy we call “Human in the Loop.”

Workforce Readiness and Education. We have 70 employees dedicated purely to training, skilling and upskilling workers of all ages. Today, we have over 60 universities committed to delivering “a Robot for every Student.” UiPath is not a class in a curriculum. It should be used across all classes in a business school. We are also working with employers to help reskill existing employees. This commitment to help employees benefit, learn and grow in this market transition runs deep at UiPath.

Author’s Comment: The UiPath ecosystem is growing rapidly. We’ve seen large global system integrators enter the space and are going hard after the opportunities presented by RPA. When Accenture, Deloitte, PriceWaterhouseCoopers, Ernst & Young and IBM enter markets, you know it’s starting to gain momentum. These companies like large opportunities that are transformative and RPA appears to be taking on that persona.

QL Some have said RPA is over. What inning are we in, in your view?

A: We are probably in the second inning. The first inning was early adopters and a ton of pilots and proofs-of-concept. This represented the bulk of 2016 and 2017. Today, we have hundreds of customers that have built out Robotic Operation Centers and have easily added hundreds of thousands of hours of capacity to their organizations. The result is much greater agility and speed. And, even much more satisfied employees. SMBC, as an example in Japan, expects to add 3 million hours of capacity by next year. As we progress to the third and fourth innings, we will see more adoption of machine learning alongside RPA to actually improve a process through real data-driven analytics.

Our sales this quarter will grow 3.5X versus the same quarter last year. This comes from a combination of expansions of existing customers and the fast uptake of new customers. The benefits from RPA are contagious and also are proven.

Finally, I don’t think many are saying that RPA is over. One is a frustrated analyst not happy that other analysts are gaining clout in RPA and Pega, and some of the BPM players, try desperately to downplay RPA. Just do a Google Trends on Robotic Process Automation versus “One Office” or “Digital Process Automation.”

Author’s Comment: The key to adoption is the ability for business users — domain experts — to use the technology. The company which can catalyze grass-roots adoption versus a top-down automation edict will have an advantage. The firm with the simplest system will have a leg up on the competition. Organizations will hire consultants to get started, but they want to learn how to fish, not outsource the catch.  

Q: There’s sometimes a narrative that puts RPA and AI together. But many practitioners point out that RPA is best for mimicking human interaction with an older, existing workflow, such as filling in forms or cutting and pasting information. While this can get pretty complex, it may not lend itself (at least today) to AI. What’s your take on the AI wild card?

A: And the narrative has been true. There is nothing wrong with getting real productivity benefits by simply having a robot do what a human does — delivering higher accuracy and freeing up the human. But, no question, our goal is not just to mimic, but to augment our “Human in the Loop” strategy.

We have invested heavily to show how one can best apply natural language processing, machine learning and deep learning to data flowing through an automation in the UiPath platform. We are making this actually “Drag and Drop AI.” Today, you can easily apply Stanford NLP, for example, to an automation and get context out of an email conversation. This is happening today. Or, you can drag-and-drop IBM Watson into an automation in UiPath and turn a decision from rules-based to experience-based.

I think most people do not understand that digitizing operations through RPA is actually the best path to apply a machine learning model to a real process. This is really where our innovation is today. So, while continuing to perfect computer vision is a top priority, making it super easy for developers to apply ML models and AI algorithms is a big part of our everyday thinking.

Author’s Comment: AI adoption has been a challenge for many companies. Their data models are siloed or data is very messy. As well, they often don’t have the data science expertise to leverage machine intelligence. Craig LeClair, an RPA expert from Forrester Research, agrees. He told SiliconANGLE that from his perspective, many companies are struggling to take advantage of AI and they haven’t yet realized the benefits. “RPA is a very practical form of automation that companies can get a handle on right now, and move the dial for digital transformation,” he said. Start by automating a process, eliminating mundane tasks and retraining people. Gather the data, learn and then apply machine intelligence as a “Phase 2” initiative.

What about jobs? Will Dr. Watson replace Dr. Welby?

One of the biggest knocks on automation in general and RPA specifically is that it will eliminate jobs. The concern has merit and workers are likely to be impacted, some significantly. In a 2017 study, for example, McKinsey & Co. found that “about half of all work activities globally have the technical potential to be automated by adapting currently demonstrated technologies.” However, the study went on to conclude that the proportion of the work actually displaced by 2030 is much lower, with a likely midpoint of 15 percent globally.

Nonetheless, the study concluded, “Major transitions lie ahead that could match or even exceed the scale of historical shifts out of agriculture and manufacturing. Our scenarios suggest that by 2030, 75 million to 375 million workers (3 to 14 percent of the global workforce) will need to switch occupational categories. Moreover, all workers will need to adapt, as their occupations evolve alongside increasingly capable machines.”

Indeed prominent academics, including MIT’s Andrew McAfee and Erik Brynjolfsson generally concur. In an interview on theCUBE with SiliconANGLE, they argued that machines have always replaced humans. But they pointed out that for the first time in history, they’re doing so for cognitive functions, which brings interesting challenges and opportunities.

“Technology’s always been destroying jobs, but it’s also always been creating jobs,” Brynjolfsson said. “A couple centuries ago, 90% of Americans worked in agriculture on farms. In 1900 it was down to about 41% percent. Today it’s less than 2%. All those people didn’t simply become unemployed. Instead, new industries were invented by Henry Ford, Steve Jobs, Bill Gates and lots of other people. Rather than becoming unemployed, they became redeployed.”

The question many ask is: Is this trend happening fast enough?

Brynjolffson cited some positive signs. For example, he said global poverty rates are dropping. Wealth and per capita GDP in the United States are at record highs. But concerns remain about the breadth of participation across society. In the past 10 to 15 years, despite the overall size of the wealth pie, median income has declined.  

What is the impact of technology on this trend? Is it hurting? Or can technology help? These are fair questions.

Normally, median income tracks productivity but not this time around. Should we be concerned? McAfee said we should be worried but protecting the past from the future is not the answer. Technology, he said must move forward and we need to foster innovation. If there are side effects and challenges, they must be understood and addressed.

Indeed, the two professors are sanguine about the future. Perhaps “Dr. Watson” won’t replace Dr. Welby and certainly in the near term won’t displace Dr. Oz or a compassionate interaction with a nurse. But, McAfee argued, “I do think that Dr Watson can and should take over for people in the developing world who don’t have access to first-world medical care. They’ve got a smartphone. OK, we’re going to be able to deliver absolute top-shelf, world-class medical diagnostics to those people fairly quickly. Of course, we should do that.”  

What do RPA customers say about business impact and jobs?

In its press release, UiPath cited the following recent customer wins: American Fidelity, BankUnited, CWT (formerly known as Carlson Wagonlit Travel), Duracell, Google, Japan Exchange Group, LogMeIn, McDonald’s, NHS Shared Business Services, Nippon Life Insurance Co., NTT Communications Corp., OrangeTM, Ricoh Company, Ltd., Rogers Communications, Shinsei Bank, Quest Diagnostics, Uber, US Navy, Voya Financial, Virgin Media and World Fuel Services. SiliconANGLE interviewed a number of UiPath users to understand better how they use RPA technology, its business impact and the effect on job displacement.

According to Leo DeSilva, a UiPath customer with Best Day Travel Group, a tour operator out of Cancun, Mexico, his company started out with an RPA pilot to prove that software robots could work. Best Day had six people working eight-hour shifts doing mundane tasks to issue tickets. They were able to deploy a single robot and can now handle all these tasks 24X7, with better quality.

“People didn’t lose their jobs because of software automation,” DeSilva said. “Our payback time was 15 days and it made our CFO very happy.” The execs actually wanted more. Best Day is now redeploying these people as domain experts to create new automations. According to DeSilva, these employees are essentially embracing and learning RPA and finding new ways to drive productivity.

The company’s “moonshot” is to double the number of passengers served with the same headcount. The goal is to invest more in RPA to drive consistency, better customer service and cross selling, such as offering a scuba diving excursion to someone taking a cruise. DeSilva told SiliconANGLE that RPA will drive many millions of revenue dollars for the company.

SiliconANGLE also spoke to Jean Younger, a vice president and Six Sigma expert at Security Benefit, a Topeka, Kansas retirement benefits company. Her focus is on using RPA to improve business processes. According to Younger, most business processes are between 3.2 and 3.8 Sigma, which is about 95% to 98% accurate. Normally, Younger said, it’s too expensive to improve that rate to Six Sigma.

Generally, use cases where the expense of achieving Six or Seven Sigma can be justified are situations that are potentially life-threatening, such as airplane engines. But business processes? A 3.5 or even 3.2 Sigma is acceptable. “But now,” said Younger, “I get to change that because with RPA, I can make them Six Sigma very cheaply, because I can pull them in, I got my bot, it comes over, pulls in the information, and there’s no double-keying. There’s no miskeys. It’s 100% accuracy.”

So what’s the ripple effect in terms of the business impact? Younger said it boils down to cost savings, efficiency and a better customer experience.

“You’re a customer, you get your policy, your name is wrong,” she explained. “How happy are you? You’re not real happy. You send it back. So, no more of that. I mean, that’s huge. So anything touching the customer going out of our business should be exactly how they put it on the application, especially if it was typed.”

World Fuel Services is a Miami-based energy services firm. Courtney Dominguez, a vice president at the company, said she was very concerned about jamming a top-down executive edict down the throats of employees. So rather than mandating robots, the company introduced RPA as a way to see how and if employees would buy into the concept.

“You want to do things smarter and do things more efficiently, but that makes people nervous too so there’s a lot of people that say, ‘I like what I do and if you do it smarter and more efficient, do you still need me?’” Dominguez said. “From the top, it’s easy to say robots, and that sounds really cool, but putting it into the water supply is a different story.”

So World Fuel Services hosted an RPA awareness day and then a bot-a-thon. “We went out and we had our whole enterprise download the community version of UiPath and just had them start experimenting and coming up with their own ideas and honestly, it was a great crowd-sourcing engine for us,” she said. “And we just came up with an instant pipeline of ideas and people really caught on and bought into it at that point.”

The bottom line

RPA technology is becoming well-funded and it’s moving fast. It’s a large market, growing fast with a virtually unlimited opportunity to drive the next wave of productivity improvements. Companies such as UiPath, Automation Anywhere and Blue Prism are leading the charge. With a fresh round of financing for UiPath, it will be interesting to see how the competition responds.

The TAM is effectively every company and every repeatable human process, so it’s huge. With all the hype around AI and digital transformation, the intriguing aspect of RPA is that it appears to be providing tangible results and a practical way to bring automation into organizations with a fast return on investment. It seems that the founders of RPA companies are also creating some massive wealth for their investors, employees and, of course, themselves.

Will RPA affect jobs? Undoubtedly. The key for employees is to ride the wave without becoming becoming driftwood. That means educating yourself, perhaps embracing RPA technology and leveraging your knowledge and expertise of process to add value to your organization.

And if it gets too hot in the kitchen and you feel like you risk eliminating your job, perhaps bring your knowledge and expertise to another company in your field. You may find you’re a transformation superstar.

(* Disclosure: UiPath is a sponsor of theCUBE and provided the customers SiliconANGLE interviewed. Neither UiPath nor other sponsors of theCUBE have editorial control of content on theCUBE or SiliconANGLE.)

Photo: SiliconANGLE