 theCUBE presents UiPath Forward 5, brought to you by UiPath. Hi everybody, Dave Vellante with David Nicholson. We're back at UiPath Forward 5. We're getting ready for the big guns to come in, the two co-CEOs. But we have a really special analyst panel now. We're excited to have Daniel Newman here. He's the principal analyst at Futurum Research and Andy Terai. He's the vice president and principal analyst at Constellation Research, guys. Good to see you. Thanks for making some time to come on theCUBE. Glad to be here. Always good. Andy, you're deep into AI. You and I have been talking about having you come to our mobile office. I'm really excited that we're able to meet here. What have you seen at the show so far? What are your big takeaways, day one and a half? Yeah, well, so first of all, I'm deep in AI because my last name has AI and I didn't talk about it at all. But all jokes aside, there are a lot of good things I heard from the conference, right? I mean, one is the last two years because of the pandemic. The growth has been phenomenal for a lot of this robotic automation, intelligent automation companies, right? So because the low hanging group of decision making processes have been already taken care of, where are they going to find the next growth spot, right? That was the question I was looking answers to. And they have some, in first one, a good acquisition they had, intelligent document processing. But more importantly, they're trying to move from deterministic rules-based RPA automation into AI-based, more probabilistic, subjective decision making areas. That's a huge market. There's tons of money involved in it. But it's going to be a harder problem to solve. Love to see the execute. Well, it's also a big pivot for the company. It started out as sort of a point product and now it's moving to platform. But the end of the macro is not an UI pass favor. It's not really in any tech company's favor, but especially a company that's going into a transition, transitioning to go to market, et cetera. What do you see? What's your take on the macro? I mean, I know you follow the financial markets very closely. There's a lot of negative sentiment right now. Are you as negative as the sentiment? Well, the broad sentiment comes with some pretty good historical data, right? We've had probably one of the worst market years in multiple decades. And of course, we're coming into a situation where all the factors are really not in our favor. You've got an interest rates climbing. You've got wildly high inflation. You've had a helicopter's dumping money on the economy for a period of time. And we're going to get into this great reset, is what I keep talking about. But I had the opportunity to talk to Bill McDermott recently on one of my shows. And Bill's CEO of ServiceNow, in case anybody out there doesn't know. But yeah, really well-spoken guy. But you know, him and I kind of went back and forth and we came up with this kind of concept that we're going to have to tech our way out of what's about to come. You can almost be certain recession is going to come. But for companies like UiPath, I actually think there's a tremendous opportunity because the bottom line is companies are going to be looking at their bottom line. Year ago, it was all about growth. A deal like the Adobe Figma deal would have been lauded. People would have been excited. Now everybody's looking at going, how are they paying that price? Everybody's discounting the future growth. They're looking at the situation. They're saying, what's going to happen next? Well, bottom line is now they're looking at that, how profitable are we? Are you making money? Are you growing that bottom line? Are you creating earnings? We're going to come into an era. We're going to come into an era where companies are going to say, you know what, people are expensive. The inflationary cost of hiring is expensive. You know what's less expensive? Investing in the cloud. Investing in AI. Investing in workflow and automation and things that actually enable businesses to expand, keep costs somewhat contained, fix costs and scale their businesses and get themselves in a good position from when the economy turns to return to growth. So since prior to the pandemic, cloud, containers, AIML and RPA slash automation have been the big four that from a spending data standpoint have been above the line, above all to kind of the rest in terms of spending momentum. Up until last quarter, AI and RPA slash automation declined. So my question is, are those two areas discretionary? Or more discretionary than other technology investments? You heard? Well, I think we're in a period where companies are, I won't say they've stopped spending, but you listened to Mark Benioff, he talked about the elongated sales cycle. I think companies right now are being very reflective and they're doing a lot of introspection. They're looking at their business and saying, we hired a lot of people, we hired really fast. Do we need to cut? Do we need to freeze? We've made investments in technology. Are we getting a return on them? We all know that the analytics, whether it's digital adoption platforms or just analytics in the business, say, what is all this money we've been spending doing for us and how productive are we? But I will tell you universally that companies are looking at workflow, automations that enable things, whether that's onboarding customers, whether that's delivering experiences, whether that's full price to quote technologies, automate, automate, automate. By doing that, they're going to bring down the cost, they're going to control themselves as best as possible in a tough macro and then when they come out of it, these processes are going to be beneficiary in a growth environment even more so. Andy, UiPath rocketed to a leadership position largely due to the product and the simplicity of the product relative to the competition and then as you well know, they expanded into platform. So how do you see the competitive environment? UiPath is again focusing on that platform play. Automation anywhere couldn't get to a public market. They had turnover at the go-to-market level. Chris Riley joined, a lot of hope left. Microsoft joined into the fray. Obviously it's having an impact that you're certainly seeing spending momentum around Microsoft. Then SAP, ServiceNow, Salesforce, every software company on the planet thinks they should get every dollar spent on software. They see UiPath's momentum and they say, hey, we can take some of that off the table. How do you see the competitive environment right now? So first of all, in my mind, UiPath is slightly better because of a couple of reasons. One, as you said, ease of use. They are able to customize it variable to what they want. So that's a real easy development advantage. And then when you develop the bots and the equivalent, it takes an average anywhere between two to maybe six weeks, generally speaking. In some industries, regular government might take more. So it's faster, quicker, easier than others, in a sense. So people love using that. The second advantage of what they have, in my mind, is that not only they are available as a managed SaaS solution on Azure Cloud, but also they have this version that you can install and maintain, manage anywhere you want, whether it's a public cloud or your own data center and so on and so forth. That's not available with almost not all of them have it. Few have it, but not all of the competitors have it. So they have an advantage there as well. Where it could become useful would be, one of the areas that they haven't even expanded is the government. Government? Is it what, sorry? The government-related solutions, right? Defense, government, all of these areas when you go, which haven't even started for various reasons. For example, they're worried about laying off people, worried about costs, worried about automating things. There's a lot of hurdles to overcome. But once you overcome that, if you want to go there, nobody's going to use or most of them will be very of using something on the cloud. So they have a solution for that version, variation of that. So they are set up to come to that next level. I mean, I don't know if you guys were at the keynote. The CEO talked about how their plans to go from one billion to five billion in AR. So they are set up to capture the market. But again, as you said, every big software company saw that momentum, they want to get into it. They want to compete with them, so. Well, to get to five billion, they've got to accelerate growth. I mean, if you do 20% CAG or over the next, you know, through the end of the decade, they don't quite get there. So they're going to have to, you know, they lowered their forecast down to mid-20s to 18%. They're going to have to accelerate that. And we've seen that before. We've seen it in cloud, where cloud, you know, accelerates growth even though you've got the law of large numbers. Go ahead, Dave. Yeah, so, Daniel, but how do we think of this market? How do you measure the TAM, the total addressable market, for automation? I mean, what's that metric that shows how unautomated are we? How inefficient are we? Is there a 5% efficiency that can be gained? Is there a 40% efficiency that can be gained? Because if you're talking about, you know, how much of the market can UI path capture? First of all, how big is the market? And then, is UI path poised to take advantage of that compared to the actual purveyors of the software that people are interacting with? If I'm interacting with an ERP system that has built into it, the ability to automate processes, then why do I need UI path? So first, how do you evaluate TAM? Second, how do you evaluate whether UI path is going to have a chance in this market where RPA is built into the applications that we actually use? Yeah, I think the TAM is evolving, and I don't have it in front of me right now, but what I'll tell you about the TAM is, there's sort of the legacy RPA TAM, and then there's what I would sort of evolve to call the IPA and workflow automation TAM that is being addressed by many of these software companies that you asked in the competitive equation and the question. What we're seeing is a world where companies are going to say, if we can automate it, we will automate it. That's actually non-negotiable. Now, the process in the ability to arrive at automation at scale has long been a battle front within every organization. We've been able to automate things for a long time. Why hasn't more been done? It's the same thing with analytics. There's been numerous studies in analytics that have basically shown companies that have been able to embrace, adopt, and implement analytics have significantly better performances. Better performances on revenue growth, better performances in operational cost management, better performances with customer experience. Guess what? Not everybody, every company can get to this. Now there's a couple of things behind this, and I'm going to try to close my answer because I'm getting a little long winded here, but the first thing is automation is a cultural challenge in most organizations. We've done endless research on companies digitally transforming and automating their business. And what we've found is largely the technology are somewhat comparable. Meaning, I've heard what he's saying about some of the advantages of partnership with Microsoft, very compelling. But you know what? All these companies that have automation offerings, whether it's through a Salesforce, Microsoft, whether it's a specialized RPA, like an automation anywhere, or a UI path, their solutions can be deployed and successful. The company's ability to take the investment, implement it successfully, and get buy-in across the organization tends to always be the hurdle. An old CIO stat, 50% of IT projects fail. That stat is still almost accurate today. It's not 50% of technology is bad, but those failures are because the culture doesn't get behind it, and automation's a tricky one because there's a lot of people that feel on the outside rather than the inside of an automation transformation. So Andy, how do you think about today's question? The SAPs, the service now is trying to, at least take some breadcrumbs off the table. They're going to create these automation stovepipes, but an automation anywhere or UI path is a horizontal play, are they not? And so, how do you think about that progression? So, first of all, all of these other companies, when they, whether it's a build, acquire, what have you, these guys already have, what, five, seven years on them. So it's going to be difficult for them to catch up with the center of excellence, knowledge, and the use cases, what they got to catch up with them. That's going to be a lot of catch up. Just to give you an idea, Microsoft Power Automate has been there for a while, right, and they're supposedly doing well as well, but they still choose to partner with the UI path as well to get them to the next level. So, there is going to be competition coming from all areas, but it's about, you know, so who is the competition? Is it Microsoft chipping away at individual productivity? Is it a service now who's got a platform play? Is it themselves just being able to execute? All, plus also, but I think the most, I wouldn't say competition, but it's more people are not aware of what areas need to be automated, right? For example, one of the things I was talking about with a couple of customers is, so they have an automation hub where you can put the process and tasks that need to be automated, and then you prioritize and start working on it. And almost all of them that I speak to, they keep saying that most of the process and task identification that they need to do for automation, it's manual right now. So, which means it's limited. You have to go and execute it. When people find out and tell you that's what need to be fixed, you try to go and fix that. But imagine if there's a way, I mean, they have solutions they're showcasing now, if it becomes popular, if you are able to identify tasks that are very inefficient or process that's very inefficient automatically, score them up, saying that you know what, this is what is going to be ROI and you execute on it, that's going to be huge. So, I think Daniel's right. There's no shortage of a market. I would agree with you. Rob Enslin this morning talked about the progression. He sort of compared it to ERP of the early days. I sort of have a love hate with ERP because of the complexity of the implementation and the cost. However, first of all, a couple points, and I would love to get your thoughts. For you, if you went back 25 years, you wouldn't have been able to pick SAP out of a lineup and say that's going to be the leader in ERP and they ended up doing really, really well. But the more interesting angle is if you could have figured out the customers that were implementing ERP in a really high quality fashion, those are the companies that really did well. You buy their stocks, they really took off because they were killing their other industry competitors. So, fast forward to automation. Will automation live up to its hype and European opinion? Will it be as transformative? And will the practitioners of automation see the same type of uplift in their markets, in their market caps, in their competitiveness as did sort of the early adopters and the excellent adopters of ERP? What are your thoughts? Well, I think it's an interesting comparison. Maybe answer it slightly different way. I think the future is that automation is a non-negotiable in every enterprise organization. I think if you're a large organization, we have absolutely filled our organizations with waste. Too much overhead, too much expense, too much technical debt, and automation is an answer. This is the way we want to interact, right? We want a chatbot that actually gives us good answers that can answer on a Tuesday at 11 p.m. at night when we want to know if the right dog food, and I'm saying that, that's what we want. That's the outcome we want. And businesses have to be driven by the outcome. Here's what I'm not sure about, Dave, is we have an era where over the last three to five years, a lot of products have become companies and a lot of them products became companies and ended up in public markets. And so the RPA space is one of those areas that got this explosive amount of growth. And you look at it and there's two ways. Is this horizontally a business, RPA? Or is this going to be something that's going to be a target of those Microsofts and those SAPs and say, look, we need hyper-automation to be deeply integrated at the ERP, CRM, HCM, SCM level. We're going to build by this or we're going to build this. And you're already hearing it in the partnerships. But this is how I think the story ends. I think either companies like UiPath get much bigger, they get much more rounded in their offerings, or you're going to have a large company, like a Microsoft come in and say, you know what, buy it rather than build it. Can this company, maybe not so much here, but can a company like Automation, anywhere, stay acquisition company? I use the service now as a parallel because they're a company that I thought would always end up inside of a bigger company. And now you're like, I think they're too big. I think they've jumped that shark down. They're acquisition proof, I would agree with you. These guys aren't yet, nor is Automation, they work for a while. And it's not necessarily a bad thing. Sometimes getting BitBud is good, but what I mean is it's going to be core and these big companies know it because they're all talking about it. But as independent analysts, we want to see independent companies. I want to see the right thing. It just makes it more fun. The right thing for customers. Yeah, but you know, okay, Oracle buying one of these guys, more customers, I'm kidding. Yeah, I guess, it's the right thing. It just makes it more fun when you have really good independent competitors that can be and spend way more on R&D than these big companies who spend a lot more on stock buybacks. But I know you got to go. Thanks so much for spending some time making time for theCUBE, Andy. Great to see you. Good to see you as well. All right, we are wrapping up day one, Dave Vellante and Dave Nicholson live. You can hear the action behind us forward at five on theCUBE. We're right back.