 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. In its early days, robotic process automation emerged from rudimentary screen scraping, macros, and workflow automation software. Once a script heavy and limited tool that largely was used to eliminate mundane tasks for individual users, and by the way still is, RPA has evolved into an enterprise-wide mega-trend that puts automation at the center of digital business initiatives. Hello, and welcome to this week's Wikibon Cube Insights powered by ETR. In this Breaking Analysis, we present our quarterly update of the trends in RPA and automation and share the latest survey data from enterprise technology research. RPA has grown quite rapidly and the acronym is becoming a convenient misnomer in a way. I mean, the real action in RPA has evolved into enterprise-wide automation initiatives. Once exclusively focused really on back office automation in areas such as finance, RPA has now become an enterprise initiative as many larger organizations especially move well beyond cost savings and outside of the CFO's purview. We predicted in early Breaking Analysis episodes that productivity declines in the US and Europe especially would require automation to solve some of the world's most pressing problems and that's what's happening. Automation today is attacking not only the labor shortage but it's supporting optimizations in ESG, supply chain, helping with inflation challenges and proving capital allocation. For example, the supply chain issues today, think about what they require. Somebody's got to do research, they got to figure out inventory management, they got to go into different systems, do prioritizations, do price matching and perform a number of other complex tasks. These are time consuming processes and now the combination of RPA and machine intelligence is helping managers compress the time to value and optimize decision-making. Organizations are realizing that a digital business goes beyond cloud and SaaS. It puts data, AI and automation at the core, leveraging cloud and SaaS but reimagining entire workflows and customer experiences. Moreover, low-code solutions are taking off and dramatically expanding the ability of organizations to make changes to their processes. We're also seeing adjacencies to RPA becoming folded into enterprise automation initiatives and that trend will continue. For example, legacy software testing tools. This is especially important as companies satisfy their business and look for modern testing tools that can keep pace with their transformations. So the bottom line is RPA or intelligent automation has become a strategic priority for many companies and that means you got to get the CIO involved to ensure that the governance and compliance edicts of the organization are appropriately met and that alignment occurs across the technology and business lines. A couple of years ago when we saw that RPA could be much, much more than what it was at the time we revisited our total available market or TAM analysis and in doing so, we felt there would be a confluence of automation, AI and data and that the front and back office schism would converge. That is shown here, this is our updated TAM chart which we shared a while back with a dramatically larger scope. We were interested that just a few days ago by the way, Forrester put out a new report picked up by Digital Nation that the RPA market would reach 22 billion by 2025. Now, as we said at the time, our TAM includes the entire ecosystem including professional services as does Forrester's recent report and the projections therein. So see that little dotted red line there that's about at the 22 billion mark we're a few years away but we definitely feel as though this is taking shape the way we had previously envisioned. That is to say a progression from back office blending with customer facing processes becoming a core element of digital transformations and eventually entering the realm of automated systems of agency where automations are reliable enough and trusted enough to make real time decisions at scale for a much, much wider scope of enterprise activities. So we see this evolving over the 2020s so the balance of this decade and becoming a massive multi hundred billion dollar market. Now, unfortunately for later investors this enthusiasm that I'm sharing around automation has not translated into price momentum for the stocks in this sector. Here are the charts, the stock charts for four RPA related players with market values inserted in each graphic. We've set the crosshairs approximately at the timing of UiPath's IPO and that's where we'll start UiPath IPO last April and you can see the steady decline in its price. UiPath's series F investors got in at $35 billion valuation. So that's been halved more than half but UiPath is the leader in this sector as we'll see in a moment. So investors are just going to have to be patient. Now, you know the problem with these hot tech companies is the cat gets let out of the bag before the IPO because they raise so much private money it hits the headlines and then at the time you had zero interest rates you had the tech stock boom during the pandemic so you're just going to have to wait it out to get a nice return if you got in sort of post IPO. You know, which I think this business will deliver over the long term. Now, Blue Prism is interesting because it's being bought by SS&C technologies after a bidding war with Vista. So that's why the stock has held up pretty reasonably. Vista is a PE firm which owns a Tibco and was going to mash it. Blue Prism that is together with Tibco. And that was a play I always liked because RPA is going to be integrated across the board and Tibco is an integration company and I felt it was in a good position to do that but SS&C obviously said, hey, we can do that too. And look, they're getting a proven RPA tech stack for 10% of the value of UiPath. So, you know, might be a sharp move. We'll see, or you know, maybe they'll jack prices and squeeze the cash flow. I honestly have no idea. And we show the other two players here who really aren't RPA specialists. Appian is a low-code business process development platform and PEGA systems, of course, we've reported on them extensively. They're a long time business process player that has done pretty well but both stocks have suffered pretty dramatically since last April. So let's take a look at the customer survey data and see what it tells us. The ETR survey data shows a pretty robust picture, frankly. This chart depicts the net score or customer spending momentum on that vertical axis and market share or pervasiveness relative to other companies and technologies in the ETR data set that's on the horizontal. That red dotted line at the 40% mark, that indicates an elevated spending level for the company within this technology. There's the chart insert you see there shows how the company positions are plotted using net score and market share or ends. And ETR's tool has a couple of cool features. We can click on the dot and it allows you to track the progression over time. In this case, going back to January, 2020, that's the lines that we've inserted here. So we'll start with Microsoft and we'll get that over with Microsoft. Microsoft acquired a company called Soft Emotive for a reported $100 million there about a little more than that. So pretty much a lunch money for Mr. Softy. So Microsoft bought the company in May and look at the gray line where it started showing up in the October ETR surveys at a very highly elevated level. Typical Microsoft, right? I mean, a lot of spending momentum and they're pretty much ubiquitous and it just stayed there and it's gone up and to the right. Just really a dominant picture. But Microsoft Power Automate is really kind of a personal productivity tool not super feature rich like some of the others that we're going to talk about. It's just part of the giant Microsoft software estate and there's a substantial amount of overlap between, for example, UI paths and Automation Anywhere's customer bases and Power Automate users. And it's speaking with a number of customers, they'll say, yeah, we use Power Automate but they see enterprise automation platforms as much more feature rich and capable and they see a role for both but it's something to watch out for because Microsoft can obviously take a bite out of virtually any platform and moderate the enthusiasm for it. But nonetheless, these other firms that we're mentioning here, the two leaders, they really stand out UI path and Automation Anywhere. Both are elevated well above that 40% line with a meaningful presence in the dataset and you can see the path that they took to get to where they are today. Now we had predicted in 2021 that in our predictions post that Automation Anywhere would IPO in 2021. So we predicted that in December of 2020 but it hasn't happened yet. The company obviously wasn't ready and it brought in new management. We reported on that Chris Riley as the chief revenue officer and it made other moves to stir up their business. Now let me say this about Riley. I've known him for years. He's a world-class sales leader, one of the best in the tech business and he knows how to build a world-class go-to-market team. I guarantee that's what he's doing. I have no doubt he's completely reinventing his sales team, the alliances. He's got a lot of experience of that when he was at EMC and Dell and HPE and he knows the channel really well. So I have a great deal of confidence that if Automation Anywhere's product is any good, which the ETR data clearly shows that it is and the company is going to do very well. Now it's for the timing of an IPO. Look, with the market shoppiness, who knows, Automation Anywhere, they raised a ton of dough and it was last valued around in 2019. It was just north of 7 billion and so if UiPath is valued at 15 billion, you could speculate that Automation Anywhere can't be valued at much more than 10 billion, maybe a little under, maybe a little over. So they might wait for the market volatility to chill out a little bit before they do the IPO or maybe they've got some further cleanup to do and they want to get their metrics better, but we'll see. Now, to the point earlier about Blue Prism, look at its position on the vertical axis, very respectable. At just a finer point on PEGA, we've always said that they're not an RPA specialist but they have an RPA offering and a presence in the ETR dataset in this sector. So, and they got a sizable market cap so we'd like to include them. Now here's another look at the net score data. The way net score works is ETR asks customers, are you adopting a platform for the first time? That's that lime green there. Are you accelerating spending on the platform by 6% or more relative to last year or sometimes relative to some other point in time? This is relative to last year. That's the forest green. Is your spending flat or is it, that's the gray, or is it decreasing by 6% or worse? Or are you churning? That's that bright red. You subtract the reds from the greens and you get net score, which is shown for each company on the right, along with the ends in the survey. So other than PEGA, every company shown here has new adoptions into double digits, not a lot of churn, UiPath and Automation Anywhere have net scores well over that 40% mark. Now, some other data points on those two. ETR did a little peeling of the onion in their data set, and I found a couple of interesting nuggets. UiPath in the Fortune 500 has a 91% net score and a 77% net score in the global 2000. So significantly higher than its overall average. This speaks to the company's strong presence in larger companies and the adoption in how larger companies are leaning in. Although UiPath is actually still solid in smaller firms as well, by the way, but now the other piece of information is when asked why they buy UiPath over alternatives, customers said a robust feature set, technical lead and compatibility with their existing environment. Now, to Automation Anywhere, they have a 72% net score in the Fortune 500 well above its average across the survey, but 46% only in the global 2000 below its overall average shown here of 54. So we'd like to see a wider aperture in the global 2000. Again, this is a survey set, who knows, but oftentimes these surveys are indicative. So maybe Automation Anywhere just working that out, more time figuring out the go to market in the global 2000 beyond those larger customers. Now, on AA, would ask why they buy from Automation Anywhere versus the competition customers cited a robust feature set, it's like UiPath, technological lead just like UiPath and fast ROI. Now, I really believe that both for Automation Anywhere and UiPath, the time to value is much compressed relative to most technology projects. So I would highlight that as well. And I think that's a fundamental reason, one of the reasons why RPA is taken off. All right, let's wrap up. The bottom line is this space is moving and it's evolving quickly and we'll keep on a fast pace given the customer pull, the funding levels that have been poured into the space and of course, the competitive climate. You know, we're seeing a new transformation agenda emerge. Pre COVID, the catalyst was back office efficiency. During the pandemic, we saw an acceleration and organizations are taking the lessons learned from that forced March experience, the digital I sometimes call it and they're realizing a couple of things. One, they can attack much more complex problems than previously envisioned. And two, in order to cloudify and satisfy their businesses, they need to put automation along with data and AI at the core to completely transform into a digital entity. Now, we're moving well beyond automating bespoke tasks and paving the cow path, as I sometimes like to say. And we're seeing much more integration across systems like ERP and HR and finance and logistics, et cetera, collaboration, customer experience. And importantly, this has to extend into broader ecosystems. We're also seeing a rise in semantic workflows to tackle more complex problems. We're talking here about going beyond a linear process of automation, like for instance, read this, click on that, copy that, put it here, join it with that, drag and drop it over here and send it over there. It's evolving into a much more interpretive actions using machine intelligence to watch, to learn, to infer, and then ultimately act, as well as discover other process automation opportunities. So think about the way work is done today. Going into various applications, you grab data, you trombone back out, you do it again, in and out, in and out, in and out of these systems, et cetera, ad nauseam and replacing that sequence with a much more intelligent process. We're also seeing a lot more involvement from C-level executives, especially the CIO, but also the chief digital officer, the chief data officer, with low code solutions enabling lines of business to be much more involved in the game. So look, it's still early here, this sector in my view, hasn't even hit that steep part of the S-curve yet, it's still building momentum with larger firms, leading the innovation, investing in things like centers of excellence and training, digging in to find new ways of doing things. It's a huge priority because the efficiencies that large companies get, they drop right to the bottom line and the bigger you are, the more money that drops. We see that in the adoption data and we think it's just getting started. So keep an eye on this space. It's not a fad, it's here to stay. Okay, that's it for now. Thanks to my colleagues, Stephanie Chan who helped research this week's topics and Alex Meyerson on the production team who also manages the Breaking Analysis podcast, Kristen Martin and Cheryl Knight, help get the word out on social. Thanks guys, your great, great teamwork, really appreciate that. Now remember, these episodes, they're all available as podcasts wherever you listen, just search Breaking Analysis podcast. Check out ETR's website at ETR.ai and we also publish a full report every week on wikibon.com and siliconangle.com. You can get in touch with me directly, david.volante at siliconangle.com is my email. You can DM me at dvolante or comment on our LinkedIn posts. This is Dave Vellante for theCUBE Insights, powered by ETR, have a great week, stay safe, be well and we'll see you next time.