Is the RPA market in trouble?

Automation Anywhere, one of the best-funded RPA providers with over $1 billion capital raised to date, went the debt route this week, securing a $200 million loan from Silicon Valley Bank, SVB Capital and Hercules Capital.

Debt raises aren’t necessarily a bad thing — they’re a useful tool, particularly for companies with high annual recurring revenue — but the magnitude and timing of the Automation Anywhere raise suggests it was more out of necessity than choice.

“This new financing will provide operational capital for the next several years as Automation Anywhere continues to advance its cloud-native automation platform,” CEO Mihir Shukla told TechCrunch via email. “We’re using AI and intelligent automation to design tech that’s accessible to everyone — all kinds of business leaders, managers and citizen developers.”

While Shukla insists Automation Anywhere’s business is robust, with a customer base of around 5,000 and “over 50% revenue growth,” the RPA market has long faced headwinds as investors increasingly express skepticism that the technology, which automates repetitive software tasks at enterprise scale, can deliver on its many promises.

PitchBook notes that shares of UiPath — Automation Anywhere’s main rival, which went public in April 2021 — plummeted 71% this year. Meanwhile, another large player, Blue Prism, last September agreed to sell itself to Vista Equity Partners for £1.095 billion (about $1.5 billion).

Gartner predicts that while the RPA market will reach $2.9 billion by the beginning of 2023, the growth rate will end substantially lower than it was in 2021, when the segment expanded by 30.9% compared to the year prior. Assuming the $2.9 billion figure comes to pass, it’d translate to 19.5% growth between the years 2021 and 2022.

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Forrester also predicted recently that RPA software market growth would begin to flatten in 2023, and indeed, it seems headed in that direction. One contributor to the slowdown is a shift to more AI-fueled automation solutions within organizations, which are replacing the legacy processes that have historically been RPA’s selling point, analysts at the firm said.

“Automation Anywhere’s additional funding shows continued confidence in the RPA and in the ‘automation’ markets in general but also reflects the need for RPA providers to do more than simple task automation,” Craig Le Clair, a principal analyst at Forrester Research, told TechCrunch in an email interview. “RPA market is more splintering than consolidating. All but the three largest providers have been picked up by business process management or enterprise app vendors.”

It’s fair to say that the woes of the RPA market are at least partly attributable to misaligned customer expectations. RPA vendors’ sales teams tout the many benefits of RPA, like freeing up staff to do more meaningful tasks and refreshing legacy IT infrastructure. But what they don’t mention is that implementing an RPA solution often proves challenging.

A 2019 survey by low-code software platform Pega found that a majority of companies adopting RPA experienced longer-than-expected deployments and high amounts of required maintenance, with 87% saying that they had “substantial problems” with broken RPA software and 45% claiming that deployments took between one and two years.

And those are the RPA successstories — a fair amount (30% to 50%) of initial RPA projects outright fail, according to EY. The firm provides a few examples, like a telecom company that deployed RPA bots for managing its complaints-handling process but ran into coding errors that led to many grievances being diverted to the wrong queue, resulting in a backlog of complaints.

In a detailed report on the sector published several years ago, Everest Group identified the top roadblocks to implementing RPA in the enterprise, including executive buy-in and securing the resources needed to educate workers about RPA-driven workflows. The report notes that RPA involves more than just configuring software — it requires process redesign, navigating different stakeholders that have purview (e.g., security and IT), and coordinating with the many business units and departments the RPA technology might touch.

Many executives at the companies surveyed for the report were under the impression that RPA tech was simple, leading them to assume that value can be extracted without investment, resources and stakeholder alignment, according to the Everest Group authors.

A more recent study from ABBYY also traces the source of failure in RPA projects to a lack of understanding; 38% of enterprise executives responding said their projects failed because they were too complex, while 30% pegged the failure on poor understanding of the underlying automation tools or the intended automation processes.

“Enterprises that adopted RPA before the pandemic are starting to lean into expanding the scope of their automation initiatives,” Leslie Joseph, a Forrester analyst studying automation, told TechCrunch via email. “These companies are building ‘automation fabrics’: enterprise-wide models of automation that are pervasive, connected, modular and crafted out of heterogenous automation technologies (as opposed to just, say, RPA). Rather than just offer the promise of tactical task automation, ‘automation fabrics’ connect a company’s technology, processes and value chains, data and workforces to drive durable and strategic automation in support of the digitization imperative.”

The declining growth prospects have spurred some RPA vendors to hunt for potential new lines of revenue. For example, in June, UiPath launched a corporate venture arm, UiPath Ventures, becoming one of the first RPA firms to do so. Signaling its ambitions, UiPath Ventures’ inaugural startup was software-as-a-service workflow automation platform AirSlate, which offers electronic signature and document management solutions complementary to UiPath’s own.

Joseph believes this type of diversification is wise, particularly in light of the broader depressive macroeconomics.

“Standalone RPA vendors that are unable to shift direction and align with [the trends] — either through refreshed product road maps or via acquisitions — will show declining client value and therefore will find it more difficult to raise capital over time,” she said. “[P]ure-play RPA companies have either been acquired or are beginning to diversify upward into the process automation space. Basic task automation is commoditizing and is increasingly starting to look more like a ‘feature’ than a ‘product.’”

As bleak as the field may look, some RPA vendors continue to find success by way of VCs. In June, Bardeen raised $15.3 million for its tool that leverages browser-based automation to complete tasks. Luminai also raised money recently, securing $16 million for its RPA-like customer support platform.

Joseph said this reflects the continued confidence in “automation” markets as well as the growing emphasis on data-driven, purpose-built automation.

“The broader demand for technology to automate enterprise processes is growing and continues to be an important driver for ongoing digital transformation,” she said.