A digital revolution led by RPA (Robotic Process Automation) has been underway and is very subtly but quickly changing the way work gets done. In my view, this is a good thing – with an aging population in several developed and nearly developed economies, we are in dire need to find alternate ways to get the work done, either through automation or human labour.
Globally, RPA has been the go-to tactical lever to reduce operating costs by automating rules-driven, error-prone manual processes. The benefits of RPA extend beyond cost reduction due to headcount release. People thus released can be retrained and deployed to perform important strategic roles or those that require human intelligence based on subjective knowledge.
Results have shown that RPA can manage nearly 60% of the processes across most organisations that are either manual, straight through, or error prone. However, this does represent the true picture, because this 60% of processes are not end-to-end enterprise-wide processes. In terms of end-to-end enterprise-wide processes, RPA can address about 25-35% of the enterprise-wide processes. You may automate a large part of Procure to Pay (standard) using RPA and pieces of order to cash, but touchless end-to-end procure to pay or order to cash using RPA is mostly a pipe dream.
Another point to note is that most of the processes being automated are primarily in Finance, HR, IT, and reporting and not really on the operations side like manufacturing, inventory management, supply chain, logistics, research & development.
Besides industries have not yet consistently adopted RPA e.g., banking, financial services, and shared services are the furthest ahead with consumer products, retail, and manufacturing following close behind. Engineering, metals, mining, hospitality, healthcare, insurance, etc have some catching up to do.
Thus far, RPA was at best a tactical initiative barely visible to the CEO and the Board. But the disruption driven by the pandemic has forced the businesses to leverage emerging technology in a far more strategic manner to truly complement the human worker e.g., automate processes end to end in a lights out mode and not just in finance, HR, and IT but enterprise-wide.Now the next question is how does one automate processes end to end and enterprise-wide? These can be addressed through a combination of emerging technologies such as RPA, machine learning, natural language processing and generation, intelligent chatbots, intelligent workflow, etc.
As an example, let us look at the process of invoice processing with varied invoice inputs (structured and unstructured inputs), invoice classification of goods vs services, and correct tax verification. This can be solved using NLP for reading varied invoice input formats with structured and unstructured inputs, invoice classification and tax validation can be done by a machine learning algorithm and the approval and posting can be done by RPA. Intelligent Automation is now a strategic lever to help organisations operate in a lights out mode – it is the intelligent digital worker – that can not only automate key processes end to end, but also help organisations to create new products and services e.g., the ability of the pharma companies to conduct large scale research and create vaccines and drugs to fight the pandemic in record time, efficiently scale the supply chain and helping humanity. Needless to add they improved their revenue and profitability.
Finally, let’s look at some numbers. Per a Forrester report, the RPA market is set to be around $2.9 billion in 2021 up from $125 million in 2016. This is dwarfed by the enterprise application market pegged at around $215 billion (by several analysts such as Allied Market Research, IDC, etc). Interestingly as per a Gartner report from FY20, the process agnostic software that powers hyper-automation (e.g. RPA, Low Code application platforms, Artificial intelligence, virtual assistants) is likely to be around $25 billion in 2021 and $30 billion in 2022.
So, is RPA the darling of PEs vs PEs that need to look beyond?
The simple answer is that traditional RPA has matured and is now being replaced by Intelligent Automation, which is a combination of RPA, ML, NLP, NLG, intelligent chatbots, and intelligent workflow. A pure-play RPA product company (most barring a few are despite whatever they claim) looks exciting in the short term (2-3 years at best) and may not be a great investment option. On the other hand, product companies that are focussed on Intelligent Automation can be the real blue-chip and investment multipliers both in the short and long term as not only can Intelligent Automation be leveraged to automate routine and mundane error-prone manual processes, but also automate complex processes that need subjective knowledge and can help organisations create new products, new services, new experiences, improve revenue, improve margins and EPS – in short, improve tangible stakeholder and shareholder value in the long term.
The writer is Partner – Intelligent Automation at EY India.