Feb. 2 2021 10:02 AM

The long-overdue RPA market consolidation takes off

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    For far too long, the market valuations for RPA vendors have been so lofty — so out of this world — that the natural progression of RPA being consolidated into digital process automation (DPA) platforms through mergers and acquisitions has been completely stymied. High valuations have been a significant roadblock for the many process automation and content management vendors seeking to integrate RPA into their evolving intelligent business automation platforms. Ideally, these two technology solutions for tasks and processes belong together in a more elegant, integrated way than the crazy quilt of overlapping RPA/DPA vendor partnerships that were quickly stitched together to get around stratospheric market caps.

    Here’s why figuring out this muddled state of affairs is so important to RPA buyers:

    RPA excels at task automation, while digital process automation, also known as simply process automation, manages the more complex, structured and dynamic processes. In other words, process automation tackles the big picture, such as accounts payable, order processing, and customer support, or even end-to-end processes such as order-to-cash and procure-to-pay. With this rich process environment, where do tasks fit? Tasks are always completed within the context of business processes – whether those processes are automated, semi-automated, or manual. From a business solutions perspective, RPA and process automation systems belong together to fully address the business process.

    The RPA/DPA world is now righting itself. There’s a clear trend, as these three important process automation and/or content management vendors made RPA acquisitions in the past eight months, while showing how it can be done without breaking the bank:
    • Appian acquired Jidoka, a small RPA vendor based in Spain
    • IBM acquired WDG, a small Brazilian RPA vendor
    • Hyland just acquired Another Monday, a small RPA vendor headquartered in Germany
    These vendors went through extensive build/buy/partner decisioning and decided to partner in the short term while vetting potential acquisition candidates. Ultimately, they found that buying and integrating RPA products was a faster onramp than building integrated RPA into their process, analytics and content product roadmaps. Because the three acquisition targets were small, undervalued companies working under the radar, the business cases for these acquisitions were compelling.

    The companies making RPA acquisitions in 2020 join five other process/content/applications companies that have already acquired RPA products and integrated them into their platforms: Kofax, Microsoft, Nintex, Pegasystems and SAP. Process automation and content management vendors ignore RPA at their peril because SAP’s and Microsoft’s RPA acquisitions alone underscore the market potential for RPA as seen through the eyes of tech giants.

    As a result, it’s interesting trying to predict which vendors will decide to buy other small RPA companies — or, to their detriment, take a pass on this market altogether. For example, if and when will Salesforce or OpenText make their moves? Will some of the smaller process automation vendors ink a deal, similar to how Nintex expanded its portfolio through smart acquisitions. Buyers could come from many diverse markets, such as application software, low-code tools, content management, customer communications management and collaboration, to name a few.

    There’s one other big change to watch. The valuations for current RPA market leaders are likely to tumble because it will be hard for three leading vendors — Automation Anywhere ($6.8 billion valuation as of July 13, 2020), Blue Prism (£1.28 billion market cap as of Aug 20, 2020) and UiPath ($10.2 billion valuation as of July 13, 2020) — to maintain their incredible market caps. This doesn’t mean they will have done anything wrong. It’s just an economic reality that what goes up really will eventually go down. To counteract this situation, expect these companies to go through their own build/buy/partner strategies and ultimately make additional acquisitions in AI, process mining and digital process automation. They have considerable financial and marketing clout. Don’t count them out for a second as they forge new paths to support their growth strategies.

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