Automating the Future
Being a Robotic Process Automation (RPA) developer in my last job, I have had my first hand experience at how wonderful it was. Imagine having someone to “do” the exact same work as you do everyday and not make any mistakes. That’ll be a lot of time and energy savings!
RPA is a software that links any application using a software platform to automate manual tasks through the steps programmed by the user. In the RPA market, there are a few major players. The top 3 companies are UiPath, Automation Anywhere and Blue Prism.
I have made a comparison table of the 3 softwares for easy reference below in Table 1.
It is clear that in terms of market share, UiPath takes the lead at about 48%. It requires minimal coding knowledge and more of design thinking for the creation of workflow for the software. In terms of pricing, besides the licence cost, there is also implementation costs. From my experience, I personally feel that UiPath may be the easiest to learn for a beginner as it does not require much coding skill.
In terms of adoption rate, both UiPath and Automation Anywhere provide the community edition for free and they have many free materials online for self-learning. By providing freemium software, it will drive up adoption rate for individuals. When adoption rate in individuals increases, companies will be ready to go into a wide scale adoption if their employees are knowledgeable in the software. This will also drive down cost of hiring developers or outsourcing the development work.
Let’s do some analysis of UiPath. We will analyse:
- Profitability
- Brand awareness
Profitability
UiPath uses the term Annualize Renewal Run-rate (ARR) as its KPI. The ARR refers to annual revenue per year assuming there is no new customers and no customers cancelling their subscription. They have a ARR of $653M, assuming their licence cost $3990/yr, they have about 163,659 paid users per year. They have about 10,000 downloads a month in the community, that amounts to 120,000 community users per year. In a freemium model, to determine profitability, we need to figure out what is the average cost of each community user as the paid users are “paying” for them.
Since the ratio of paid users to free users is about 1.36, the cost of free user is covered.
Please note that the calculation is solely based on my own assumption.
Brand awareness
In terms of brand awareness, I took proxy from google search trends as shown in the graph below. The blue line represents UiPath and the amount of searches has not been dropping for the past 1 year, this shows us that people are still searching for this software.
The green line represents the overall search for Robotic Automation Process topic and it is on a slight increase. I believe that the trend will still continue to be on the rise as automation is important for the future workplace.
Let’s take a look at the marketing cost. It has reduced by approximately 21% from $483k to $380k from 2020 to 2021. In terms of actual revenue generated per dollar spent on marketing, it was $0.70 in 2020 and $1.59 in 2021. This is a very good sign as UiPath is on traction to gaining brand awareness.
In conclusion, as an ex-RPA developer, I have seen first-hand how RPA has benefitted my fellow colleagues in their productivity. I believe that with the potential market size of $60B opportunities, RPA has ample room for growth.
In terms of investing opportunity, UiPath seems to be the best bet as it has a high market share, good management team, the cost of every free user is covered and it has good brand awareness among the public. Most importantly, it has a good user interface that is made easy for everyone!
Thanks for reading!
