Now that the fear of robots and automation is beginning to subside, corporations are becoming increasingly aware of the value of an established human workforce, particularly as customer experience is now top of the agenda.
According to Guy Kirkwood, Chief Evangelist at UiPath and keynote speaker at Sourcing Decisions 2018, as robots are taking over repetitive, mundane tasks, they are breathing new life into the talent pool by allowing people to do more “brain work” than “hand work” – an unexpected result for the companies that expected to reduce their headcount with automation.
Before joining UiPath, a global robotic process automation (RPA) vendor, Kirkwood worked in BPO for more than two decades, giving him a broad perspective of the industry. UiPath saw its customer base expand from 100 clients in 2016 to 700 in 2017, as well as experiencing a whopping 850% revenue growth last year.
In this exclusive interview with Kirkwood, we attempt to settle the headcount reduction argument once and for all, as well as learn more about the true impacts of wide scale automation adoption.
Nearshore Americas: This month, UiPath received US$153 million in Series B investment funding from Accel, CapitalG, and Kleiner Perkins Caufield & Byers. What is it about RPA and UiPath that these VCs have such confidence in?
Guy Kirkwood: In total, we have now received US$183 million, following US$30 million in Series A funding from Accel last year. Accel backed Facebook, Spotify, Slack, and Dropbox during their own early stage funding rounds, and the organization has been watching our explosive growth over the last year, so they also led the Series B funding and this time extended it to the other VCs.
CapitalG is of particular interest because it used to be known as Google Capital, Alphabet’s venture arm, and has invested in 29 organizations, making UiPath number 30. Thanks to this, we get to align with Google’s activity in developing and deploying AI, which is really important for us.
RPA has been and continues to be really good at automating structured tasks and rule-based activities, and can do them better, faster, and cheaper than humans. What they are poor at is dealing with activities that utilize semi- or un-structured data.
UiPath is like a peanut butter and jelly sandwich, with UiPath being the PBJ in the middle. The lowest slice of bread are organizations that are providing some of the core requirements for AI. These include Celonis for process mining, Humley for Natural Language Processing, Enate for Robotic Service Orchestration (the workflow between robots and humans), and Abbyy, which has cracked semi-structured data.
The top slice of bread represents the big, independent software vendors, such as Oracle, SAP, Microsoft, and Google. RPA is unusual because it is not sold to IT; it is sold to operations, so as far as the big ISVs are concerned, because we operate across all industries and geographies, they get an entirely new route to market.
Nearshore Americas: For the clients eating that sandwich, how do they expect it to taste? In other words, what do large organizations expect to get from automation and AI, and why is ignorance of these tools such a problem in the market?
Guy Kirkwood: It’s the unknown, the fear of the new, and mainly because Hollywood has promulgated a misguided view. Numerous presentations have featured Skynet, HAL, iRobot, or some other nonsense that has no bearing on how AI is being used by companies, but that is what people have in their minds when we describe AI or robots. As an example, only two and half years ago, we were asked “how do you stop the robot from pressing the screen too hard?” I’m not joking.
That ignorance in the market is being reduced by analysts and consultancy firms, as they are educating the market through reports, which vendors like us are helping to shape – the potential of the tech is now being communicated far better than the fear of it.
When clients talk about wanting to do something with AI, in most cases they don’t have much idea what that entails. It’s like buzzword bingo, with people calling for blockchain, IoT, AI, or robots. From a pragmatic perspective, there are a number of technologies and tools that make up an “AI”, but the only reason that organizations really would want to use them is because it allows them to automate more tasks. That’s it.
In the US, we are seeing massive growth coming from a very rapid spread throughout the organization. As a result of this, eight customers have cycled through as our biggest customer in the last four months, five of which have been US headquartered. That’s because it’s all about scale – once an organization decides to go the automation route, they scale it extremely fast.
Vendors are generally not driving this adoption, consulting companies are. They are using RPA as the first step to take their customers through the digital transformation journey. This is because it is relatively cheap, fast, and provides good ROI, so the consultancies and systems integrators are training their people as fast as possible. It provides a great first step that allows them to sell the full gamut of DX activities.
Nearshore Americas: How does cost play into the fears of adopting automation, and what cost ratios are we looking at?
Guy Kirkwood: It’s currently about a third of the cost of an offshore individual for a fully-loaded robot with implementation included. That robot can do the work of between three and five people, leading to a minimum of a nine times efficiency gain per dollar spent. This is generally for back-office functions, as things are different in the front office.
With front office customer service operations, the attended robots are triggered by the activity of the agents, which requires one robot for every one human. By the time the customer has called in and gone through security, the robot will have found data from multiple systems or departments that the agent would normally have to toggle between, and you have a single version of the truth. This massively improves customer experience.
During my two decades in BPO, my colleagues and I persuaded companies to move their work to low-cost locations like India from the US because it was a third of the cost – not now, but it was then. Indian companies have moved to cheaper Tier 2 and Tier 3 cities because their business model generally hasn’t changed from the FTE-based pricing model. As they have grown, attrition has become a monster problem, which is why there is such interest in automation in the country.
It’s also been discovered that robots can be reconfigured to meet regulatory requirements, particularly in the BFSI (banking, financial services, and insurance) industries, because it’s a byproduct of the way that robots work. This means the technology can be applied to anti-money laundering or other data protection regulations, so the cost of meeting the regulatory requirement is effectively zero if you already have robots in place. For companies that keep getting fined by regulators for incorrect data or mis-selling, this is priceless. The SEC actually has a real fondness for RPA because it’s consistent, quick, deterministic, and there is no room for interpretation.
Nearshore Americas: Let’s clear this up once and for all. How is RPA and automation actually impacting workforces today?
Guy Kirkwood: It’s completely the opposite of what most people expect. Every organization, almost without exception, goes into automation to reduce the headcount. This is why everything in the press is focused on the millions of jobs that might be lost, which is definitely not what we are seeing.
What happens is that organizations create a business case around reducing headcount in their back-office operations and corporate functions, such as finance and accounting, procurement, or HR. What they in fact find when they implement robotics, particularly when it spreads across the organization, is that the value of the human capital inside the organization is much higher than they expected – as I describe it, just because people are doing monkey jobs doesn’t mean they’re monkeys.
If you take those crappy, mundane, repetitive parts of the job away from people, then they genuinely start to move up the value chain, providing a much better service within the organizations internally than the company expected – the business case changes as a result of that.
Although there are some reductions in headcount, that is happening naturally through attrition. What we are not seeing is mass redundancies as a result of automation. It also provides an agility and a gain in efficiency that allows organizations to move into new areas, or launch new products, without recruiting new people. It’s very rare to automate a process end to end; you need human activity somewhere along the line. Therefore the flow of that work is very important for efficiency.
Robots enhance humans to allow them to do more “brain work” than “hand work”. As more tasks and processes become automated, we will start to see a reduction in cubicle jobs, but a concomitant increase in the number of people working in customer service, because people in society as a whole want personal service – the value of the customer is going to become ever more important.
Nearshore Americas: What are the real impacts of RPA and automation on BPO and outsourcing? Are companies and their customers seeing cost reductions and positive effects, or is it still too early to say?
Guy Kirkwood: The outsourcers have been using automation for three or four years as early adopters, but they used it to reduce their cost to serve, rather than to transform themselves. They are transforming now, but it’s a pretty slow and painful process.
Right now, 9% of our global revenue comes from India, and 60% of the people who have signed up to our free online training, known as the UiPath Academy, also come from India, so from within those captives, global business services, shared services, and outsourced operations that have a combined 3.5 million people doing those tasks, people have started to recognize that they need to train themselves, meaning that those organizations are changing bottom up, not top down.
By region, RPA adoption in the industry is led by North America, followed by India, Japan, APAC, Australia, and South America. Countries that fell behind are now using RPA to leapfrog over issues related to labor arbitrage, which has been going on for the last 15-20 years.
Nearshore Americas: What can we expect from your keynote presentation at Sourcing Decisions 2018, and what do you anticipate from the conference?
Guy Kirkwood: What we are seeing with artificial intelligence and automation is both a revolution and an evolution in the way that the US and Canadian corporate world will run in the coming months and years. Therefore I’ll be looking closely at the local Canadian market, as well as addressing the impact that automation will have on both business and society in the region.
The fact that Sourcing Decisions is focused on this, one of the fastest-growing markets, is a testament to the leadership and foresight of the organization.