RPA Market Size: Trends, Growth, Global Market Forecast
The COVID-19 pandemic has created both winners and losers, and, as an angel investor with a focus on tech, I’ve been fascinated at how tech founders and startups have risen to the challenge of this time, using it as an opportunity to create and innovate, especially in the robotics process automation market. I’ve added a few of these companies to my portfolio recently, including Gecko Robotics, Cafe X, and SoftWear Automation, which all utilize RPA in vastly different ways, from infrastructure inspection and coffee orders to t-shirt production.
Despite economic pressures caused by the pandemic, the global robotics process automation (RPA) market is predicted to see major growth in 2021 and beyond.
Why? According to Gartner Research, the central driver for this growth is RPA software’s ability to improve business processes in three ways: by increasing speed, quality, and productivity. With rising demands to reduce cost during the pandemic, RPA is helping companies cut costs and improve their bottom line by automating their systems and reducing the number of employees involved in redundant tasks.
Robotics Process Automation Market Size Predicted to Reach $2 Billion in 2021
According to Gartner’s latest market forecast, revenue for RPA software is projected to reach close to $2 billion ($1.89 billion) in 2021. This is an increase of 19.5% from 2020 and another year of massive growth compared to the 11.9% growth from 2019 to 2020.
One contributing factor to this growth is the expected decrease in RPA prices by 5-10% in 2021 and 2022, democratizing RPA and making it more available to businesses of all sizes.
RPA Market Size Projected to Reach Almost $9 Billion by 2024, Over 25 Billion by 2027
Fast forward to 2024, and the RPA market is expected to reach nearly $9 billion ($8.75 billion) as it continues to mature in its credibility, applicability, and clarity, according to Grand View Research, Inc.
As the market moves towards this projection, we’ll see more businesses integrating RPA in place of their standard outsourcing model. Since RPA tools are 65% less expensive than staffing full-time employees, why outsource jobs when software can get the work done with less overhead and greater efficiency?
Challenges Faced in the RPA Market
The current challenges businesses are facing amidst the pandemic, while not ideal, have made way for a smooth transition into the RPA market.
When COVID-19 hit in 2020, most businesses lost revenue. That loss of revenue meant they needed to cut overhead expenses to improve the bottom line. To reduce cost, most businesses started reducing employees and looking to automate their most redundant processes with software. That’s where RPA came in.
Today, small- to mid-sized enterprises (SMEs) use RPA because they’re facing the most pressure to monitor their human resources and costs. As for large enterprises, the biggest challenge they’re facing is the move to remote work, which has majorly affected their overall business.
Still, to see success in the RPA market, new vendors and startups will need to mitigate the high cost associated with the software and overcome the lack of awareness around RPA, especially in underdeveloped economies.
How Robotics Process Automation Will Impact Future Markets
While many people assume RPA will take the place of human workers in future markets, that’s not necessarily the case. RPA will handle the mundane, repetitive tasks, freeing up human workers to handle more complex tasks.
The beauty of RPA is that it can handle its prescribed functions while continuously learning new skills and scaling as needed—all without human intervention. We’ll see more RPA used for tasks such as payroll processing, and vendor onboarding in the future while real workers will be tasked with more involved jobs, like customer service.
Many investors are also relying on ESG (environmental, social, and governance) criteria to drive investment decisions, looking to invest in more sustainable startups. RPA software automation is a great example of how startups can employ ESG criteria, as automation and robotics can help directly tackle global problems such as pollution, excess demand for limited resources, safety concerns, and wage inflation.
Additionally, COVID-19 is accelerating the need for a digital workforce, which is good news for RPA startups on the horizon. When RPA startups target companies, however, they should be aiming more for the CFOs and COOs rather than IT. Gartner estimates that nearly half of new RPA clients will come from buyers outside of IT because C-suite executives like the quick deployment and low-code automation capabilities RPA offers.
Companies that already invested in RPA pre-COVID-19 have seen the immense benefits of cost savings and lean production from their investment. They’ll continue to integrate more of this technology in the coming years, not only to reduce cost but also to safeguard their business against future black swan events.
RPA Market Trends
As RPA gets better, and more enterprises begin adopting it, its functionalities will continue to expand and it will become applicable to new business verticals. While market growth took a hit with the onset of COVID-19, companies are re-energized to start integrating more of the software into their processes to reduce errors, slash costs, and enhance human resource productivity.
Robotics Process Automation Software Revenue Chart
As you can see in the table below, the RPA market is projected to grow at a compound annual growth rate (CAGR) of over 40%. According to ResearchandMarkets.com’s findings, we can expect this trend to continue through 2027. While we saw a decline in the growth rate from 2019 to 2020, it’s already picking back up in 2021 and due to the growing need for efficiency and cost reduction brought about by the pandemic.
Demand for Model Tools to Drive an Increase in RPA Revenue
One trend we’ll be seeing, as predicted by Global Market Insights, is the demand for model tools driving part of the increase in RPA revenue. In 2019, North America’s model-based segment made up about 30% of the RPA market share alone, with that number anticipated to rise as we move toward 2026.
This comes from the rising and continuous need for designing testing strategies. Model-based testing automates what can otherwise be a resource- and time-consuming component of the software development process that usually requires expert knowledge and manual input.
Robotics Process Automation Market Outlook, Segmented by Market Types:
RPA is disrupting and improving processes across industries, from proptech to SaaS. In these two examples, RPA can help proptech enterprises retrieve, authenticate, and process sensitive financial information efficiently and safely. On the other hand, the concept of SaaS can also be applied to RPA, creating a new enterprise solution known as RPaaS.
We can also look at how RPA is impacting the market through different sub-segments. Below is the market outlook from 2016 to 2028 based on these sub-segments, courtesy of Grandview Research.
RPA Type Outlook
RPA software will keep a steady CAGR during this window due to the need for enterprises to overcome remote work challenges. Service, however, after capturing over 62 percent of the market share in 2020, will see the highest CAGR between 2021-2028 led by rising demand to automate repetitive, high-volume tasks.
RPA Service Outlook
Consulting made up the biggest revenue share (over 41%) within the service segment and its CAGR will expand significantly from 2021 to 2028 thanks to the market’s ever-increasing automation awareness. RPA Implementation will likely see the highest CAGR in the segment during this period, attributed to increased adoption of customer-specific RPA solutions.
RPA Deployment Outlook
We can expect cloud deployment to see the highest CAGR (over 34%) for the length of the forecast period, due mainly to increased RPA adoption as an outsourced solution since it provides low-cost infrastructure, requires less maintenance, and is simple to deploy.
On-premise deployment had the largest revenue share of over 90% in 2020 and will continue to steadily expand. This expansion will be heavily driven by large-scale enterprises skeptical about exposing their data in the cloud and wanting assurance that RPA tools will follow in-house protocol.
RPA Organization Outlook
In 2020, large enterprises accounted for the largest market revenue share at over 66%, the main reason being the drastically shifting workforce and the dawn of our new “virtual workforce.”
The SME segment is predicted to see the fastest CAGR between the two, however. This lead is largely driven by the need to reduce monthly costs and improve the bottom line to gain a competitive edge.
RPA Application Outlook
Banking, financial services, and insurance (BFSI) is the dominant application segment, with a revenue share of over 29%. BFSI adoption is expected to remain high as RPA becomes more applicable for many back- and front-office tasks.
Behind that, the dominant application segment will be IT and Telecom, followed by Logistics, Energy, and Utilities.
Just below those two is the Pharma/Healthcare sector, which is expected to grow at the fastest CAGR mainly because of COVID-19-related implementation at hospitals and vaccine centers.
Final Thoughts
So, what’s the outlook for RPA? As an angel investor, it’s easy for me to see that the future for RPA is overwhelmingly positive – as long as new RPA industry players can help enterprises see past the high up-front costs and increase awareness in emerging economies. If you want to get involved in this growing market, focus on non-IT SME buyers and make a case for implementing your software by illuminating just how RPA can boost efficiency while improving their bottom line.
MacDonald Ventures helps bold entrepreneurs with world-changing solutions looking to usher in the next generation of technology, and RPA is undoubtedly part of that. If you have an RPA idea with this kind of potential and want to work with an angel investor who believes in disrupting markets for the better, let’s talk.
