Latest News 04/10/2019
Rise of the Robotic Workforce
Senior Investment Manager Ewan Millar discusses the current rate of technological change, in particular Robotic Process Automation and the impact this is likely to have on business going forward.
I am sure most will agree that the current pace of technological change, and disruption, seems to be occurring at an ever-increasing rate. Digitization, cloud data, Artificial Intelligence (A.I.), Machine Learning, blockchain and the internet of things (IOT) are just a few of the new technology-related terms that have made their way into our collective vocabulary in recent times. Indeed, it is widely accepted that we are currently in the throes of the 4th Industrial revolution, otherwise referred to as Industry 4.0.
The 3rd Industrial revolution started mid-way through the last century with the invention and mass adoption of the computer and all of its associated benefits. The 4th Industrial revolution is being driven by the ability to collect and analyse mass data in order to be able to solve problems and perform tasks more efficiently. It is making possible concepts previously consigned to the world of science fiction, such as driverless cars and voice activated virtual assistants. To quote Brynjolfsson and McAfee from their seminal book, The Second Machine Age, “Computers and other digital advances are doing for mental power – the ability to use our brains and shape our environments – what the steam engine and its descendants did for muscle power.” They made the point that in the next twenty-four months, the planet will add more computer power than it did in all previous history. The bulk of the societal benefits from this must still be ahead of us, which we would do well to embrace rather than resist.
One facet of this technological ‘revolution’ has been coined Robotic Process Automation (RPA). These ‘bots’ are purchased by businesses in order to carry out largely menial tasks previously the responsibility of human employees. The ‘bots’ in reality are not physical in form but rather software programmes that can be intuitively adapted (or taught) how to complete certain data driven tasks, and can learn on the job (machine learning) when they spot patterns, errors or better ways of doing things. They can navigate between different software applications to, for example, generate invoices, send emails and populate databases. They can even read and convert PDF documents using OCR (Optical Character Reference) technology. These ‘bots’ can work 24 /7, they don’t make mistakes, and they are quick. The impact on business is going to be profound.
Corporate clients are adopting RPA technology at an increasing rate as the benefits and payback from investing into it becomes increasingly apparent.
Globally, there are three leading RPA suppliers; Automation Anywhere and UiPath, who are both privately held US based companies, and the UK listed Blue Prism. Corporate clients are adopting RPA technology at an increasing rate as the benefits and payback from investing into it becomes increasingly apparent. HSBC, for example, have suggested that their 36,000 staff currently employed in operations could be reduced to 10,000 over the next ten years. They are not alone. In 2018, only 4% of large corporates globally had adopted RPA at scale, i.e. using greater than fifty ‘bots’, but 68% had begun their adoption of RPA, this was up from only 49% in 2017 (source: Deloitte). HHS Research forecast that globally the market for RPA will be worth over $4bn by 2022. Beyond that, making inroads into the $160bn (Gartner est.) global Business Process Outsourcing (BPO) market is likely.
Some jobs will likely come under threat, but the evidence thus far has suggested that employees are freed up to carry out more intellectually stimulating jobs, leading to increased job satisfaction. Professor Willcocks from LSE probably said it best, “(RPA)… takes the robot out of the human.” Another area of impact will be the ‘offshoring’ trend – outsourcing low value-add service jobs to low cost labour countries - that we have witnessed over the last couple of decades, which is likely to slow down, or even reverse.
RPA suppliers’ customer testimonies talk about their adoption having driven down the price of the products and services that they offer, improved service levels and increased customer satisfaction. The uses for RPA ‘bots’ is becoming increasingly widespread, including dealing with real-time customer enquiries. The next time you are ‘chatting’ to an employee representative in an online help chat box, you may ponder whether there is even a real being on the other end of the line.
At Cornelian we invest in a number of companies making use of industrial automation and an increased robotic workforce, particularly in the UK Equity market. Click here to view our latest asset allocation.
Senior Investment Manager