UiPath has reduced its workforce by several hundred employees.[i] The business has grown at an incredible pace, as have several other providers such as Automation Anywhere. Overall, there is nothing we see that indicates a flattening or slowing of robotic process automation (RPA’s) growth. The layoffs have more to do with the challenges of scaling an emerging company and subtle shifts in the market.

Here’s our view: Success for emerging companies depends on getting A players in the right roles. But you just can’t hire hundreds of people a month and secure them, so a pruning exercise was inevitable and should result in stronger and more focused employees.

Secondly, the market has shifted from two years ago. Simple formulas for growth no longer work as well. Phase one of the market went like this: Add a salesperson, and you could bank on them quickly securing X number of new customers and revenue. This was true for the first (rule of five) phase of the market that targeted simple task automation, but it’s less true now. We suspect that many of these layoffs were in marketing and sales, not engineering.

Enterprises investing in RPA now embrace more transformational projects — beyond simple task automation — and it is taking longer. This explains in part why more than 50% of companies with RPA initiatives have less than 10 bots in production. Scaling beyond that requires setting up automation strike teams and integration of more advanced analytics components such as text analytics or conversational intelligence. Firms today wrestle with a less clear ROI and a total cost of ownership they don’t quite understand. These realities of a maturing market are headwinds to revenue growth for platform providers.

But RPA has a significant role to play in the future of automation. It has become the starting point for intelligent process automation that embraces RPA plus pragmatic AI components. The early stage of the market with hyper valuations puts too much emphasis on market share growth. UiPath’s business has grown at an incredible pace, as has several other providers such as Automation Anywhere, but some percentage of this growth is “fake growth” fueled by outside dollars and a mad dash for attention. This type of recalibration should be expected — and there will be more — but is merely a speeding ticket on a much longer journey.

[i] Source: Nick Ismail, “UiPath fires hundreds of employees: is the RPA market facing a crisis?” Information Age, October 23, 2019 (https://www.information-age.com/uipath-fires-hundreds-employees-rpa-market-crisis-123485825/).