>>Live from Las Vegas. It's the cube covering UI path forward Americas 2019 brought to you by UI path. >>Welcome back to the Bellagio in Las Vegas. Everybody, this is Dave Vellante and we're here day two of UI path forward three. The third North American event is the cubes, second year covering UI path. The rocket ship that is UI path. PDC is here, he's the vice president of AI at UI path and Rudy Coon who is the chief marketing officer and co founder of process gold UI path. Just announced this week, the acquisition of process gold. So Rudy, congratulations and you may as well PD. Thank you. So that's cool. Um, process gold is focused on process mining. You guys may or may not know about them, but really maybe, maybe you cofounded the company. Why did you co-found you and your founders process gold and tell us a little bit about the problems that you're solving. Yeah, right. You know, um, many years ago I started my career with IBM and I used to be a business consultant. >>And typically if you try to implement any kind of technology like RPA, but back then we didn't have the LPA. But if you try to figure out what the real process and the company are and you ask people, please tell me how does the process where it looks like. Usually people cannot tell you. They say yes we have a documentation but it's outdated the moment you print it. So the idea was um, actually I came across process mining more than 10 years ago and I met the guy in, at the university of and he had this bright idea to reconstruct business processes solely based on digital footprints from any kind of it system. I mean, think about it. You, you use SAP, you use any kind of other it systems and you take the data that is left behind after the execution or the support of a process. >>You take it, you push the magic button and you see what the process really is, like an extra races and from business processes. But we, we saw that in the demo at the a analyst event. I thought it was like magic. I mean I think it's actually, I think of a small company like ours easement even though the number of processes we have and the relative complexity and by the way, half the time people aren't following them and but you were able to visualize them. So. So first of all, why did you acquire process gold? What was the thinking there? So you know, just to pop one level up the stack, what exactly are we trying to do as a company? And you are about as we are building this whole new set of platform capabilities, right? We used to have product lines in studio, orchestra and robot, but now when we look at the whole customer journey and all the elements that need to be there in that customer journey, we essentially have to weld something, what I call the operating system called a self improving enterprise. >>And what that means is that our three elements you need to combine. You need to have a measurement system in place, which can quantify the ROI of your automations. Of course you need a really solid RPA platform like ours to do the automation itself, you have to be able to bring in pieces for doing complex stuff, cognitive stuff using AI. And then you need a scientific way of planning those automations using tools like process board because you have to do process mining. Once you complete this, watch your cycle, you can keep doing more and more of the automation. Essentially you're feeding the beast of efficiency in your organizations. So essentially the way this worked, we can't do, don't, don't have the means to do the demo here, but you essentially pointed your system at a process and it visually showed me the steps and laid them out and in great detail. >>Um, and I said, wow, that's like magic. Um, but this stuff actually works. You got no real customers using this if you do. Yeah. Okay. >> So you know, we worked for companies like, like portion Germany, maybe you have heard about them. They, they build cars and they are using process code for part of the production process. Today in today's world, every process, no matter how offensive is a physical process like production or purchasing or whatever it's used or it's supported by it and at least a lot of data behind. And this is exactly that, the goldmine for us. So we extract this data and again, you know, we have a lot of algorithms in the, in the software. It's, it's sort of magic as it is a lot of mathematics, which is magic for me. But um, it works. Yeah, just take the data, you pushed a button and just see the process with all the details. >>As you mentioned, like stupid times, bottlenecks, compliance issues and this three, the, the, the source, you know, if he wants to see the process, you can then decide is it, is this process now suitable for automation or maybe should we first optimize the process and then vote for automation. And this is key for, for RPA. >> Well, I think, you know, I'm talking a lot of customers this week and last year offline as well. A lot of times we'll tell us the mistakes they made is they'll, they'll automate a crappy process. Yup. This presumably allows me to sort of highlight the shine a light on some of the weaknesses and the weak links in the chain. >> So process optimization is a big deal, right? Both in the pre automation phase and in the post automation phase. Once you automated a process, you need to know what are the bad things that are happening there, what are the blockers, what are the nonconforming steps that you're taking? >>So that's in the post automation but also in the pre automation phase where you haven't even decided what exactly are you going to automate. It's really hard to quantify what are the high ROI processes, right? I can go in our bottle, automate something which is not useful at all for the users, right. And so we want our users to a wide making those mistakes. And that's why we are exposing these powerful, powerful set of tools where you can use all these tools to easily document your processes, manage your processes, use process mining to look deeper into how our people and the different entities in your organizations working together. You know, historically if you look at stuff like all of in all of human history, there have been certain processes, but as computers came on and stuff, you look at it on in, in scifi movies, everyone has always, as Rudy says, the X way for the enterprise. >>You always wanted to have this Uber system that can understand everything that we are doing and tell us, you know, how can we improve stuff? Or what can we do better? Because as a species that fuels our evolution. And so this is, it's, it's, it's fundamental to a lot of things that people do in every day and almost in every action that they did. >> So the in the secret sauce is math, right? So again, please, the secret sauce. Yeah, it's math, but you've got to have some kind of discovery engine as well. I mean this is, it's a system. So maybe can you give us a little bit more idea as to what's under the covers? Well, you know, it all starts with data and the data we need in the beginning, it's very, very simple. We need only three different attributes. The first attribute is what we call the case ID. >>So the case ID is a unique identifier for a case and it depends on the process. If we talk, for example, a very simple invoice approved process in the case that it would be the invoice number. When we talk about claims management or with a claims number or a purchase number, whatever the second attribute we need is the timestamp. And every time we find the timestamp in a system like SAP or lock file or database, this time subsume a timestamp actually represents some sort of activity. So we need a case ID, timestamp and activity and solely based on this data we can already show you how the process looks like. And then we enrich this data with other attributes like let's say supplier or invoice amount to give you some more ideas and some statistics. So this is the data we need. We, you know, we transformed this data, we access directly the database. >>So there is no, there's no need to extract the data. We directly access to data and we transform it and then it will be represented in our application. So you get rid of full transparency of what's going on. So when you were a consultant, you mentioned you're a consultant at IBM, you would sit down with a pen and paper and talk to people about what they did. Maybe time and motion studies and studies, you know, you know, this process mapping workshops, everybody comes out and just allows it. So you sit together with people in the room and at the end of the day you have more processes than you have people there. And everybody's telling you a different story and you know exactly that. Not everything is totally true. So a lot of gray area. Yeah. And the maps that you had to build and people simply don't know what the processes are. >>It's not that they don't want to tell you, they simply don't know. Or as I said before, different people have different processes and they don't follow those. There's no standard to follow. She's pretty, what's the vision for how, how process gold fits into UI path. So as a problem was talking about in his keynote, and Daniel talked about this too, um, a lot of our customers came to us, uh, to automate the processes that they already know about for the processes that they don't know about. We have this whole set of tools, the Explorer set of rules that we are releasing. Process world is a part of that. But essentially now you don't need to know what processes to automate. You can use an automated set of tools to do that process scored, as Rudy was talking about, can go in and look at these log files, uh, ordered logs that are generated by your systems of record. >>Um, and then be able to visualize, optimize our process. But the technologies are really complimentary because these guys, uh, used to work in the backend systems. That's why, you know, that's where most of the process mining works works in the back end looking at the audit logs, but you have as has, you know, we have really strong background in understanding the gooey in the front end, uh, understanding of apps, controls and the control flows that the users have using our computer vision technology. When you combine these technologies, there's a magical effect that happens. Like if your backend does not contain the audit, log off some actions that people are taking in the front end. Let's say it's a small application which does not generate that are the, once you combine these two data points, this is one of the first in the industry on the wonderful kind system that can look across all the different spectrum of applications and be able to understand the processes at a deeper level. >>Technically when you make an acquisition, you obviously looking at the technology and how it's going to integrate, how challenging will it be for you to integrate? What have you done any sort of, when you did the due diligence, you know, a lot of companies are really dogmatic about integration. Others frankly aren't that let's buy the company up by another one. What's your philosophy? It >>was kind of a match made in heaven. I remember the first time I talked to Rudy on the phone and uh, you know, are at the end of the day our philosophies aligned like almost a hundred percent because at the end of the day process goal and UI bad is all about that customer obsession, delivering the value to our customers. And the values are saying we want our customers to get out of this mundane tasks to automate the tasks as optimally as possible. And so both the companies, the, the, the outcomes aligned pretty well. Now the mechanics of the integration, um, I think both do. Both the companies are, these aren't you know, dot com era companies where you know, somebody came over the an idea and did this take Rudy and the team had been working in this area for 10 years. They have organization knowledge, they have the expertise and so does you have adults. >>And so we will take what I'm, what I call a loosely coupled approach where we can choose common customers, we can choose comments that are features that we are going to work on and that's how we will integrate. But again, the focus of all this is to deliver the value to our customers. Not think about the mechanics of what the integration would look like. I think one of the most exciting things that I'm hearing is this notion of the processes that are not known. Um, because so many processes today are unknown, especially as we go into this new digital world. We used to know what processes we want to automate your point, some technology at it. Okay great. We're going to automate now with this digital disruption that's going on. You actually may have no idea. You may be making processes up on the fly, so you need a way to identify those processes quickly and then those ones that are driving our ROI. >>Um, I'm interested in your thoughts on AI and ROI and how to measure that, how those things fit together. So, you know, AI, this is I think the biggest problem in the AI right now. There's a lot of hype in this space. We are tracking close to 3000 different AI startups in the world and uh, nobody can actually put a number to the revenues or the valuation, the real valuation because of this ROI quantification problem, right? Um, let's say I have a company, we'd say, Oh, we are the best in class. And understanding faces short, how is it going to be useful to an enterprise if you cannot measure what well you official recognition system is adding to your enterprise, it's not good enough for the business people. Because at the end of the day, my, I can have the world's brightest PhDs telling me I have the state of the art model in the world, which does law, but in fact cannot translate it into business value. >>It doesn't really work. And so that's why ROI quantification is so in parking and you have to make sure you align them econometrics of the AI, uh, measures and the business KPIs so that if, for example, so your data science team should be able to know what metrics they have to improve in order to get a better ROI for the business. So you have to align those two things. And that is part of research that is not really prevalent in academic circles. Interesting. I mean, you've seen some narrow successes in I'll call AI, you know, things like a infrastructure optimization. Okay, great. Makes sense. What I'm hearing from you is identify the KPIs that are going to drive your voice of the customer defines value first to take away, identify what those KPIs are. And this every business has thousands of KPIs, but there's really like three or four that matter, right? >>So identify those top ones and then you're saying measure on a continuous basis how your system affects those metrics. So in economics this is called the treatment effect. Uh, so for example, if you water my term sales and marketing processes, the KPIs that matter to you is what is your conversion rate from when the leads hit your system to when the revenue is realized or what is the total revenue that you're making? Right? As you said, there's only two or three top level gave you as that really matter. And now if for example you put an AI system in place that treats your leads differently, you should see an increase and uptick in revenue. And so that's what I mean by the Ottawa quantification. So if you instrumented the system properly, put it in the right quantification measurement system in place and have the auto optimization mechanism, that's how things should work. >>You know, with with cross mining we can even add additional KPIs to the picture KPIs you usually don't have because if you ask a company, nobody can tell you how many different variations of the process you actually have. And with process mining we can exactly measure how many variations there are. So if you are up to streamlining to simplifying the process to speed it up, we can actually tell you if your optimization effort is successful or not because we can show you how the number of very our variations is going down over time. Even if we, you know, we can also measure the, the success of RPA implementation. So it really pros we use process code and pro money not only for identification of processes but also for the monitoring of processes after an successful RPA implementation. I can see so many use cases for this. >>I mean it's like my mind is just racing. I mean sales guys in one region and sales gals in the other region doing things differently. You've got different country management doing things differently. If I understand you correctly, you can identify the differences in those processes, document them, visualize them and identify the ones that are actually optimized or help people optimize and then standardized across the organization to drive those metrics that matter. It's very powerful. It is really powerful. You know, as I said, we are living in the golden age of this system that can self-improve your companies. I mean this, this was the Holy grail of all of computer science work with technologies like process score with RPA, with AI. I think we are at that inflection point where we can realize that. So we got to go. But I'll, I'll give you guys sort of the last, last word, each of you. >>So actually first of all, Rudy question, how large can you tell me how large the process gold team is? How many people? We have grown with 60 people. 60 equals zero. We are based, our headquarter is in the, is in the, in from the Netherlands. Um, so this is where we are very close to university. This is where our developers basically are located. And uh, I'm based in Frankfurt in Germany, but for now, let's see what the future will be. So what's a home run for you with this marriage? The home run, you know, since we are in Las Vegas, I was wondering if you hit the jet park Jack photo, if we hit the jackpot. But I actually think of the customers, our customers get the Jaguar because this combination of, of your technology, of our technology, this is really, you know, good answer. So that as I was gonna ask you the same question PD is, I can't even tell you, um, almost every one of the UI path customers has expressed interest in process glow, right? >>Because right now we have a portfolio of products, but the interest that we are getting in process board with the process mining offerings is unparalleled. So Rudy is right. Our customers are the ones which are driving this inhibition and the integration. And I'll be able to actually acquire this solution. I forget, I have my notes with relatively near term, right? Yes. We are gonna make it available to our customers as soon as possible. Awesome guys, congratulations. Really great to have you on the cube. Thank you. All right, and thank you everybody for watching. We'll be back with our next guest right after this short break. You're watching the cube alive from the Bellagio UI path forward three. We were right back.

>> From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> Like a marathon runner pumped up on adrenaline, UiPath sprinted to the lead in what is surely going to be a long journey toward enabling the modern automated enterprise. Now, in doing so the company has established itself as a leader in enterprise automation while at the same time, it got out over its skis on critical execution items and it disappointed investors along the way. In our view, the company has plenty of upside potential, but will have to slog through its current challenges, including restructuring its go-to market, prioritizing investments, balancing growth with profitability and dealing with a very difficult macro environment. Hello and welcome to this week's Wikibon Cube insights powered by ETR. In this Breaking Analysis and ahead of Forward 5, UiPath's big customer event, we once again dig into RPA and automation leader, UiPath, to share our most current data and view of the company's prospects relative to the competition and the market overall. Now, since the pandemic, four sectors have consistently outperformed in the overall spending landscape in the ETR dataset, cloud, containers, machine learning/AI, and robotic process automation. For the first time in a long time ML and AI and RPA have dropped below the elevated 40% line shown in this ETR graph with the red dotted line. The data here plots the net score or spending momentum for each sector with we put in video conferencing, we added it in simply to provide height to the vertical access. Now, you see those squiggly lines, they show the pattern for ML/AI and RPA, and they demonstrate the downward trajectory over time with only the most current period dropping below the 40% net score mark. While this is not surprising, it underscores one component of the macro headwinds facing all companies generally and UiPath specifically, that is the discretionary nature of certain technology investments. This has been a topic of conversation on theCUBE since the spring spanning data players like Mongo and Snowflake, the cloud, security, and other sectors. The point is ML/AI and RPA appear to be more discretionary than certain sectors, including cloud. Containers most likely benefit from the fact that much of the activity is spending on internal resources, staff like developers as much of the action in containers is free and open source. Now, security is not shown on this graphic, but as we've reported extensively in the last week at CrowdStrike's Falcon conference, security is somewhat less discretionary than other sectors. Now, as it relates to the big four that we've been highlighting since the pandemic hit, we're starting to see priorities shift from strategic investments like AI and automation to more tactical areas to keep the lights on. UiPath has not been immune to this downward pressure, but the company is still able to show some impressive metrics. Here's a snapshot chart from its investor deck. For the first time UiPath's ARR has surpassed $1 billion. The company now has more than 10,000 customers with a large number generating more than $100,000 in ARR. While not shown in this data, UiPath reported this month in its second quarter close that it had $191 million plus ARR customers, which is up 13% sequentially from its Q1. As well, the company's NRR is over 130%, which is very solid and underscores the low churn that we've previously reported for the company. But with that increased ARR comes slower growth. Here's some data we compiled that shows the dramatic growth in ARR, the blue bars, compared with the rapid deceleration and growth. That's the orange line on the right hand access there. For the first time UiPath's ARR growth dipped below 50% last quarter. Now, we've projected 34% and 25% respectively for the company's Q3 in Q4, which is slightly higher than the upper range of UiPath's CFO, Ashim Gupta's guidance from the last earnings call. That still puts UiPath exiting its fiscal year at a 25% ARR growth rate. While it's not unexpected that a company reaching $1 billion in ARR, that milestone, will begin to show lower, slower growth, net new ARR is well off its fiscal year '22 levels. The other perhaps more concerning factor is the company, despite strong 80% gross margins, remains unprofitable and free cash flow negative. New CEO, Rob Enslin, has emphasized the focus on profitability, and we'd like to see a consistent and more disciplined Rule of 40 or Rule of 45 to 50 type of performance going forward. As a result of this decelerating growth and lowered guidance stemming from significant macro challenges including currency fluctuations and weaker demand, especially in Europe and EP and inconsistent performance, the stock, as shown here, has been on a steady decline. What all growth stocks are facing, you know, challenges relative to inflation, rising interest rates, and looming recession, but as seen here, UiPath has significantly underperformed relative to the tech-heavy NASDAQ. UiPath has admitted to execution challenges, and it has brought in an expanded management team to facilitate its sales transition and desire to become a more strategic platform play versus a tactical point product. Now, adding to this challenge of foreign exchange issues, as we've previously reported unlike most high flying tech companies from Silicon Valley, UiPath has a much larger proportion of its business coming from locations outside of the United States, around 50% of its revenue, in fact. Because it prices in local currencies, when you convert back to appreciated dollars, there are less of them, and that weighs down on revenue. Now, we asked Breaking Analysis contributor, Chip Simonton, for his take on this stock, and he told us, "From a technical standpoint, there's really not much you can say, it just looks like a falling knife. It's trading at an all time low but that doesn't mean it can't go lower. New management with a good product is always a positive with a stock like this, but this is just a bad environment for UiPath and all growth stocks really, and," he added, "95% of money managers have never operated in this type of environment before. So that creates more uncertainty. There will be a bottom, but picking it in this high-inflation, high-interest rate world hasn't worked too well lately. There's really no floor to these stocks that don't have earnings, until you start to trade to cash levels." Well, okay, let's see, UiPath has $1.6 billion in cash in the balance sheet and no debt, so we're a long ways off from that target, the cash value with its current $7 billion valuation. You have to go back to April 2019 to UiPaths Series D to find a $7 billion valuation. So Simonton says, "The stock still could go lower." The valuation range for this stock has been quite remarkable from around $50 billion last May to $7 billion today. That's quite a swing. And the spending data from ETR sort of supports this story. This graphic here shows the net score or spending momentum granularity for UiPath. The lime green is new additions to the platform. The forest green is spending 6% or more. The gray is flat spending. The pink is spending down 6% or worse. And the bright red is churn. Subtract the red from the green and you get net score, which is that blue line. The yellow line is pervasiveness within the data set. Now, that yellow line is skewed somewhat because of Microsoft citations. There's a belief from some that competition from Microsoft is the reason for UiPath's troubles, but Microsoft is really delivering RPA for individuals and isn't an enterprise automation platform at least not today, but it's Microsoft, so you can't discount their presence in the market. And it probably is having some impact, but we think there are many other factors weighing on UiPath. Now, this is data through the July survey but taking a glimpse at the early October returns they're trending with the arrows, meaning less green more gray and red, which is going to lower UiPath's overall net score, which is consistent with the macro headwinds and the business performance that it's been seeing. Now, nonetheless, UiPath continues to get high marks from its customers, and relative to it's peers it maintains a leadership position. So this chart from ETR, shows net score or spending velocity in the vertical access, an overlap or presence in the dataset on the horizontal access. Microsoft continues to have a big presence, and as we mentioned, somewhat skews the data. UiPath has maintained its lead relative to automation anywhere on the horizontal access, and remains ahead of the legacy pack of business process and other RPA vendors. Solonis has popped up in the ETR data set recently as a process mining player and has a pretty high net score. It's a critical space UiPath has entered, via its acquisition of ProcessGold back in October 2019. Now, you can also see what we did is we added in the Gartner Magic Quadrant for robotic process automation. We didn't blow it up here but we circled the position of UiPath. You can see it's leading in both the vertical and the horizontal access, ahead of automation anywhere as well as Microsoft and others. Now, we're still not seeing the likes of SAP, Service Now, and Salesforce showing up in the ETR data, but these enterprise software vendors are in a reasonable position to capitalize on automation opportunities within their installed basis. This is why it's so important that UiPath transitions to an enterprise-wide horizontal play that can cut across multiple ERP, CRM, HCM, and service management platforms. While the big software companies can add automation to their respective stovepipes, and they're doing that, UiPath's opportunity is to bring automation to enable enterprises to build on top of and across these SaaS platforms that most companies are running. Now, on the chart, you see the red arrows slanting down. That signifies the expected trend from the upcoming October ETR survey, which is currently in the field and will run through early next month. Suffice it to say that there is downward spending pressure across the board, and we would expect most of these names, including UiPath, to dip below the 40% dotted line. Now, as it relates to the conversation about platform versus product, let's dig into that a bit more. Here's a graphic from UiPath's investor deck that underscores the move from product to platform. UiPath has expanded its platform from its initial on-prem point product to focus on automating tasks for individuals and back offices to a cloud-first platform approach. The company has added in technology from a number of acquisitions and added organically to those. These include, the previously mentioned, ProcessGold for process discovery, process documentation from the acquisition of StepShot, API automation via the acquisition of Cloud Elements, to its more recent acquisition of Re:infer, a natural language processing specialist. Now, we expect the platform to be a big focus of discussion at Forward 5 next week in Las Vegas. So let's close in on our expectations for the three-day event next week at the Venetian. UiPath's user conference has grown over the years and the Venetian should be by far be the biggest and most heavily attended in the company's history. We expect UiPath to really emphasize the role of automation, specifically in the context of digital transformation, and how UiPath has evolved, again, from point product to platform to support digital transformation. Expect to focus on platform maturity. When UiPath announced its platform intentions back in 2019, which was the last physical face-to-face customer event prior to COVID, it essentially was laying out a statement of direction. And over the past three years, it has matured the platform and taken it from vision to reality. You know, I said the last event, actually, the last event was 2021. Of course, theCUBE was there at the Bellagio in Las Vegas. But prior to that, 2019 is when they laid out that platform vision. Now, in a conjunction with this evolution, the company has evolved its partnerships, pairing up with the likes of Snowflake and the data cloud, CrowdStrike, to provide better security, and, of course, the big Global System Integrators, to help implement enterprise automation. And this is where we expect to hear a lot from customers. I've heard, there'll be over 100 speaking at the show about the outcomes and how they're digitally transforming. Now, I mentioned earlier that we haven't seen the big ERP and enterprise software companies show up yet in the ETR data, but believe me they're out there and they're selling automation and RPA and they're competing. So expect UiPath to position themselves and deposition those companies. Position UiPath as a layer above these bespoke platforms shown here on number four. With process discovery and task discovery, building automation across enterprise apps, and operationalizing process workflows as a horizontal play. And I'm sure there'll be some new graphics on this platform that we can share after the event that will emphasize this positioning. And finally, as we showed earlier in the platform discussion, we expect to hear a lot about the new platform capabilities and use cases, and not just RPA, but process mining, testing, testing automation, which is a new vector of growth for UiPath, document processing. And also, we expect UiPath to address its low code development capabilities to expand the number of people in the organization that can create automation capabilities and automations. Those domain experts is what we're talking about here that deeply understand the business but aren't software engineers. Enabling them is going to be really important, and we expect to hear more about that. And we expect this conference to set the tone for a new chapter in UiPath's history. The company's second in-person gathering, but the first one was last October. So really this is going to be sort of a build upon that, and many in-person events. For the first time this year, UiPath was one of the first to bring back its physical event, but we expect it to be bigger than what was at the Bellagio, and a lot of people were concerned about traveling. Although UiPath got a lot of customers there, but I think they're going to really up the game in terms of attendance this year. And really, that comparison is unfair because UiPath, again, it was sort of the middle of COVID last year. But anyway, we expect this new operations and go-to-market oriented focus from co-CEO, Rob Enslin, and new sales management, we're going to be, you know, hearing from them. And the so-called adult supervision has really been lacking at UiPath, historically. Daniel Dines will no doubt continue to have a big presence at the event and at the company. He's not a figurehead by any means. He's got a deep understanding of the product and the market and we'll be interviewing both Daniel and Rob Enslin on theCUBE to find out how they see the future. So tune in next week, or if you're in Las Vegas, definitely stop by theCUBE. If you're not go to thecube.net, you'll be able to watch all of our coverage. Okay, we're going to leave it there today. I want to thank Chip Simonton again for his input to today's episode. Thanks to Alex Morrison who's on production and manages our podcasts. Ken Schiffman, as well, from our Boston office, our Boston studio. Kristen Martin, and Cheryl Knight, they helped get the word out on social media and in our newsletters. And Rob Hof is our editor in chief over at SiliconANGLE that does some great editing. Thanks all. Remember, these episodes are all available as podcasts wherever you listen. All you got to do is search Breaking Analysis Podcasts. I publish each week on wikibon.com and siliconangle.com, and you could email me at david.vellante@siliconangle.com or DM me @dvellante. If you got anything interesting, I'll respond. If not, please keep trying, or comment on my LinkedIn post and please do check out etr.ai for the best survey data in the enterprise tech business. This is Dave Vellante for theCUBE insights powered by ETR. Thanks for watching, and we'll see you next time on Breaking Analysis. (gentle techno music)

(upbeat music) >> From the Bellagio Hotel in Las Vegas, It's theCUBE. Covering UiPath FORWARD IV. Brought to you by UiPath. >> Welcome back to theCUBE's coverage of UiPath FORWARD IV. Live from the Bellagio, in Las Vegas. I'm Lisa Martin with Dave Vellante. We're here all day today and tomorrow. We're going to talk about process mining next. We've got two guests here. Mike Engel is here, intelligent automation and process intelligence leader at PWC. And Ryan McMahon, the SVP of growth at UiPath. Gentlemen, welcome to the program. >> Thank you, Lisa. >> Thank you. >> So Ryan, I'm going to start with you. Talk to us about process mining. How does UiPath do it differently and what are some of the things being unveiled at this event? >> So look, I would tell you it's actually more than process mining and hopefully, not only you but others saw this this morning with Param. It's really about the full capabilities of that discovery suite. In which, obviously, process mining is part of. But it starts with task capture. So, going out and actually working with subject matter experts on a process. Accounts payable, accounts receivable, order to cash, digitally capturing that process or how they believe it should work or execute across one's environment. Right Mike? And then from there, actually validating or verifying with things or capabilities like process mining. Giving you a full digital x-ray of actually how that process is being executed in the enterprise. Showing you process bottlenecks. For things like accounts payable, showing you days outstanding, maverick buying, so you can actually pin point and do a few things. Fix your process, right? Where process should be fixed. Fix your application because it's probably not doing what you think it is, and then third, and where the value comes, is in our platform of which process mining is a capability, our PA platform. Really moving directly to automations, right? And then, having the ability with even task mining to drill into a specific bottleneck. Capturing keystrokes, clicks, and then moving to, with both of those, process mining and task mining, into Automation Hub, as part of our discovery platform as well. Being able to crowdsource, prioritize, all of those potential, if you will, just capabilities of automations, and saying, "Okay, let's go and prioritize these. These deliver to the greatest value," and executing across them. So, as much as it is about process mining, it's actually the whole entire discovery suite of capabilities that differentiates UiPath from other RPA vendors, as the only RPA vendor that delivers process mining, task mining and this discovery suite as part of our enterprise automation platform. >> Such a critical point, Ryan. I mean, it's multi-dimensional. It's not just one component. It's not just process mining or task mining, it's the combination that's really impactful. Agree with you a hundred percent. >> So, one of the things that people who watch our shows know, I'm like a broken record on this, the early days of RPA, I called it paving the cow path. And that was good because somebody knew the process, they just repeat it. But the problem was, the process wasn't necessarily the best process. As you just described. So, when you guys made the acquisition of ProcessGold, I said, "Okay, now I'm starting to connect the dots," and now a couple years on, we're starting to see that come together. This is what I think is most misunderstood about UiPath, and I wonder, from a practitioner's perspective, if you can sort of fill in some of those gaps. It's that, it's different from a point tool, it's different from a productivity tool. Like Power Automate, I'll just say it, that's running in Azure Cloud, that's cool or a vertically integrated part of some ERP Stack. This is a horizontal play that is end to end. Which is a bigger automation agenda, it's bold but it's potentially huge. $60 billion dollar TAM, I think that's understated. Maybe you could, from a practitioner's perspective, share with us the old way, >> Yeah. >> And kind of, the new way. >> Well obviously, we all made a lot of investments in this space, early on, to determine what should we be automating in the first place? We even went so far as, we have platforms that will transcribe these kind of surveys and discussions that we're having with our clients, right. But at the end of the day all we're learning is what they know about the process. What they as individuals know about the process. And that's problematic. Once we get into the next phase of actually developing something, we miss something, right? Because we're trying to do this rapidly. So, I think what we have now is really this opportunity to have data driven insights and our clients are really grabbing onto that idea, that it's good to have a sense of what they think they do but it's more important to have a sense of what they actually do. >> Are you seeing, in the last year in a half we've seen the acceleration of a lot of things, there's some silver linings but we've also seen the acceleration in automation as a mandate. Where is it? In terms of a priority, that you're seeing with customers, and are there any industries that you're seeing that are really leading the edge here? >> Well I do see it as a priority and of course, in the role that I have, obviously everybody I talk to, it's a priority for them. But I think it's kind of changing. People are understanding that it's not just a sense of, as Ryan was pointing out, it's not just a sense of getting an understanding of what we do today, it's really driving it to that next step of actually getting something impactful out the other end. Clients are starting to understand that. I like to categorize them, there's three types of clients, there's starters, there's stall-ers and those that want to scale. >> Right? So we're seeing a lot more on the other ends of this now, where clients are really getting started and they're getting a good sense that this is important for them because they know that identifying the opportunities in the first place is the most difficult part of automation. That's what's stalling the programs. Then on the other end of the spectrum, we've got these clients that are saying, "Hey, I want to do this really at scale, can you help us do that?" >> (Ryan) Right. >> And it's quite a challenge. >> How do I build a pipeline of automations? So I've had success in finance and accounting, fantastic. How do I take this to operations? How do I take this this to supply chain? How do I take this to HR? And when I do that, it all starts with, as Wendy Batchelder, Chief Data Officer at VMware, would say and as a customer, "It starts with data but more importantly, process." So focusing on process and where we can actually deliver automation. So it's not just about those insights, it's about moving from insights to actionable next steps. >> Right. >> And that is where we're seeing this convergence, if you will, take place. As we've seen it many times before. I mentioned I worked at Cisco in the past, we saw this with Voice Over IP converging on the network. We saw this at VMware, who I know you guys have spoken to multiple times. When a move from a hypervisor to including NSX with the network, to including cloud management and also VSAN for storage, and converging in software. We're seeing it too with process, really. Instead of kids and clipboards, as they used to call it, and many Six Sigma and Lean workshops, with whiteboards and sticky papers, to actually showing people within, really, days how a process is being executed within their organization. And then, suggesting here's where there's automation capabilities, go execute against them. >> So Ryan, this is why sometimes I scoff at the TAM analysis. I get you've got to do the TAM analysis, you've got to communicate to Wall Street. But basically what you do is you pull out IDC or Gartner data, which is very stovepipe, and you kind of say, "Okay we're in this market." It's the convergence of these markets. It's cloud, it's containers, it's IS, it's PaaS, it's Saas, it's blockchain, it's automation. They're all coming together to form this, it sound like a buzzword but this digital matrix, if you will. And it's how well you leverage that digital matrix, which defines your digital business. So, talk about the role that automation, generally, RPA specifically, process mining specifically, play in a digital business. >> Do you want to take that Mike or do you want me to take it? >> We can both do it? How about that? >> Yeah, perfect. >> So I'll start with it. I mean all this is about convergence at this point, right? There are a number of platform providers out there, including UiPath, that are kind of teaching us that. Often times led by the software vendors in terms of how we think of it but what we know is that there's no one solution. We went down the RPA path, lots of clients and got a lot of excitement and a lot of impact but if you really want to drive it broader, what clients are looking at now, is what is the ecosystem of tools that we need to have in place to make that happen? And from our perspective, it's got to start with really, process intelligence. >> What I would say too, if you look at digital transformation, it was usually driven from an application. Right? Really. And what I think customers found was that, "Hey," I'm going to name some folks here, "Put everything in SAP and we'll solve all your problems." Larry Ellison will tell you, "Put everything into Oracle and we'll solve all your problems." Salesforce, now, I'm a salesperson, I've never used an out of the box Salesforce dashboard in my life, to run my business because I want to run it the way I want to run it. Having said that though, they would say the same thing, "Put everything into our platform and we'll make sure that we can access it and you can use it everywhere and we'll solve all of your problems." I think what customers found is that that's not the case. So they said, "Okay, where are there other ways. Yes, I've got my application doing what it's doing, I've improved my process but hang on. There's things that are repeatable here that I can remove to actually focus on higher level orders." And that's where UiPath comes in. We've kind of had a bottom up swell but I would tell you that as we deliver ROI within days or weeks, versus potentially years and with a heavy, heavy investment up front. We're able to do it. We're able to then work with our partners like PWC, to then demonstrate with business process modeling, the ability to do it across all those, as I call, Silo's of excellence in an organization, to deliver true value, in a timeline, with integrated services from our partner, to execute and deliver on ROI. >> You mentioned some of the great software companies that have been created over the years. One you didn't mention but I want you to comment on it is Service Now. Because essentially McDermott's trying to create the platform of platforms. All about workflow and service management. They bought an RPA company, "Hey we got this too." But it's still a walled garden. It's still the same concept is put everything in here. My question is, how are you different? Yeah look, we're going to integrate with customers who want to integrate because we're an open platform and that's the right approach. We believe there will be some overlap and there'll be some choices to be made. Instead of that top down different approach, which may be a little bit heavy and a large investment up front, with varied results, as far as what that looks like, ours is really a bottoms up. I would tell you too, if you look at our community, which is a million and a half, I believe, strong now and growing, it's really about that practitioner and those people that have embraced it from the bottom up that really change how it gets implemented. And you don't have what I used to call the white blood cells, pushing back when you're trying to say, "Hey, let's take it from this finance and accounting to HR, to the supply chain, to the other sides of the organization," saying, "Hey look, be part of this," instead of, "No, you will do." >> Yeah, there's no, at least that I know of, there's no SAP or Salesforce freemium. You can't try it before you buy. And the entry price is way higher. I mean generally. I guess Salesforce not necessarily but I could taste automation for well under $100,000. I could get in for, I bet you most of your customers started at 25 of $50,000 departmental deployments. >> It's a bottoms up ground swell, that's exactly right. And it's really that approach. Which is much more like an Atlassian, I will tell you and it's really getting to the point where we obviously, and I'm saying this, I work at UiPath, we make really good software. And so, out of the box, it's getting easier and easier to use. It all integrates. Which makes it seamless. The reason people move to RPA first was because they got tired of bouncing between applications to do a task. Now we deliver this enterprise automation platform where you can go from process discovery to crowd sourcing and prioritizing your automations with your pipeline of automations, into Studio, into creating those automations, into testing them and back again, right? We give you the opportunity not to leave the platform and extract the most value out of our, what we call enterprise automation platform. Inclusive of process mining. Inclusive of testing and all those capabilities, document understanding, which is also mine, and it's fantastic. It's very differentiated from others that are out there. >> Well it's about having the right framework in place. >> That's it. From an automation perspective. I think that's a little bit different from what you would expect from the SAP's of the world. Mike, where are you seeing, in the large organizations that you work with, we think of what you describe as the automation pipeline, where are some of the key priorities that you're finding in large organizations? What's in that pipeline and in what order? >> It's interesting because every time we have a conversation whether it's internal or with our clients, we come up with another use case for this type of technology. Obviously, when we're having the initial conversations, what we're talking about is really automation. How do we stuff that pipe with automation. But you know, we have clients that are saying, "Hey listen, I'm trying to carve out of a parent company and what I need to do is document all of my processes in a meaningful way, that I can, at some point, take action on, so there's meaningful outcomes." Whether it be a shared services organization that's looking to outsource, all different types of use cases. So, prioritizing is, I think, it's about impact and the quickest way to impact seems to be automation. >> Is it fair to say, can I look at you UiPath as automation infrastructure? Is that okay or do you guys want to say, "Oh, we're an application." The reason I ask, so then you can answer, is if you look at the great infrastructure plays, they all had a role. The DBA, the CCIE from Cisco, the Cloud Architect, the VMware admin, you've been at all of them, Ryan. So, is there a role emerging here and if it's not plumbing or infrastructure, I know, okay that's cool but course correct me on the infrastructure comment and then, is there a role emerging? >> You know, I think the difference between UiPath and some of the infrastructure companies is, it used to take, Dave, years to give an ROI, really. You'd invest in infrastructure and it's like, if we build it they will come. In fact, we've seen this with Cloud, where we kind of started doing some of that on prem, right? We can do this but then you had Amazon, Azure and others kind of take it and say, "Look, we can do it better, faster and cheaper." It's that simple. So, I would say that we are an application and that we reference it as an enterprise automation platform. It's more than infrastructure. Now, are we going to, as I mentioned, integrate to an open platform, to other capabilities? Absolutely. I think, as you see with our investments and as we continue to build this out, starting in core RPA, buying ProcessGold and getting into our discovery suite of capabilities I covered, getting into, what I see next is, as you start launching many bots into your organization, you're touching multiple applications, so you got to test it. Any time you would launch an application you're going to test it before you go live, right? We see another convergence with testing and I know you had Garrett on and Matt, earlier, with testing, application testing, which has been a legacy, kind of dinosaur market, converging with RPA, where you can deliver automations to do it better, faster and cheaper. >> Thank you for that clarification but now Mike, is that role, I know roles are emerging in RPA and automation but is there, I mean, we're seeing centers of excellence pop up, is there an analogy there or sort of a similar- >> Yeah, I think the new role, if you will, it's not super new but it's really that sense of an automation solution architect. It's a whole different thing. We're talking about now more about recombinant innovation. >> Mike: Yeah. >> Than we are about build it from scratch. Because of the convergence of these low-code, no-code types of solutions. It's a different skill set. >> And we see it at PWC. You have somebody who is potentially a process expert but then also somebody who understands automations. It's the convergences of those two, as well, that's a different skill set. It really is. And it's actually bringing those together to get the most value. And we see this across multiple organizations. It starts with a COE. We've done great with our community, so we have that upswell going and then people are saying, "Hang on, I understand process but I also understand automations. let me put the two together," and that's where we get our true value. >> Bringing in the education and training. >> No question. >> That's a huge thing. >> The traditional components of it still need to exist but I think there are new roles that are emerging, for sure. >> It's a big cultural shift. >> Oh absolutely, yeah. >> How do you guys, how does PWC and UiPath, and maybe you each can answer this in the last minute or so, how do you help facilitate that cultural shift in a business that's growing at warp speed, in a market that is very tumultuous? How do you do that? >> Want to go first or I can go? >> I'll go ahead and go first. It's working with great partners like Mike because they see it and they're converging two different practices within their organization to actually bring this value to customers and also that executive relevance. But even on our side, when we're meeting with customers, just in general, we're actually talking about, how do we deal with, there's what? 13 and a half million job openings, I guess, right now and there's 8500 people that are unemployed, is the last number that I heard. We couldn't even fill all of those jobs if we wanted to. So it's like, okay, what is it that we could potentially automate so maybe we don't need all those jobs. And that's not a negative, it's just saying, we couldn't fill them anyway. So let's focus on where we can and where, there again, can extract the most value in working with our partners but create this new domain that's not networking or virtualization but it's actually, potentially, process and automation. It's testing and automation. It might even be security and automation. Which, I will tell you, is probably coming next, having come out of the security space. You know, I sit there and listen to all these threats and I see these people chasing, really, automated threats. It's like, guys a threat hunter that's really good goes through the same 15 steps that they would when they're chasing a false positive, as if a bot would do that for them. >> I mean, I've written about the productivity declines over the past several decades in western countries, it's not universal around the world and maybe we have a productivity boost because of Covid but it's like this perpetual workday now. That's not sustainable. So we're not going to be able to solve the worlds great problems. Whether it's climate change, diversity, massive deaths, on and on and on, unless we deal with that labor gap. >> That's right. >> And the only way to do that is automation. It's so clear to me that that's the answer. Part of the answer. >> It is part of the answer and I think, to your point Lisa, it's a cultural shift that's going to happen whether we want it to or not. When you think about people that are coming into the work force, it's an expectation now. So if you want to retain or you know, attract and retain the right people, you'd better be prepared for it as an organization. >> Yeah, remember the old, proficient in Word and Excel. Makes it almost trivial. It's trivial compared to that. I think if you don't have automation chops, going forward, it's going to be an issue. Hey, we have whatever, 5000 bots running at our company, how could you help? Huh? What's a bot? >> That's right. You're right. We see this too. I'll give you an example at Cisco. One of their financial analysts, junior starter, he says, "Part of our training program, is creating automations. Why? Because it's not just about finance anymore. It's about what can I automate in my role to actually focus on higher level orders and this for me, is just amazing." And you know, it's Rajiv Ramaswamy's son who's over there at Cisco now as a financial analyst. I was sitting on my couch on a Saturday, no kidding, right Dave? And I get a text from Rajiv, who's now CEO at Nutanix, and he says, "I can't believe I just created a bot." And I said, "I'm at the right place." Really. >> That's cool, I mean hey, you're right too. You want to work for Amazon, you got to know how to provision a EC2 instance or you don't get the job. >> Yeah. >> You got to train for that. And these are the types of skills that are expected- >> That's right. >> For the future. >> Awesome. Guys- >> I'm glad I'm older. >> Are you no longer proficient in Word is the question. >> Guys, thanks for joining us, talking about what you guys are doing together, how you're really facilitating this massive growth trajectory. It's great to be back in person and we look forward to hearing from some of your customers later today. >> Terrific. >> Great. >> Thank you for the opportunity. >> Thank you for having us. >> Thank you guys. >> Our pleasure. For Dave Vellante, I'm Lisa Martin, you're watching theCUBE live from the Bellagio in Las Vegas, at UiPath FORWARD IV. Stick around. We'll be back after a short break. (upbeat music)

>> From The Cube studios in Palo Alto in Boston, bringing you data driven insights from The Cube and ETR, this is Breaking Analysis with Dave Vellante. >> UiPath has always been an unconventional company. You know it started with humble beginnings. It's essentially a software development shop. Then it caught lightning in a bottle with its computer vision technology. It's really, it's simplification mantra and it created a very easy to deploy software robot system for bespoke departments so they could automate mundane tasks. You know the story. The company grew rapidly, was able to go public early this year. Now consistent with its out-of-the-ordinary approach, while other firms are shutting down travel and physical events, UiPath is moving ahead with Forward IV, it's annual user conference next week with a live audience there at the Bellagio in Las Vegas. It's also fast forwarding as a company, determined to lead the charge beyond RPA and execute on a more all-encompassing Enterprise automation agenda. Hello everyone and welcome to this week's Wikibond Cube Insights powered by ETR. In this breaking analysis and ahead of Forward IV, we'll update you in the RPA market the progress that UiPath has made since its IPO and bringing some ETR customer survey data that's contextualized the company's position in the overall market and relative to the competition. Here's a quick rundown of today's agenda. First I want to tell you theCube is going to be at Forward IV at the Bellagio next week. UiPath, this is their big customer event. It's live, it's a physical event. It's primarily outdoors. You have to be vaccinated to attend. Now, this not completely out of the ordinary. John Furrier and theCube were at AWS Public Sector this past week and we were at Mobile World Congress in one of the first big hybrid events of the year at Barcelona. We thought that event would kick of the fall event season, live event in earnest but the COVID crisis has caused many tech firms, most tech firms actually, to hit pause button. Not UiPath, they're moving ahead. They're going forward and we see a growing trend for smaller VIP events with a virtual component, topic maybe for another day. Now we've talked extensively about the productivity challenges and the automation mandate the pandemic has thrust upon us. Now, we've seen pretty dramatic productivity improvements as remote work kicked in but its brought new stresses. For example, according to Qualtrics, 32% of working moms said their mental health has declined since the pandemic hit. 15% of working dads said the same by the way. So, one has to question the sustainability of this perpetual workday. And we're seeing a continuum of automation solutions emerging and we'll talk about that today. We're seeing tons of M&A as well but now, in that continuum, on the left-side of the spectrum, there's Microsoft who in some ways, they stand alone and their Azure is becoming ubiquitous as a SaaS-Cloud collaboration and productivity platform. Microsoft is everywhere and in virtually every market, whether video conferencing, security, database, cloud, CRM, analytics, you name it. Microsoft is pretty much there and RPA is no different. With the acquisition of Softomotive last year, Microsoft entered the RTA market in earnest and is penetrating very deeply into the space, particularly as it pertains to personal productivity building on its software stake. Now in the middle of that spectrum if you will, we're seeing more M&A and that's defined really by the big software giants. Think of this domain as integrated software place. SAP, they acquired Contextere. They also acquired a company called Process Insights, Service now acquired Inttellebot. Salesforce acquired Servicetrace, we see Infor entering the frame and I would put even Pega, Pega systems in this camp. Software companies focused on integrating RPA into their broader workflows, into their software platforms and this is important because these platforms are entrenched Their well guardants of thoughts and complicated with lots of touchpoints and integration points and frankly they are much harder to automate because of their entrenched legacy. Now, on the far side of that spectrum, are the horizontal automation players and that's been let by UiPath with automation anywhere as the number two player in this domain. And I even put a blue prism in there more M&A recently announced that Vista is going to acquire them Vista also owns Tibco, they are going to merge those two companies. You know Tibco is come up with the integration play. So again I would put them in that you know, horizontal piece of the spectrum. So with that as background, we're going to look at how UiPath has performed since we last covered them and IPO and I'm going to bring in some ETR survey data to get the spending view from customers and we'll wrap up. Now, just to emphasize the importance of automation and the automation mandate, we talk about it all the time in this program. We use this ETR chart. It's a two dimensional view with net score which is the measure of spending momentum on the vertical axis and market share which is a proxy for pervasiveness in the data set that's on the horizontal axis. Now note that red dotted line, it signifies companies within elevated position on the net score vertical axis anything over that is considered pretty good. Very good. Now this shows every spending segment within the ETR taxonomy. And the four spending categories with the greatest velocity are AI, cloud, containers and RPA. And they have topped the charts for quite a while now. They are the only 4 categories which have sustained above that 40% line consistently throughout the pandemic and even before. Now the impressive thing about cloud of course is it has both spending momentum on the vertical axis and a very large market share or presence in the data set. The point is RPA is nascent still. It has an affinity with AI as a means of more intelligently identifying and streamlining process improvements. And so we expect those two to remain elevated and grow to the right together. UiPath pegs its TAM, total available market at 60 billion. And the reality is that could be understated. Okay, as we reported from the UiPath S1 analysis we did pre IPO, the company at that time had an ARR annual recurring revenue of $580 million and it was growing at 65% annually. And nearly 8000 customers at the time, a 1000 of which had an ARR in excess of a 100k. And the net revenue retention the company had was over 145%. So let's take a look at the pictures 6 months forward. We mentioned the $60 billion TAM, ARR now up over $726.5 million on its way to a billion ARR holding pretty steady at 60% growth as is NRR, net revenue retention and more then a 1000 new customers and 200 more with over a 100000 in ARR and a small operating profit which by the way exceeded the consensuses pretty substantially. Profitability is not shown here and no one seems to care anyway these days. It's all about growing into that TAM. Well that's a pretty good looking picture, isn't it? The company had a beat and a raise for the quarter earlier this month, so looking good right. Well you ask how come the stock is not doing better. That's an interesting question. So let's first look at the stocks performance on a relative basis. Here we show UiPath performance against Pega systems and blue prism, the other two publicly traded automation. Pure plays sort of in the case of Pega. So UiPath outperformed post its IPO but since the early summer Pega is been the big winner while UiPath slowly decelerated. You see Blue prism was at the lag until it was announced that it was in an acquisition talks with a couple of PE firms and the prospects of a bidding war sent that yellow line up as you can see. UiPath as you can see on the inset, has a much higher valuation than Pega and way higher than blue Prism. Pega interestingly is growing revenues nicely at around 40%. And I think what's happening is that the street simply wants more. Even though UiPath beat and raised, Wallstreet is still getting comfortable with management which is new to the public market game and the company just needs to demonstrate a track record and build trust. There's also some education around billings and multi-year contracts that the company addressed on its last earnings call. But the street was concerned about ARR for new logos. It appears to be slowing down sequentially and a notable decline in billings momentum which UiPath CFO addressed on the earnings call saying look they don't need the trade margin for prepaid multi year deals, given the strong cash position. Why give anything up. And even though I said nobody cares about profitability well, I guess that's true until you guide for an operating loss when you've been showing small profit in recent quarters what UiPath did. Then, obviously people start to care. So UiPath is in bit of an unknown territory to the street and it has a valuation, it's pretty rich. Very rich actually at 30 times revenue multiple or greater than 30 times revenue multiple. So that's why in my view, investors are being cautious. But I want to address a dynamic that we have seen with this high growth rocket chip companies. Something we talked about Snowflake and I think you are seeing some of that here with UiPath. Different model in the sense that Snowflake is pure cloud but I'm talking about concerns around ARR and from new logos and that growth in a sequential basis. And here's what's happening in my view with UiPath. You have a company that started within departments with a smaller average contract size, ACV maybe 25000, may be 50000 but not deep six figure deals. That wasn't UiPath's play. And because the company focused so heavily on simplicity and made it really easy to adapt, customers saw really fast ROI. I mean break-even in months. So we very quickly saw expansion into other departments. So when ACV started to rise and installations expanded within each customer, UiPath realized it had to move beyond a point product and it started thing about a platform and making acquisitions like Processgold and others and this marked a much deeper expansion into the customer base. And you can see that here in this UiPath chart that they shared at their investor deck, customers that bought in 2016 and 2017 expanded their spend 13, 15, 18, 20x So the LTV, life time value of the customer is growing dramatically and because UiPath is focused on simplicity, and has a very facile premium model much easier to try before you buy than its competitors it's CAC, Customer acquisition cost are likely much lower than some of its peers. And that's a key dynamic. So don't get freaked out by some of those concerns that we raised earlier because just like Snowflake what's happening is that the company for sure is gaining new customers, may be just not at the same rate but don't miss the forest through the trees I.e getting more money from their existing customers which means retention, loyalty and growth. Now speaking of forest, this chart is the dynamic I'm talking about, its an ETR graphic that shows the components of net score against spending momentum. Net score breaks down into 5 areas. That lime green at the top is new additions. Okay, so that's only 11% of the customer mentions. By the way we are talking about more than a 125 responses for UiPath. So it's meaningful, it's actually larger in this survey or certainly comparable to Microsoft. So that's just something right there. The next bar is the forest green. Forest green is what I want you to focus. That's customer spending 6% or more in the second half of the year relative to the first half. The gray is flat spending which is quite large. The pink or light red, that's spending customers spending 6% or worse, that's a 4% number. But look at the bottom bar. There is no bar, that's churn. 0% of the responders in the survey are churning. And Churn is the silent killer of SaaS companies. 0% defections. So you've got 46% spending more, nobody leaving. That's the dynamic powering UiPath right now and I would take this picture any day over a larger lime green and a smaller forest green and a bigger churn number. Okay, it's pretty good, not Snowflake good but it's solid. So how does this picture compare to UiPath's peers. Let's take a look at that. So this is ETR data, same data showing the granularity net score for Microsoft power automate, UiPath automation anywhere, Blue Prism and Pega. So as we said before, Microsoft is ubiquitous. What can we say about that. But UiPath is right there with a more robust platform. Not to overlook Microsoft, you can't but UiPath will you that the don't compete head to head for enterprise automation deals with Microsoft and may be they will over time. They do however compete head to head with automation anywhere. And their picture is quite strong as you can see here. You know as is Blue Prism's picture and even Pega. Although Blue Prism automation anywhere UiPtah and power automate all have net scores on this chart as you can see the tables in the upper right over 40%, Pega does not. But you can see Pega as a pure play RPA vendor it's a little bit of sort of apples and oranges there but they do sell RPA and ETR captures in their taxonomy so why not include them. Also note that UiPath has as I said before more mentions in the survey than power automate which is actually quite interesting given the ubiquity of Microsoft. Now, one other notable note is the bright red that's defections and only UiPath is showing zero defections Everybody else has at least little of the slims on defections. Okay, so take that as you will but its another data point, the one that is powerful nit only for UiPath but really for the entire sector. Now the last ETR data point that we want to share is the famous two dimensional view. Like the sector chart we showed earlier, this graphic shows the net score on the vertical axis that's against spending velocity and market share or pervasiveness on the horizontal axis. So as we said earlier, UiPath actually has a greater presence in the survey than the ever present Microsoft. Remember, this is the July survey. We don't have full results from the September-October survey yet and we can't release them until ETR is out of its quiet period but I expect the entire sector, like everything is going to be slightly down because as reported last week tech spending is moderated slightly in the second half of this year. But we don't expect the picture to change dramatically UiPath and power automate we think are going to lead in market presence and those two plus automation anywhere is going to show the strength in spending momentum as will most of the sector. We'll see who comes in above the 40% line. Okay, what to watch at Forward IV. So in summary I'll be looking for a few things. One, UiPath has hinted toward a big platform announcement that will deepen its capabilities to beyond being an RPA point tool into much more of an enterprise automation platform, rewriting a lot of the code Linux, cloud, better automation of the UI, you are going to hear all kind of new product announcements that are coming so I'll be listening for those details. I want to hear more from customers that further confirm what I've been hearing from them over the last couple of years and get more data especially on their ROI, on their land and expand, I want to understand that dynamic and that true enterprise automation. It's going to be good to get an update face to face and test some of our assumptions here and see where the gaps are and where UiPath can improve. Third, I want to talk to ecosystem players to see where they are in participating in the value chain here. What kind of partner has UiPath become since its IPO, are they investing more in the ecosystem, how do partners fit into that flywheel. Fourth, I want to hear from UiPath management Daniel Dines and other UiPath leaders, their exiting toddler wheel and coming into an adolescence phase or early adulthood. And what does that progression look like, how does it feel, what's the vibe at the show. And finally I'm very excited to participate in a live in-person event to see what's working, to see how hybrid events are evolving, we got to good glimpse at Mobile congress and this week in DC at public sector summit. As you know theCube is doing hybrid events for years and we intend to continue to lead in this regard and bring you the best real time information as possible. Okay, that's it for today. Remember these episodes are all available as podcasts wherever you listen, all you do is search breaking analysis podcast. We publish each week on Wikibound.com and Siliconangle.com and you can always connect on twitter @dvellante or email me at David.vellante@siliconangle.com Appreciate the comments on LinkedIn and don't forget to check out ETR.plus for all the survey data. This is Dave Vellante for theCube insights powered by ETR. Be well and will see you next time. (upbeat music)

>> Narrator: Live from Las Vegas, it's theCUBE. Covering UiPath Forward Americas, 2019. Brought to you by UiPath. >> Welcome back everyone to theCUBE's live coverage of UiPath Forward here at the Bellagio in Las Vegas, Nevada. I'm your host, Rebecca Knight, co-hosting alongside of Dave Vellante. We're joined by Cathy Tornbohm, she is the distinguished VP Analyst at Gartner. Thank you so much for coming on theCUBE. >> Very welcome, nice to be here. >> And Guy Kirkwood, he is the Chief Evangelist at UiPath. Thank you so much. >> Thanks Rebecca. >> So, we're hearing so much of these mantras, these catchphrases of UiPath. "automation first", "a robot for every person", "we're re-booting work", these are the theme's that Guy was touting up on the main stage, Cathy. Beyond that, I'd like to hear from you a little bit about what you're seeing in the RPA space at the moment. What are the trends and the themes that you think are most salient? >> I think the most fascinating thing about RPA right now is that it's really highlighting the problems the organizations have. All their accidents of history are really being brought up by RPA. And then you've got these digital darlings that they're trying to compete with, the Greenfield site kind of people. And some of those don't have beautiful back offices, but let's not go there for a minute. So, it, RPA is an opportunity for companies to link their digital dreams with their existing legacy nightmares. >> And those legacy nightmares include all of the things that Guy was talking about today: the drudgery, the dreariness, those mundane tasks that take up so much of our time. >> Absolutely, and really, if you think about it, in organizations, typically less than 15% of the applications that they're using have got some sort of application programming interface. So if you don't have a way of linking them, you end up with this long turn of applications that aren't linked together, with people literally being swivel-chair integration between the applications. >> Well, why can't you just string a bunch of API's together and automate that way? >> Well, in fact, there's a guy called Ian Barkin who works for Symphony, one of their organizations, it was set up to create automations for organizations. So one of the services businesses since been acquired by Sykes. And he describes it as process sediment, and it builds up in businesses in the same way that sedimentary rock builds up over millions of years. And digging through that, so that you can actually become more efficient is very difficult to do. So doing it on API level means you got to join up all those things individually. Whereas, using RPA, if system 'A' has a user interface, and system 'B' has a user interface, you can just use RPA. >> So, Cathy, you've been following process automation as a category for a number of years. Why RPA, why is it so hot, and why now? We've heard that it's the number one software category... >> Cathy: Fastest growing, yeah. Fastest growing, from Gartner. We've seen spending data that confirms that. Why now? (sighing) >> It's the digital competition that companies are facing, and the recognition that they cannot continue to be quite as bad at some of the things that they are bad at. So it's really that business transformation story back again, business process re-engineering, the same story that we had with BPO like ten years ago, but now, with robots instead. >> Yeah, it's interesting, I was at a, we had a show last weekend, it was the CEO of Suze, Suze... How do ya say it? Anyway, Suze, she said to me, "Well, you know, digital transformation's really about business transformation." And you kind of said the same thing. I mean, thoughts on that? >> I mean, you look at the start of the outsourcing market, the BPA market, twenty years ago. The very first deals were actually IT outsourcing deals that then transformed the business using IT as the enabler. So the first deal that I got involved with ever, in the outsourcing market, was Perot Systems with a British and Asian company. And we were putting in business process re-engineering consultants who actually transformed the business using IT as the enabler for that. There is no difference now, in fact one of the, one of the partners here, one of our original customers, actually put together a plan where we did the implementation, you know, soup to nuts, so that we could find out how we fit in to that whole transformation piece. And our team put together a whole package on all the learnings that we got out of that. And I had to laugh, because they're exactly the same things that every transformation program has had for the last thirty years. >> You know, if you look at kind of the history of certain segments, and I wonder if, Cathy, if you see RPA as one of them, like if you could've figured out who was implementing ERP the best, you didn't know SAP was going to become the leader, but if you could've figured out who was adopting ERP, you could've made a lot of money in the stock market, 'cause those companies had a huge productivity boost. Kind of same thing with Big Data, nobody really made any money in Big Data, so-called 'Big Data', a dupe. But the guys who applied it probably did pretty well. Do you see RPA as similar where the practitioners are going to actually be the ones that add more value to the industry than the new, the newly minted billionaires? >> It's almost the opposite. So the more RPA a company needs, it means the worse they did at managing their ERP in the first place. >> So they're kind of a mess? >> Yeah, yes. That need to be cleaned up, yeah. >> Yes, if you've got a hundred and twenty four ERP's that don't talk to each other, and you want to close your books in any kind of reasonable time frame, you're going to be a massive adopter of RPA, which basically means the more rubbish you are and activity, the more opportunity there is to automate more of it. >> So, what are the metrics that matter when you talk to your clients? >> Well, what I try and encourage clients to do is to really focus on business outcomes. So, much as Guy probably doesn't want me to say this, I don't really care how many 'scripts', aka robots, you've built, or how many run times you've deployed. What I care about is the business impact that you've managed to achieve. So, whatever KPI's are important to you, so are you managing to collect more revenue? Are you managing to make your customers happier because you're managing to decrease average handle times? or increase right first time activities. So anything that you're doing that actually improves the good old business metrics, is just going to be fantastic. So those are the sort of metrics that, really, companies should be focusing on. Not how many scripts they've built, that's absolutely pointless. >> I mean, are they focusing on that? I mean, when you... >> Yeah, lots of people are. >> Yeah? >> Yeah. >> In terms of ROI, we hear from customers that it has had them more accurate, they're more efficient, they're cost saving on human hours of the mundane tasks. But, when you were up on the main stage talking about how we're rebooting work, we're changing this moment, is it sparking the creativity, the imagination, the time spent on strategy in the more higher-level things? Is that, I mean that seems like that's the goal of return on investment. >> It is, within those organizations that are the most mature. So, what we're seeing, is the bifurcation, really, of the market between those organizations that are just starting and scaling up what they can, internal senses of excellence. Those organizations that are using the partners behind us. Those organizations that are using external parties to help them develop that. So Delight, for instance, they are sort of a managed service business. And instead of using people, they're using automation. So, Delight, by accident, has a BPA business in Spain, but then they'll turn that into an automation-heavy business and then providing that managed service. And then, the smartest customers, including SNBC, who we heard from yesterday, are actually turning their back office cost operations into a front office of revenue generator. Now, that is radically different from what we've seen prior. >> So Cathy, I got to ask you, when I was on a plane out here, somebody texted me a picture of the latest hype cycle. And they said, they knew I was going to UiPath, they said, "RPA has entered the trough of disillusionment." I said, "Oh, awesome, Gartner's, Cathy's coming on, and I can ask her about that." Well, what's your take on that? >> I think as Guy says, some people have already sailed through the trough, they've already gone through the challenges, or some of the challenges, and they've already found these fantastic productive things. I mean, we're estimating that people will save close to a million dollars for a large company, and just not having to do re-work of getting it wrong first time with re-keying that data. So, where there's some fantastic savings available, that you know, some of the ones have gone through the trough and done that, a lot of the other ones, they kind of, they don't understand the limitations of RPA and all those other partner tools that they need to put with it. So, don't understand it, can't handle unstructured data by itself. It needs a sister tool, so, what Gartner's talking about right now is this concept of hyper automation where you look across all the different activities that you would need to, sort of replace a person. So the people that are heading into the trough as sort of this second wave of adopters that Guy talked about, that will really struggle because they didn't understand the limitations in the first place. >> Well then, you know the, sometimes, things like the Magic Quadrant, and the trough of disillusionment, they're somewhat misunderstood sometimes, people, you know they see 'em, Gartner's very clever with the way it works things, but, so how should we think about that hype cycle? It's actually, in a way it's progress, isn't it? For an industry where they start... Entering that trough. >> Its, what Gartner says, is all industries have to go through that type of growing pains. And I think that we're seeing that, UiPath's expanded massively, and that's always a challenge for companies as they grow very rapidly. And as companies try and, as they say, take these wrong metrics. So I think things like UiPath buying ProcessGold is fantastic, it's a really, really good move for them. And I expect to see a lot of other process mining companies acquired, brought in to the RPA fold, because, there's four reasons why companies are going to go into this disillusionment, right? These are the main challenges with companies trying to use RPA properly. One is, they don't know what the processes are. So ProcessGold will give you a really good indication, they don't know about the microscopic level, and they don't know about the macro level. So things like digital twins will be something else that we would expect to see very closely partnered with companies like UiPath. And they don't know how to orchestrate their resources. So, other companies, like Innate, that can help you figure out how to do that will become... So its kind of like we're sort of breaking down a lot of what happened in other software categories and re-building them all up, in the way that the business can actually adopt them, hence, the AI Fabric sort of idea. So they don't know the processes, politics, people will lie to you about what they do all day, so they can sabotage your process, and there's a lot of silos within organizations that hate each other and throw things over the wall. So that all needs streamlining, and the more you can do across silos, the more successful any automation project would be. Then you've got, when you take a person out of a process, you take their eyes, their ears, the mouth, the nose. How are you going to replace that when you're trying to take them out, because you've got the keyboard fingers thing with the RPA tool? You need all these other activities replaced, replicated, supported. And then you've got the economics of production, so actually making sure that the scripts that you've built are actually worthwhile and are going to be cost-effective. It's something that we're studying at the moment. So you've got all these, all these different barriers, from all these different angles that are really going to push this thing into the trough for a little bit. And that's why it's great that RPA companies are looking at ways to mitigate that for their customers. >> Now, remember we said, as the understandings. So RPA is really good at dealing with structured data. Rule-spaced activities, deterministic things. That's why in regulatory, highly regulated environments, it's very effective, and the regulators love this sort of stuff. Because it's deterministic. When you look at AI, then we look at it in four ways. So you've got process understanding, which is the ProcessGold acquisition, you look at conversational understanding, 'cause ultimately robots are going to be controlled by voice. So you have to understand, the system has to understand that, let's say you're sitting in a bank, and the robot doesn't understand something, you say, "Okay, robot, stick that in the Well's account." It has to understand that Well's, in this case, means Well's Fargo. It does not mean a hole in the ground, water at the bottom, or a town in Somerset, in the UK, 'cause they're well's. So getting those ontologies correct is so important. So, that's conversational understanding. Document understanding. Because, as Cathy said, companies are still wading around in paper. So, understanding what those different documents are and how to action them is going to be really important. And finally, you're looking at visual understanding. So understanding and viewing things on the screen exactly the same way that humans do. So it's getting that combination right. >> So for RPA to live up to the hype, and there's a lot of hype, and it's a good thing, it's fun to track. It's got to go presumably beyond cleaning up the crime scene, if you will, to this new vision that you and Guy just laid out. What is the distance between, I dunno, sometimes I say 'paving the cow path', which gives you a nice hit, but as you say, it's 'cause companies... Ya know, they're messed up, to this vision of this, actually the guy from Pepsi today talked about it, this fabric of automation across the organization. How big of a gap is that? >> It's very different by every different company on the planet, really, in terms of their accidents of history, what their IT application landscape looks like, and what their business landscape looks like. And when you try and put the two things together, that's where you find the opportunities for any type of automation. >> Well come on, that's such an 'it depends' answer. (laughing) At the macro, will... In your expert opinion, will RPA live up to the hype? So many trends haven't, enterprise data warehousing, Big Data, Doob, all that stuff. You think RPA has the potential to crack through that. >> You mentioned a very good point. I think the most successful companies are the ones that actually will take the person that's managing the data and analytics of how their process is performing, and doing that with their automation strategy. And there are very few companies that've actually worked that out. They've still got totally two walls and they just meet up here at the CEO. So, unless companies actually take a more active business outcomes approach, and look at their end-to-end processes of order to cash and source to pay, these problems will carry on for some time. >> Well that's a great point, I mean, so it's data, it's machine intelligence, I guess Cloud for scale, you guys made a SAS announcement today, it's "automation first", to use your buzz word. >> Cathy: You need it all to come together. >> And it's really developing those best practices in your role as Chief Evangelist in helping understand what the most successful companies do, and then making sure that's implemented. >> Well that's why I spend more of my time listening than I do talking. Because the very nature of being a Chief Evangelist is the best job and the worst job title in the world. It's the best job because I spend my entire time talking to people like Cathy who know about what's happening within the market, and then feeding it back into our organization so we can make the right bets, so we can make the right acquisitions, but develop the right things. The bad thing about the job, is that I keep getting an inordinate number of people on LinkedIn saying, "So pleased that Jesus has entered your life." And I'm not that type of evangelist. (laughing) >> It's in the title. >> You know there's always this age-old debate in the industry of best of breed versus kind of a sweet approach. You see in SAP, for instance, acquired an RPA company, In Four talks about it. And then you get the specialist, UiPath. How do you see that shaking out, as the industry gets kind of more consolidated, how do you see a company like UiPath thriving, continuing to thrive? >> Gartner's going to predict coming in our new prediction series, but... Roughly 20 to 30% of enterprise adoption of AI, machine learning activities for process-based activities, will go through the RPA market. So, and with the IBPMS market, sort of combined together, that process management, because RPA has managed, cleverly, to capture the imagination of the business person. So, actually, there's a lot of IT departments that are talking to us about, how do we, how do we enshrine this activity, foreshadow IT, that's happening in the business, and make it successful, put governance plans in place so it will actually be successful in the way that it's actually now dealing with its own crime scene... (laughing) (mumbling) Its own rubbish, in a much better way. And I think that responsibility of business to understand how it can automate things and how it can manage things will really help a lot. So, I think the RPA players are well-placed to either be acquired into that bigger set of the established, large... Software providers, all to kind of keep blazing a trail for independence of the business. I'm not so sure about this idea that everybody should be programming their own scripts, I think that's a challenge. And I think the new interfaces will help mitigate some of the problems that we've seen with that approach, that hasn't been, haven't been very well done historically, so that's another area that will probably be a bit trough of disillusionment, but, actually, well-managed RPA projects have actually got a really good chance of delivering back very interesting benefits for businesses. >> Yeah, as a discreet innovation category, it does kind of feel that way, and often times, those markets are winner take most, the winner makes a ton of dough, number two makes a little bit of money, number three kind of breaks even, and everybody else gets consolidated or goes out of business, so, you guys go big or go home. That's kind of... Your posture. >> Tomorrow morning I'm doing, I'm doing my predictions for next year, and one of them is that the challenger RPA vendors, and indeed the service organizations that are small, are going to continue to consolidate and get acquired next year. So that's the 2020 prediction for us. >> Great. Well, Guy and Cathy, thank you both so much for coming on theCUBE. It was a great conversation. >> Oh, good, thank you. >> Thank you very much, indeed. Thanks Rebecca. >> Dave: Thanks you guys. >> I'm Rebecca Knight for Dave Vellante, stay tuned for more of theCUBES live coverage of UiPath. (techno music)