The Next Wave of Automation and How It'll Affect The White-Collar Workforce

When we think about automation, it is usually manufacturing, factory floor improvements, and companies like Rockwell Automation (ROK) that come to mind, but we are seeing an acceleration in the adoption of automation occurring in the white-collar and professional services world as well. While driverless cars and warehouses that exclusively employ robots may get the most headlines, jobs in more traditional office and professional settings are increasingly facing pressures from AI (artificial intelligence) and machine learning solutions.

A 2019 Wells Fargo (WFC) research report predicted that automation would cut around 200,000 jobs from the banking industry by 2019. The hyper-low interest rate environment of the past decade-plus has squeezed banks' margins to exceptionally tight levels, and given their biggest expense categories is employees, it is no surprise that they are looking for ways to reduce those costs.

Prior to the pandemic, many companies were already using digital applications that provide some level of automation and basic data analytics, from customer relationship management to automated Human Resource systems to accounting processes. Automation can significantly reduce costs and employees' time spent on repetitive tasks, helping an organization focus more on revenue generation and growth. Companies such as Salesforce.com (CRM), Workday (WDAY), Splunk (SPLK), and Slack (WORK) have been helping their clients with many such functions for years, but companies today are going well beyond the traditional levels of automation.

Process automation helped many companies not only survive but, in some cases, thrive during pandemic lockdowns. For example, when indoor dining was limited or prohibited, restaurants were able to leverage the process automation provided by solutions such as Uber's (UBER) UberEats, DoorDash (DASH), and GrubHub (GRUB) to continue to serve their customers.

The pandemic sped up the shift towards increased levels of automation. According to consulting firm McKinsey & Co, by 2030, automation will displace an additional 8.4 million workers in the U.S., a 23% increase from the pre-pandemic scenario. The report found that jobs most likely to be replaced with automation will be in sales, office support, and food and customer service. According to a recent World Economic Forum report, 80% of business leaders are accelerating the automation of their services in response to the pandemic, with 43% expecting new technologies to reduce their workforce.

The pandemic not only accelerated the adoption of many technologies, such as automation, but it also affected the way in which these new tools were used. With all the pressures the pandemic has brought, companies have been forced to adopt and adapt at a faster pace than ever before just to survive.

The next phase of automation will be driven by Artificial Intelligence (AI) and machine learning, which enables machines to solve problems and take actions that were previously only possible with human involvement. These tools can process immense amounts of data, identify patterns, predict future behaviors, possibly recognize images better than a highly skilled person, and enable systems to make complex decisions. These systems are able to continuously learn and adapt, much like we do but without coffee breaks, vacation and sick days, and requests for a raise.

Those leading the AI charge include Nvidia (NVDA), which is building an AI lab in Cambridge, England, that is expected to feature an AI supercomputer. The company's graphics processing units will also be used to power "Leonardo," the world's fastest AI supercomputer. While Salesforce has long been in the corporate automation game, don't think it is a tired has-been. The company was, in fact, one of the earliest adopters of AI, having launched its AI tool, Einstein, in September 2016. This technology uses data gathered on every user action to create predictive analytics and aid in routing issues.

Another company making waves in corporate AI is DocuSign (DOCU). In 2020 the company purchased Seal Software, an AI company focused on contract analytics as it looks to revolutionize contracts. The company's usage of natural language processing and machine learning to identify potential risks in a contract and reduce the time needed to close deals.

A relatively new entrant on the public stage is Robotic Process Automation company UiPath, which, founded in 2005 and having just announced a confidential submission for an IPO in December 2020. The company provides technology that emulates the actions of a person interacting with a digital system to execute a business process. The automated solution can then "trigger responses and communicate with other systems in order to perform on a wide variety of repetitive tasks. Only substantially better: an RPA software robot never sleeps and makes zero mistakes." Examples of companies leveraging RPA solutions across their human resources, finance, and payroll systems include Walgreens Boots Alliance, Coca-Cola, and Siemens. The reasons for their usage span the processing of repetitive data, process transactions, and the automation of certain tasks.

One of the next waves of automation will be spurred on by the arrival of the internet of things, which will combine sensors, networks, and software to operate machines, improve quality control, cut down on analytical errors, and enhance safety.

The bottom line is that where companies can cut costs and improve performance, particularly when it comes to repetitive or relatively predictable processes, technology will likely step in to replace human beings. This means the future is likely to see major changes in the workforce as people need to retool, but also opportunities as the more mind-numbing tasks are taken over by bots that revel in just that kind of task. The future could be a lot more efficient and work a bit more fun.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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