The News
On June 5, 2024, SAP announced that it entered into a definitive agreement to acquire WalkMe. Walkme is a leader in the digital adoption platform (DAP) market. DAPs are about the elimination of digital friction from workflows to turn the business application tech stack into a competitive advantage.
You can read the complete announcement here.
WalkMe’s solutions help organizations navigate constant technology change by providing users with advanced guidance and automation features that enable them to execute workflows seamlessly across any number of applications. This results in higher adoption of the underlying application and as such drives value realization.
By combining WalkMe with SAP’s earlier acquisitions Signavio and LeanIX, SAP intends to complement its business transformation management portfolio to better help customers through their transformation journeys.
According to the press release, WalkMe helps organizations boost enterprise productivity and lower risk by enabling consistent, effective and efficient use of software and the workflows it enables. Its DAP works on top of an organization’s application landscape, detects where people encounter friction and provides the tailored support and automation they need to complete the job to be done, right in the flow of work, across any application. Importantly, WalkMe will continue to fully support non-SAP applications.
“Applications, processes, data and people are the four key elements of a successful business transformation,” said Christian Klein, CEO and member of the Executive Board of SAP SE. “By acquiring WalkMe, we are doubling down on the support we provide our end users, helping them to quickly adopt new solutions and features to get the maximum value out of their IT investments.”
The acquisition is planned to be an all-cash transaction at a valuation of $1.5bn US. This represents a 45 percent premium over the closing share price on June 4, 2024.
The bigger picture
SAP is pushing customers hard to transition from their ECC environments to adopt S/4HANA, in particular S/4HANA cloud, ideally using its RISE and GROW programs. So far, customers are reacting less than enthusiastically although the demand seems to pick up, which has several reasons, amongst them cost and the general perception of SAP software being clunky and hard to use - whether this perception is right or wrong.
At the same time, this “upgrade” is as much a business transformation as it is a technical one. Users, who migrate from one world to another will appreciate all the help they can get. And they are too often the group that gets involved last.
On the other hand, users, especially millennials, these days expect a more consumerized and easy-to-use user interface.
It is exactly here that DAPs play out their strengths.
In addition, there is the ongoing or expected shift to conversational user interfaces. While this shift will change the way users interact with enterprise systems, it will neither be abrupt, nor will conversational user interfaces totally replace more traditional ones anytime soon. Users, especially occasional users, will still need a lot of help when navigating through the tasks they want or need to accomplish, even if it happens.
My analysis and point of view
This acquisition certainly makes sense, especially looking at what Signavio and LeanIX are delivering. WalkMe certainly augments SAP’s capabilities in helping customers get more user buy-in during their transition to S/4HANA. Right- or wrongfully, SAP applications have the reputation of being overly complicated and not user friendly. And in all fairness, this is not specific to SAP but true for most, if not all ERP-style applications. These applications are simply not made for occasional users but more for power users. Not that this is an excuse for clunkiness.
With GROW and RISE, this transition to S/4HANA is first of all a business transformation, which is about changing existing or establishing new business processes. Given this, every change will cause friction in their execution, some of it unnecessary. With the combination of Signavio and WalkMe, more of this friction can be identified and addressed. This is also true for projects that do not follow RISE, but any other methodology. In addition, as there is simply not enough capacity available to migrate the great many existing ECC customers to S/HANA fast, it pays off to offer them a method to remove or fix problematic areas of their instances before embarking on the transition journey to S/4HANA. In SAP CEO Christian Klein’s words “Applications, processes, data and people are the four key elements of a successful business transformation. By acquiring WalkMe, we are doubling down on the support we provide our end users, helping them to quickly adopt new solutions and features to get the maximum value out of their IT investments.” He is exactly right about it. For too long, the users were left behind. Certainly long enough for a new software category - established by WalkMe, got established. It is good to see SAP finally taking better care of them now. As said, SAP software does not have the reputation of being very usable.
As a side note, apart from “applications” and “data”, SAP needed to acquire the capabilities that it needs to to manage the transformation of businesses. And people came last. But hey - better late than never. And SAP is the first ERP vendor to actively address this topic as part of an integrated strategy.
It remains to be seen how SAP integrates the screen-based help that WalkMe offers into its copilot Joule, which is a step into changing the user interface into a conversational one - which should be far easier to “navigate” for the occasional user. I still see quite some upside here, because the information/data that processes - hence the systems - demand, will not be fully known by non power users. Although the work with the system will appear more natural, the same challenges we have now will remain and these users will need support. And WalkMe has announced WalkMeX in May, which points towards the support of conversational user interfaces.
As many other companies that get acquired by major business appllications vendors, WalkMe also has a significant footprint with other vendors’ customers. It would be worthhile to keep these clients, minimally as bridgeheads. What we have learned is that the approach that SAP used with hybris was quite successful in this, until SAP let the brand vanish. WalkMe offers a similar gateway into businesses that are not SAP strongholds, if SAP moves smartly. It will be interesting to see how this evolves with WalkMe being part of SAP or an SAP company.
From a transaction perspective, I can only speculate that either there was another bidder or that SAP put itself in a weak negotiating position - the latter I can hardly believe. In any case, it appears that SAP really wanted exactly the capabilities offered by WalkMe and not the ones of a competitor. Every analyst or consultant, and I mean every single one I talked to, expressed astonishment at this high price that SAP is willing to pay for WalkMe.
All in all, I applaud SAP for taking this step, and am curious about how WalkMe gets integrated into SAP’s offerings.
But man, the price tag.
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