LeanIX acquisition to turn SAP into an orchestration player?

Within the announcement of its acquisition of LeanIX, SAP also revealed a new Business Transformation Suite. LeanIX adds enterprise architecture management (EAM) to business process management that SAP acquired in 2021 with its takeover of another German firm, Signavio. These deals are less about the consolidation of German technology providers and indicate that SAP is responding to the orchestration of technology that is typically the role of a CIO today. LeanIX also provides SAP with the tools to manage cloud migration, which is essential to organizations and to SAP as it competes with hyperscalers. 

SAP and LeanIX announced the acquisition on September 7, 2023, with the deal expected to be closed by the fourth quarter of 2023, subject to regulatory approval. No terms and price for the acquisition was revealed. The acquisition comes a year after the two companies formed a strategic alliance. SAP Chief Strategy Officer Sebastian Steinhaeuser said in a media briefing: 

LeanIX has been a partner of SAP Signavio for some time now, and SAP and LeanIX have over 500 joint customers, including big international household names. We know LeanIX well, many CIOs leverage them as part of RISE transformations.

Whilst general manager of SAP Signavio Rouven Morato said: 

LeanIX is the next step to help SAP's customers on their cloud journey in the RISE context.

An admission that the deal bolsters SAP's cloud migration plans as a way to aid customers and entice them into using SAP's brand of cloud services management in conjunction with hyperscalers. SAP and LeanIX have been doing this as partners.  diginomica’s Jon Reed says: 

I think the temptation to bolster their own toolkit over what the hyperscalers have to offer is strong. SAP is definitely seeing a strong need to have a more robust offering to stand up against the hyperscaler's internal tooling, as it wants to manage SAP workloads for its customers on the hyperscalers.

Who is LeanIX?

Speaking to the author last October at their Bonn headquarters, co-founder and CEO of LeanIX André Christ was filled with ambition for the company: 

People told me we are crazy going into this market; it is complicated, and there is only potential for €10 million in revenue. We wanted to create something that defined the category, like Salesforce has defined their category. 

We want to be the Google Maps for software, whether it is what an organization builds or acquires.

LeanIX has grown in 10 years from a two-person business to 600 employees and an international footprint, with 30% of its customers based in the USA, which generates half of the total revenues at LeanIX. At the acquisition briefing, Christ said LeanIX had 1,000 customers and had recently added fast moving consumer goods maker Mars to its client list. 

On the acquisition, the co-founder said: 

It is now the right time to take the next step. I strongly believe in SAP's vision of a comprehensive Business Transformation Suite. And I am convinced that LeanIX can and will play a pivotal role in it.

Rise of Business Transformation Suite

The acquisition of LeanIX adds another component to SAP reconfiguring itself as a business change and software provider. As Steinhaeuser said in the media briefing: 

To capture that opportunity with LeanIX, we are planning to create a unique and comprehensive Business Transformation Suite. 

Morato added: 

We will commercially make LeanIX available in the context of RISE. Due to legal reasons, we cannot go into any detail of this at this moment. The goal we are pursuing jointly is the Business Transformation Suite.

Steinhaeuser said of the acquisition and its role in the Business Transformation Suite:

With their capabilities, LeanIX will contribute a lot to making our customers' transformations faster and more successful.

The combination of systems and process transformation capabilities with LeanIX will also help us gain even more traction with RISE and GROW with SAP.

The above indicates Reed's analysis is on the money; SAP is ensuring it has a cloud migration offering equal to that of the hyperscalers. 

Enterprise resource planning (ERP), analytics and cloud are undoubtedly major architectural structures of the enterprise. Therefore, enterprise architecture management will, and has, been helpful for organizations moving their ERP to the cloud. CIOs and CTOs considering or using the Grow with SAP RISE with SAP services will be concerned that the addition of LeanIX is a further 'upselling' opportunity for SAP.

One CIO of a LeanIX customer expressed concerns about how they will fare post-acquisition. Will SAP provide a forum for such CIOs to raise their roadmap questions, and get those questions answered? 

SAP argues that the digital transformation demands of CIOs and CTOs warrant the acquisition. Morato said: 

Their product is market leading in a space that is needed in any SAP implementation, and obviously, we as SAP have access to ten-thousands of customers who are exactly in this situation.

So, we are bringing together the market-leading enterprise architecture tool, with the demand many customers have on their transformation journey, and we can open the door towards the CIOs of these ten thousands of customers. So, clearly a win-win and a huge opportunity. 

Steinhaeuser adds: 

Digital transformation is consistently named a top priority for CIOs. The digital transformation service market is one of the largest in IT, growing quickly.

On how Signavio and LeanIX will fit together for a transforming organization, Morato said in the briefing: 

In such a transformation, you need to be able to understand your IT landscape and what a change in the landscape means for your processes and vice versa: if you adapt your processes, you have to know what systems and applications are affected. So, bringing this closely together will be a huge benefit for our customers to successfully transform, and we deliver both from one source. 

In many conversations we are having with customers, we hear exactly this: they want a tight alignment and integration between the systems and architecture AND their process world to ensure a smooth transformation. 

Let me give you a glimpse of it. You typically go through certain phases in a transformation. 

In the preparation phase, you need to understand the current state both on how your landscape looks and how you execute your business processes. Then you plan the future design, and you again have the connection between how you want to design your future IT architecture and system landscape and how you want to run your business processes. 

And then obviously comes the execution where you implement the new world to finally monitor how the business is adapting to the new reality of process execution and IT landscape. So, enterprise architecture and business processes go hand in hand in any transformation journey. 

With the combination of SAP, SAP Signavio and LeanIX, we can support a customer regardless of their departure point of their transformation journey – whether it's a process-led or an IT-led initiative."

Orchestration & alignment

LeanIX was formed a decade ago as a response to the fragmented nature that technology began to take on, something co-founder Christ saw in a role with Deutsche Post, whose Bonn headquarters office towers over the LeanIX office. Christ told me: 

IT is getting much more decentralized. The CIO is no longer the gatekeeper; they are the orchestrator and helping the business make decisions. 

Salesforce sells directly to sales and marketing teams, so they are not going through the gate. The other big trend is that there will not be one large system but a number of best-of-breed systems that have to be connected together. 

The USP for CIOs is how you connect and interconnect. You need to continuously discover what technology your organization is purchasing. CIOs cannot judge and purchase marketing technology, but they can help with the single-sign on security, for example, so it is a new way of dealing with business-managed IT.

SAP and Steinhaeuser recognize this orchestration demand:

Some of our customers have complex and highly interconnected IT landscapes that make it difficult to know how business processes are being executed. At the same time, it's nearly impossible to make process changes without visibility into and understanding of their IT landscape. Put simply: Systems and processes are two sides of the same coin.

LeanIX describes its acquisition as:  

The planned acquisition helps SAP expand its business transformation portfolio, giving customers access to the full suite of tools required for continuous business transformation.

Continuous business transformation is leading to enterprise architecture being redrawn, as we have detailed. As enterprise architects and CIOs increasingly focus on business value, the tools they will rely on most - and potentially value and pay the most for - will be those that enable the business to be in a state of constant change. ERP and its cloud infrastructure will continue its journey towards being a commodity.

My take

There are some real challenges ahead for the duo. LeanIX has some awareness challenges with both CIOs and enterprise architects, which may or may not be helped by being part of SAP. CIOs will be concerned about upselling, and as detailed above, previous experience of SAP acquisitions has not always been positive. 

These acquisitions and the mood music suggest SAP is well aware of the need to become an orchestration partner. The question remains: can SAP's sales culture move on and do for the Walldorf headquartered business what Azure has done for Microsoft?