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SAP Sapphire 2024 - why does SAP plan to acquire WalkMe? An early unvarnished take

Jon Reed Profile picture for user jreed June 6, 2024
Summary:
SAP had a few rabbits up its sleeve at Sapphire 2024. In particular, the surprise announcement of an agreement to acquire WalkMe shook things up. On the ground in Orlando, I had the chance to ask SAP leadership my burning questions - here's a first take.

SAP's Scott Russell fielding question
(SAP's Scott Russell at media Q/A)

I wasn't planning on writing about WalkMe today. But on the day before SAP Sapphire 2024 kicked off, something was in the air. During our analyst sessions with SAP leadership, it seemed to me that another shoe was just about to drop. And no, it was not one of the now-announced Business AI updates in the SAP Sapphire News Guide

On the beginning of day 2 (Wednesday June 5), SAP's agreement to acquire WalkMe for $1.5 billion was announced - and there was the shoe. My plan to write about the surprising surge of the S/4HANA Public Cloud Edition was (temporarily) sidelined.

I had a burning question or two; those got answered during the press Q/A following the day 2 keynote. But first, the official verbiage. As per SAP CEO Christian Klein: 

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.

So - reducing end user friction, a notorious problem with enterprise software, is now crucial. During his day 2 keynote, SAP Chief Revenue Office and Executive Board Member Scott Russell said:

Today, SAP announced our intention to acquire a company called WalkMe. WalkMe is a great organization, and they are the market leader in digital adoption platforms. But why it's so important to SAP - and hopefully it's important to you - is that we are obsessed not only about great applications, great platforms to deliver value for your business, but we care passionately about the transformation journey to get there. 

A quick note on "Digital Adoption Platforms"- to the best of my knowledge, WalkMe coined this term to describe how they make enterprise software navigation easier. Full credit to WalkMe for creating their own category, but it's hardly a coincidence they are the leader in a category they created. I believe a big part of why WalkMe matters is because enterprise software is no longer the domain of super users alone. Engaging casual business users, and making software easy for younger workers to use intuitively, is non-negotiable. So-called "transformation" efforts require broad buy-in, and that starts with ease of adoption. Russell continued:

On our Business Technology Platform, we have the underlying platform to help you manage your data, your integrations, your extensions, your code, the ability to be able to manage that data layer of your business. With LeanIX, we brought in a capability to help you manage your enterprise systems landscape: the applications, the capability to be able to understand your entire technology architecture. With SAP Signavio, we're able to then bring a process insight, process management, process mining - an understanding of your enterprise business processes across your SAP and non-SAP landscape, to be able to understand how to optimize that.

And now with WalkMe, we're excited about the opportunity for [the most important area] - which is your people. That business user that wakes up every morning and is using the SAP applications- providing a behavioral experience be able to help them with their tasks, to be able to support them on the digital adoption journey using the SAP and non-SAP portfolio. It's another step for SAP, and another piece for us to be able to create value for all parts of your business. Your data, your systems, your processes, and your people.

Kudos to Russell for acknowledging the "non-SAP" part of a customer's portfolio. That's the kind of open platform talk today's customers like to hear. By "non-SAP", Russell is also alluding to the fact that WalkMe delivers its capabilities for the users of several leading software vendors, including two of SAP's biggest competitors. More on that shortly.

The caution flag for SAP customers: keep an eye on how everything from BTP to Signavio to LeanIX to WalkMe eventually connects. Most of these recent acquisitions are not going to truly change the lives of SAP users if they are discrete applications. It's the fluid integration of these solutions that gets to the potential Russell is describing. 

But hold up: during her day one keynote, SAP Chief Marketing and Solutions Officer and Executive Board Member Julia White said that SAP Joule, SAP's AI Copilot, was the new UX. So isn't there a risk in the planned acquisition of WalkMe, given that WalkMe built its business on helping user with screen-by-screen software navigation? Isn't the shift to copilots disruptive to screen navigation? Is there an acquisition risk here, in terms of how fast the user experience is changing? If so, how do we assess merger value versus potential risk? In the post-keynote media Q/A, I posed that question to Scott Russell. He responded:

When we announced this morning, I got asked that question a couple times already. And it's the right question, because let's face it, we are changing the way we interact and operate with our business applications through Joule, and that cuts across [all our applications]. Joule will help the user in an easier way: what are the activities? How do analyze them? What are the tasks that I need to do? 

But if you think about constant innovation, and the tasks that need to be done, my best example is that WalkMe is already a partner we already work with on Concur. Many people only will only travel once or twice a year, so they're not a professional user. So that task is one that needs to be navigated. They need to be guided step by step: 'What's the content? How do I use that?' And so what we believe strongly we analyze this is the coexistence of a Copilot tool with WalkMe, that can give that step-by-step activity. Joule [could say]: we need to do these seven tasks. WalkMe will guide me through the tasks to be done.

And then obviously for our high-volume users, and the users of our business applications, then we're thinking about constant innovation. It's not always easy for a business user to understand, 'Well, I've got this [new application], how do I use it?" So WalkMe can help them, say, 'Okay, we've got a new task, whether it be guided by Joule or in the application - we can help support that.' So it's complimentary in our view. And also, last but not least, WalkMe is also leveraging that technology, to be able to serve that up, and deliver that content in an easier way.

My take

WalkMe is pushing into the impact of AI as well. To that end, WalkMe announced WalkMeX in May. WalkMeX is an AI copilot that is billed as providing "the best next step for any workflow, anywhere." SAP says it intends to integrate WalkMeX with Joule.

Copilot integrations are new territory. Given that SAP also announced a notable integration with Microsoft's 365 Copilot, SAP will be under pressure to prove that Copilot integrations are fruitful, and not unwieldy. I suspect, based on what I know of AI agent interoperability, that integrating copilots will prove useful (and not too difficult). However, I do wonder whether WalkMe's copilot will be useful to Joule users, or just redundant.

I gave an early take on this announcement to TechTarget on Wednesday. Upon further reflection, I have a more counterintuitive take. I don't think copilots are going to become the sole new UX anytime soon. We've heard a few vendors talk this up, but I believe many users, particularly the power users that get big loads of work accomplished, will want to stick to their screen navigations - even as they appreciate more simplicity and workflow automation (and by the way, WalkMe is doubling down on the automation part of its offering as well).

Therefore, I think WalkMe's traditional screen navigation support, perhaps linked to their own AI services, will have a longer shelf life than some think.  Exactly how SAP puts all these pieces together remains to be seen. WalkMe spends lots of time understanding the UI frustrations of enterprise users. Can SAP puts this know-how to good use? WalkMe was serving SAP customers quite effectively as a standalone company. Will it be able to deliver exponentially more value to SAP customers once it's acquired? We'll find out.

You can't evaluate a sports draft the same year it happens. You can't properly assess an acquisition for some years either. It's all about how you execute on it. But you can certainly speculate, and speculation is fun, too, as long we don't assign guru status to off-the-cuff remarks. Along those lines, the early market response was relatively favorable, though WalkMe has had its ups and downs since its 2021 IPO. 

If I'm a Workday or Oracle WalkMe customer, I'm probably not jumping for joy today. Yes, WalkMe will "continue to fully support non-SAP applications," and this could all work out fine for all those customers, but let's just be honest here: this is always how it works. It was the same story when Workday acquired Adaptive Planning, and SAP customers running Adaptive had to ask the hard questions. 

These are the inherent risks of customer choice in an acquisitive market. Holding vendors' feet to the fire over such things is part of the game too, so I'm sure WalkMe is expecting some hard questions. I also find myself wondering about Workday and Oracle's official/non-official views on this. It will be interesting to see if there are any public reactions. I don't know what will happen, but I'll have my popcorn handy.

However, the popcorn-scarfing part of this job should not consume us. As such, I see no reason why this can't be a good result for SAP and its customers. But as with all acquisitions, value doesn't land in the lap; you have to prove it out.  

Image credit - Photo of SAP Executive Board Member and Chief Revenue Officer Scott Russell fielding a media question by Jon Reed.

Disclosure - SAP and ASUG are diginomica premier partners, as are Workday and Oracle. SAP paid the bulk of my expenses to attend SAP Sapphire Orlando 2024.

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