As companies look to stave off technical debt, a process of aging systems limiting a company’s ability to modernize, the first step is simply understanding the state of your architecture. SAP announced today that it is acquiring German startup LeanIX, a software service which helps companies map out their architecture.
The purchase is expected to complement the 2021 Signavio acquisition, a German business process automation company that SAP bought for a reported price of $1.2 billion. While the companies did not share the purchase price, ProWellTech is hearing that today’s acquisition price is in the same neighborhood, but a bit higher.
SAP is hoping to parlay the company’s capabilities into a business to help companies modernize their software stacks more quickly. CEO Christian Klein said it’s about recognizing that systems and processes are part of the same problem set and building on the company’s prior experience to speed up modernization activities. “Together with LeanIX, we want to offer a first-of-its-kind transformation suite to provide holistic support to our customers on their business transformation journeys,” Klein said in a statement about the deal.
To that end, the company is building a new ‘business transformation’ suite based on Signavio, LeanIX and various pieces built by SAP over the years. The result, according to the company, will be a comprehensive view of “business processes and applications, including overlaying process dependencies and mapping the impact of potential transformations on the IT landscape.”
LeanIX CEO and co-founder André Christ sees the two companies capabilities supplementing each other. “SAP helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption,” he said in a statement.
It’s worth noting that last month LeanIX announced a partnership with Microsoft to launch the LeanIX AI Assistant, a generative AI tool that enables customers to interact with the software to ask questions, generate documentation and make architecture recommendations, among other things. The generative AI component certainly made the company’s offerings more attractive to SAP, which sees tremendous potential to help companies speed up these transformation processes.
It’s a bold ambition, trying to bring these various pieces of technology together, and it’s always a challenge for large companies like SAP to capture the vitality of acquired startups without quashing their innovation inside the big corporation. Working in its favor, however, is the fact that the two companies have been partners for some time.
Further, the company is also looking to solve a real problem around helping customers reduce technical debt. In a recent ProWellTech interview with David Linthicum, chief cloud strategy officer at Deloitte, he talked about companies in two distinct digital transformation categories – haves and have nots:
“There are companies that have done a lot of pre-planning and eliminated as much technical debt as they could, and have designed a path to modernization, who have a clear vision about how they’re going to leverage technology strategically to elevate the business,” he said. “And there are those who haven’t done that, who have a tremendous amount of technical debt, and can’t figure out how to modernize the existing systems.”
Thomas Preuss, managing partner at German venture capital firm DTCP, an early investor in LeanIX, sees this deal as validation for the German startup ecosystem. “It is encouraging to see an acquisition of this size in Germany in the current market. The transaction is a great indicator that Europe is catching the US when it comes to product and quality of Enterprise SaaS businesses. In Europe, we are seeing third generation investors and entrepreneurs coming through the ecosystem, building category leading businesses in tech hubs that now rival those in the US,” he said in an email.
LeanIX launched in 2012 and raised almost $120 million, including an $80 million Series D in 2020. The company reports it has 1000 customers, up from 300 at the time of the Series D, and has revenue approaching €100 million. The deal is expected to close in the fourth quarter, subject to normal regulatory oversight.