SAP has announced its intention to purchase Qualtrics for $8 billion. Qualtrics is an experience management platform that collects data around employee, product, brand and the customer for analysis. SAP has entered a definitive agreement
to buy the company.
SAP CEO Bill McDermott commented: “We continually seek out transformational opportunities – today’s announcement is exactly that. Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks. SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”
Co-Founder Ryan Smith will continue to lead Qualtrics as a separate business unit within SAP. It will remain in its dual headquarters in Provo, Utah, and Seattle, Washington.
To pay for the acquisition, SAP has already secured €7 billion finance, approximately $7.89 billion. The price includes unvested employee incentive compensation and cash on the balance sheet at close. It expects to complete the acquisition in H1 2019. Both the SAP board and Qualtrics shareholders have approved the acquisition.
Leveraging experience data
The acquisition makes sense. It will compliment SAP C/4HANA nicely and provides the feedback loop that is missing from many other CRM solutions. It will provide SAP access to the ability to analyse operational data from its existing platforms and the experiential data collected by Qualtrics. Once integrated this will create a powerful solution that delivers insights from across the lifecycle of customers and employees.
Ryan Smith, CEO of Qualtrics, said: “Our mission is to help organizations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions. Supported by a global team of over 95,000, SAP will help us scale faster and achieve our mission on a broader stage. This will put the XM Platform everywhere overnight. We could not be more excited to join forces with Bill and the SAP team in this once-in-a-generation opportunity to power the experience economy.”
It seems so simple and yet there is a lot of work to do. Qualtrics already has out of the box integrations with Salesforce, Tableau, Marketo
, Slack and Adobe Analytics. It also has an API that enables other platforms to integrate. While remaining a separate business unit one wonders how quickly it can integrate its platform to SAP HANA, including SAP C/4HANA and SAP S/4HANA.
What does this mean
The question is whether competitors will see this as SAP becoming dominant in the market. There is no doubt that SAP as one of the larger companies is leveraging its financial muscle in this play. This may delay the formal approvals.
It is more likely to prompt a counter move by Salesforce, Oracle or Infor to acquire one of the other leading companies. According to a recent Forrester report Qualtrics and Medalia are the two market leaders in the customer feedback management sector. Others include Clarabridge, InMoment and Confirmit. Medallia is likely to have a higher purchase price that Qualtrics, while the others less. Will Salesforce, Oracle or Infor look to acquire to boost their functionality in this space? None are mentioned in the recent Forrester Wave report which might indicate a weakness in that area.
Qualtrics will deliver a significant complement to the SAP CRM platform SAP C/4HAHA. This year SAP has continued to drive its agenda to challenge Salesforce in that marketplace. This acquisition, though expensive, will certainly put it ahead of Salesforce in terms of functionality and presence in the XM market.