Three Reasons SAP Acquired Qualtrics International

On November 11, 2018, just days before a planned IPO, SAP announced its acquisition of Qualtrics International, the cloud analytics and customer experience company. Strategically, Qualtrics appears to be the right fit for SAP, which has committed $8 billion to the takeover. Qualtrics will remain a separate entity and Qualtrics CEO Ryan Smith will maintain his position as the leader of the company. The acquisition has some interesting qualities to it, some of which we analyze a bit further below:

  1. SAP is known the world over for making hard-acquisitions of any company that suits their vision, and Qualtrics is no exception. However, Qualtrics is one of the first companies promised to be allowed to be kept as a separate entity rather than a direct integration to the SAP platform.

As SAP has grown, it has taken on several different companies under their umbrella, one of which is the travel and expense management software provided by “Concur”. In the case of Concur, we can see components that are installed within SAP systems as integration points for the tool. Essentially, one must only install and configure Concur as an add-on to SAP NetWeaver now, instead of using a dedicated system for it. The current plan for the Qualtrics software suite keeps it separate from the SAP software ecosystem, but under the corporate umbrella in terms of training and documentation.

  1. For the price of $8 billion, SAP has technically overpaid, but Bill McDermott (CEO) is confident that this acquisition will be astronomical and compares it to the purchase of Instagram by Facebook back in 2012.

In an aggressive move, SAP has liquidated around 6% of their net worth and has acquired the Qualtrics for 20 times its 2017 revenue. This is a gigantic leap of faith, whichever way you look at it, and one can only assume that SAP is very confident in the product and offering provided by Qualtrics.

  1. Qualtrics has a few solutions on their platform; one of which allows survey participants to submit short responses and have a software algorithm compile these results into neutral/positive/negative response categories. This is called “Automated Sentiment Analysis”, in the industry, or “Advanced TextiQ” by Qualtrics.

Automated Sentiment Analysis isn’t a new technology, and with a quick online search, you can see there are a couple of other companies, such as Trackur or Brandwatch, who also offer this type of technology in their product and service portfolio. Why then, did SAP pursue Qualtrics specifically?

SAP has chosen Qualtrics seemingly because they offer the best Experience Software (EX) that combines survey-based feedback for the following:

  • Brand Experience
  • Product Experience
  • Customer Experience
  • Employee Experience

The data points that Qualtrics is able to deliver pairs well with SAP’s already popular Analytics platforms and other Operational Software (OX). In fact, using BI and Machine learning, SAP should be highly capable at analyzing the multiple data points that Qualtrics is able to provide through its survey protocols.

Given these three factors, SAP has made a good buying decision here, but our team at Pangaea wonders what this could mean for the overall SAP experience. We imagine the first part of their plan will involve utilizing the stock software provided by Qualtrics to start qualitatively assessing SAP’s customer base, as well as why they might be losing people over time. Qualtrics has many topics on their website regarding this, referring to it as “Customer Churn”. Their theory is if one can detect when a customer is just about to “jump ship”, the people involved in CRM can shift gears quickly to provide more value and keep the customer happy. More antiquated methods involved letting a customer leave the organization first before trying to pull them back in later.

Another possibility is SAP taking from the Qualtrics software (in terms of product surveys) and improving segments of their offerings. If SAP builds their partners and customers into this survey network, it could serve as a valuable resource to help drive an increase in satisfaction across their product lines.

We’d love to hear if you have opinions and thoughts on this acquisition. Please leave your comments down below.

At Pangaea, we remain at the forefront of SAP accelerator development and the latest technologies to help organizations improve their efficiency and effectiveness, and achieve their business objectives. Please do not hesitate to contact us if you have any questions about our product and service offerings.

Thomas RautenbachArchitect
Thomas Rautenbach has over 20 years of diverse systems experience with a strong focus on system and integration architecture and software design and development. He has detailed technical, functional and system knowledge across the SAP technology platform, including extensive experience with the Finance, Supply Chain, Sales and Distribution, and Human Resources modules.

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