On November 12, 2018, SAP announced its intent to acquire Qualtrics for a whopping $8 billion. This signals SAP’s move towards incorporating key drivers of the modern economy (customer experience and employee experience) into its enterprise software products, including CRM, ERP and Analytics.
As an Industry Analyst, my first briefing with Qualtrics was on January 2012. At the time, the company was focusing its customer experience (CX) management capabilities on providing companies with surveys designed to collect feedback from their customers. Qualtrics also empowered HR executives with employee feedback management capabilities, as well as B2B market research firms with access to its survey tools and insights. Since that first briefing, Qualtrics has consolidated its messaging across those products, and added two new features – product experience management and brand experience management – all under the umbrella term of Experience Management.
SAP’s portfolio enables capturing and analyzing customer feedback and behavioral data across various channels. This data can be about customer interactions and references to company products and/or the company brand. By capturing and analyzing this data, CX leaders across businesses can make more informed decisions to manage customer journeys, the company brand and design, and company products and services.
For HR executives, the feedback management and analytics capabilities enable Qualtrics to help its users monitor and gauge employee experiences, better manage the onboarding process, and support performance reviews through 360-degree review processes. Aberdeen’s research depicted in Table 1 shows that when companies establish a successful VoC program by streamlining how they capture and analyze customer feedback and behavioral data, and foster an environment of engaged employees, they enjoy Best-in-Class results that far outperform the lagging results observed by others.
Considering the performance improvements illustrated above, it’s no surprise that CX leaders across companies of all sizes and verticals throughout the world prioritize fine-tuning their customer experience program execution. However, the performance impact of better managing customer experiences and fostering an environment of engaged employees has not been lost on the investor community as well. Specifically, over the past few years, companies providing the capabilities needed to monitor and manage customer experiences across all channels have attracted significant investment. In fact, in April 2017, Qualtrics raised $180 million in Series C financing.
Qualtrics hasn’t been alone in attracting investments. We’ve also seen other customer engagement solution providers receive significant funding or be acquired by private equity firms over the past several months. Examples include Talkdesk receiving $100 million in Series B financing in October 2018, and Marketo being acquired by Adobe in September 2018.
“Traditional” enterprise software (CRM, ERP and Analytics) firms such as Oracle, SAP and IBM have not been sitting on the sidelines either. They closely monitor the market to determine which technologies are top of mind across their current and prospective users, and pursue opportunities to enrich their existing capabilities through both innovation and acquisitions. On the latter, in October of 2018 IBM announced its intent to acquire RedHat, and Oracle announced its intent to acquire DataFox. Meanwhile, in January 2018, SAP acquired CallidusCloud to add sales performance management and CPQ capabilities to its portfolio.
In October 2013, SAP also acquired Hybris to strengthen its CRM capabilities. Hybris had a well-known brand even prior to the acquisition, as well as strong capabilities in the commerce market. However, commerce capabilities by themselves are no longer enough to succeed as a modern CX technology platform. So, SAP combined the commerce capabilities of Hybris and the sales performance management and sales enablement capabilities of CallidusCloud with its core CRM capabilities to launch its SAP Customer Experience portfolio in June 2018. Adding Qualtrics into this platform will enable SAP to help its users gather more customer feedback and behavioral data, and manage employee engagement to achieve CX objectives.
It will be interesting to observe SAP’s next moves in managing its CX platform. Competitors such as Salesforce, Microsoft and Adobe continue expanding their own portfolios through capabilities such as B2B commerce, campaign management and customer data integration. Yet, in September 2018, SAP, Microsoft and Adobe announced their OpenData initiative, enabling users to more easily integrate data across these companies’ software to establish and maintain a more holistic view of customer interactions. Therefore, while these providers have competitive offerings, they also enable their users to utilize multiple applications that can easily integrate to deliver omni-channel customer experiences.
One of the most significant benefits for SAP is that they will now have access to Qualtrics’ userbase, hence expanding its market share in the CX technology market. It’s important for SAP to devise and communicate how this acquisition will impact Qualtrics users, and how they can benefit from broader SAP capabilities. This also provides SAP an opportunity to help its users add new capabilities, such as customer and employee feedback management, where the insights captured are integrated with their existing CRM system. If integrations and customer communications are handled well, this acquisition will not only help SAP strengthen its market positioning in the CX technology market, but it will also help its users transform their activities to keep up with the requirements of the modern marketplace.
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