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SAP Qualtrics public [shutterstock: 258188879, Ruslan Grumble]
[shutterstock: 258188879, Ruslan Grumble]
Blog Editor-in-Chief

SAP And Qualtrics: Making A Virtue Of Necessity?

Integration of Qualtrics with SAP’s core systems seems to have failed. SAP’s intent to take Qualtrics public is an attempt to make a virtue of necessity.

SAP announced its intent to take Qualtrics public through an initial public offering (IPO) in the United States. Qualtrics is one of the leading companies in experience management (XM), its founders having popularized the term. There are other companies such as Adobe that offer similar solutions, but none have gotten quite the same buzz as Qualtrics.

One year ago, I spoke with then-SAP COO Christian Klein, shortly before then-CEO Bill McDermott departed and Christian Klein took his place. His view on Qualtrics at the time was ambivalent. On one hand, he said that Qualtrics’ software and its functionalities were unique in the market. On the other hand, he admitted that exactly because of its unique algorithms and system architecture, integration with SAP ERP or CRM would be a difficult task. Maybe it proved to be impossible after all?

Another idea I haven’t seen much discussion about is Qualtrics on Hana. Many SAP cloud acquisitions, like Ariba or SuccessFactors, have found their way onto Hana, so why not Qualtrics? Maybe its perfect algorithms weren’t compatible with SAP’s database.

Has integration of Qualtrics with SAP failed?

So, integration of Qualtrics with SAP’s core systems seems to have failed. SAP’s intent to take Qualtrics public is an attempt to make a virtue of necessity, in my opinion. Instead of trying to force integration between two fundamentally incompatible systems, SAP is seemingly trying to cut its losses, rather making money as Qualtrics’ majority shareholder than its parent company. As CEO Christian Klein describes in the official press release, “SAP’s acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40 percent, demonstrating very strong performance in the current setup. We decided that an IPO would provide the greatest opportunity for Qualtrics to grow the experience management category, serve its customers, explore its own acquisition strategy and continue building the best talent. SAP will remain Qualtrics’ largest and most important go-to-market and research and development (R&D) partner while giving Qualtrics greater independence to broaden its base by partnering and building out the entire experience management ecosystem.”

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It’s not a bad strategy on SAP’s part. However, what about the customers that believed SAP’s promise of integration of all its cloud acquisitions? If you opted for Qualtrics instead of, say, Adobe’s experience management solution in the hopes of seamless integration with SAP’s core systems, you’re out of luck. Regardless, it will be interesting to see how this plays out.


Update: During the SAP Q2 Earnings Call (July 27, 2020), there were some interesting comments about the Qualtrics spin-out. SAP CEO Christian Klein, for example, said, “But for me, there is no downside [to the spin-out of Qualtrics] as we will continue to further embed Qualtrics within our intelligent enterprise. As part of our product strategy besides human experience management, we now figured out four other categories, which we will launch in the next quarters to come, and which we will also sell together. So there is no change because of the partial IPO.”

Ryan Smith, founder and CEO of Qualtrics, had this to say when asked about the reasoning behind the spin-out, “Number one is, look there are a bunch of other strategic providers that I think that we could go partner with. It’s not that they weren’t willing to partner, but we want to do big things with them and I think this will help. […] But probably most importantly there’s a lot of technology that we like out there. So I think this gives us an opportunity to go make our own acquisitions and be able to truly expand our vision for what experience management can be and really continue to paint what we saw years ago.”

When asked about the IPO sizing, SAP CFO Luka Mucic commented, “In terms of the IPO sizing, we frankly don’t know it exactly yet. I mean, if you look at benchmark U.S. tech IPO is typically – they float at a rate of somewhere between 10, 15 perhaps a notch above that. And we will not be miles away from that kind of broad size range. So it’s clear that also after the IPO, SAP will have the clear majority of the shareholding. In terms of the use of proceeds, we follow two primary objectives here. First of all, we want to make sure that Qualtrics is properly capitalized, so that they can pursue their investment plans. And can properly seize the opportunities that exist out in the market. But clearly, we also expect that there will be proceeds after having satisfied this purpose that will go to SAP. And on those proceeds we will clearly use them in order to foster our own strategic growth priorities, whether they will be organic or also perhaps selective tuck-in M&A activities. And in terms of the timing of a listing, that is really something which we cannot comment on it at this point in time.”

Source:
E-3 Magazine July/August 2020 (German)

About the author

Peter M. Färbinger, Editor-in-Chief

Peter M. Färbinger is Editor-in-Chief and Publisher at E-3 Magazine, B4Bmedia.net AG, Munich, Germany. He can be reached at [email protected]

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