Late yesterday evening (my time) and SAP drops a blowout offer of $8bn for Qualtrics, the survey and sentiment analysis business that recently pivoted into the so-called 'experience management' or XM arena. No surprise then that today, my planned SAP executive meetings got blown out. There just wasn't time for leadership to get its ducks in a row. Be that as it may, this acquisition deserves some attention.
At the bid price, SAP is paying a whopping (but estimated) 20x current revenue run rate for a company that expects to turn in around $400 million in the current year but with a growth rate north of 40% range. So while the multiple looks eye-watering today, that will quickly shrink, assuming that the combined SAP-Qualtrics team can keep on pace. That's quite a big if.
SAP and Qualtrics could not be more different and getting the two businesses working well together will be far from straightforward let alone getting results from the combined efforts into customer's hands.
SAP is a well-oiled sales execution machine that has rediscovered the need to be in Silicon Valley and a new found love for developers. Qualtrics, by its own admission, is a scrappy startup-ish business headquartered nowhere that SAP would call home. I've watched Ryan Smith, CEO Qualtrics on stage at one of the Irish web summits. He's quite the engaging character but very different from the booted and suited SAP exec.
Equally important, Qualtrics counts Marketo as a key partner. In turn, Marketo was recently acquired by Adobe, which positions itself as a 'digital experience' company. You see where this goes.
But the bigger concern I have is in wondering if SAP has understood the outcomes from Qualtrics data. In a blog post, Rob Enslin, SAP executive board member said:
Most tools show broad feedback but lack precision and speed. The timely process of surveys and manual feedback collection can take months to collect and analyze data. By the time decisions are made and products fixed, the world has moved on. A quintessential case of “too little, too late.”
Consider the feedback airlines most frequently ask about: the condition of the plane, the boarding process, ticket purchase, seat location, arrival timeliness. How do those insights connect to paint a broader picture? But can airlines decipher whether customer service feedback is related to how the airline or the airline personnel operate? Can they analyze the data for commonalities of the most amazing passenger experiences down to a single flight attendant, gate agent, or process? In today’s world, it’s impossible.
These are fair points but...what would these airlines do, even if they knew? That was exactly the question Brian Sommer raised in Is CX the new killer app for ERP vendors? I seriously doubt it:
I’m still bereft of upgrades, stuck in the back of the bus, and feeling like the invisible man when it comes to air carriers. They don’t know me. They don’t value my patronage. And, worst of all, they don’t care. If SAP can get some CX meetings going with United, American, Delta, etc., please call me. I’d be happy to come along to explain to them exactly why they need a total CX immersion experience.
Maybe Qualtrics can be part of that solution but I'd argue that history points in Sommer's direction. In contrast, SAP CEO Bill McDermott is firmly of the view that:
There are millions of complaints every day about disappointing customer experiences. This is called the experience gap. Businesses used to have time to sort this out, but in today’s unforgiving world, the damage is immediate, disruption is imminent. This has shifted the challenge from a running a business to guaranteeing great experiences for every single person.
Has it? We shall see.