Ryan Smith, CEO
It was in November 2018 that a flash news broke the internet. It was a big one in the world of enterprise software: SAP announced plans to acquire Qualtrics. This was not a small deal by any measure. Qualtrics’ revenues as of Q3 were $372 Million, and the company is growing at 42 percent YTY. So what made SAP pay more than 20X revenue to acquire Qualtrics? It’s simple really! With Qualtrics, SAP sees an enormous new market. While SAP has made billions selling operational software (what SAP calls OX), Qualtrics is pushing an agenda for what they call experience software (EX), an emerging area that every company is now focused on. “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,” says Bill McDermott, the CEO of SAP.
"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"
For Qualtrics, its capability to allow brands like Adidas and BMW to collect and analyse customer and employee experience information through surveys and feedback forms has impressed SAP quite a bit. Question is, where’s the synergy headed? Ryan Smith, the CEO of Qualtrics answers, “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.”
All About Data—X and O
Smith likes to talk about X and O data. Operational data ('O data') is things that have happened in the business, and has long been the speciality of vendors like SAP. Then there is experience data ('X data') which is qualitative information from customers and employees and is what Qualtrics has built itself around collecting and making sense of for big brands.
Experience data (X-data) focuses on obtaining and tapping the value of outside-in customer, employee, product and brand feedback. Combining Qualtrics’ experience data and insights with unparalleled operational data (O-data) from SAP software will enable customers to manage supply chains, networks, employees and core processes better.
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
Together, SAP and Qualtrics will deliver a unique end-to-end experience and operational management system to power the economy. By tapping into SAP’s more than 413,000 customers and global sales force of around 15,000, Qualtrics will be able to scale rapidly around the world. SAP has a strong track record of accelerating the growth of the innovative companies it acquires, as exemplified by the rapid success of SAP’s recent acquisitions.
Humble Beginning Lead to Superlative Outcomes
Qualtrics has gone from the Silicon Slopes of Utah, building software for university researchers, to a platform of tools used by the world's biggest brands to survey their customers and employees. As the tech world knows, Qualtrics started from the Smith family basement in Provo, Utah. Ryan Smith, cofounder and current CEO, started building research software as a project with his seriously ill father, a marketing professor at Utah's Brigham Young University (BYU), back in 2002.
The original idea though was to create a Software as a Service (SaaS) tool that would allow anyone to conduct research quickly and easily. Then, as the world dealt with the fallout from the 2008 financial crash, Smith and his small team saw that customers were using the platform for something else: they had started to adopt the technology for customer experience management. In other words they were doing market instead of academic research on the platform. “Around 2010, as purse strings tightened and consumers became less brand loyal, businesses had to start competing more in the customer experience space. So although Qualtrics wasn't originally built for that, a trend was starting to form, and the team went about architecting the platform around this customer experience,” says Smith.
Today, Qualtrics’ appeal is its blend of easy-to-use question-generating tools, nifty data visualizations and low cost. Users can pick from 87 question types, including sliding scales that correlate to happy to sad faces or grades from A to F, and heat maps that allow people to click on a picture of a room or stadium to indicate what they like or where they want to sit. Results display in 35 different graphs and can be shared via e-mail or viewed in real time as responses pour in online. Ebay’s motor division uses Qualtrics surveys to divine which brands auto enthusiasts are keen on and likely to buy. Last fall it integrated a Qualtrics survey into its iPhone app and noticed that its truck category was getting fewer responses than the same survey online. It tweaked the app in just a few minutes so that trucks appeared higher on the screen. Response rates for the truck category doubled. The tax division of Thomson Reuters used to spend $300,000 for 30 basic surveys a year from outside research firms. Now it has ten employees running more surveys through Qualtrics and spends just $5,000.
Filling the Significant Gap between Expectations and Experience
According to research, two-thirds of the global workforce is disengaged and the U.S. economy suffers as much as $550bn of lost productivity annually due to poor workplace experiences, and that’s where Qualtrics kicks in. Qualtrics is the first and only employee experience management platform that measures employee experiences across the entire employee lifecycle, automatically prioritizing key drivers of engagement and experience. Powered by a predictive intelligence engine, Qualtrics CustomerXM eliminates the need for manual analysis and automatically surfaces deep insights that help organizations make important HR decisions. By delivering real-time, role-based insights to the right people, managers and leaders can now uncover areas of weakness, take action, and drive critical organizational outcomes.
Qualtrics offers a free EX diagnostic that provides a customized assessment of employee experience at any organization. Measured against the Four Pillars of CX Success—Qualtrics' proven methodology for CX program success—the diagnostic evaluation includes an individualized report with a full description of what can be done to improve an existing CX program to achieve better organizational and financial results. Qualtrics' Four Pillars of CX Success provides a guide for companies to assess and manage their employee experience programs according to best-in-class criteria.
Qualtrics and SAP: What to expect?
In a blog post published at the time of the deal, now-departed executive Robert Enslin wrote: “This is a very transformative moment. With this union, we are poised to combine over 1 billion records of experience data together with operational data from 77 percent of the world's transactions touched by an SAP system.” He further went on to elaborate that the two richest data sets in the economy—experience data (X-data) from Qualtrics that tells you why and operational data (O-data) from SAP that tell you what is happening— paint a complete picture that fuels intelligent enterprises so they can deliver superior experiences: a virtuous cycle.
And truly so. As Smith put all speculations to rest by stating that all the experience data in an organisation on the Qualtrics platform and SAP's network and reach is going to help with that more than anything. Once that is in place the two vendors can start thinking about product synergies, with SAP's cloud-based HR software SuccesFactors the lowest-hanging fruit, according to Smith. Next is the commerce software Hybris, where he outlined his ambition to make Qualtrics “the feedback button for the internet”.
Adaire Fox-Martin, who leads global customer operations at SAP, said that when Qualtrics was presented to her in the boardroom as a potential M&A target she had to “look you guys up. I had to do my own research”. Expanding on that, she added, “You just described some of the CEO narratives you have been involved in, and they are exactly the same narratives have happened in meetings I have had with CEOs, around how to differentiate their customer experience. That was one aspect. Second was SAP has long been the custodian of operational data, so our system can tell you what happened and when, but it often can't tell you why.”