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Summary

On November 11, 2018, SAP announced an agreement to acquire Qualtrics for $8bn. Qualtrics was founded in 2002, and provides a feedback platform to help organizations deliver a better customer experience, improve brand perceptions, and enhance products. Why pay $8bn for that, you might ask?

The acquisition of Qualtrics provides high-grade fuel for SAP's Intelligent Enterprise moonshot

Under its umbrella brand, Qualtrics Experience Management Platform, Qualtrics provides a sophisticated yet intuitive platform for both traditional solicited feedback from event-triggered transactional surveys, and unsolicited feedback through sentiment analysis. This provides an important feedback mechanism to gain a deeper understanding of customer expectations, and their experiences and perceptions of the enterprise.

Qualtrics iQ uses machine learning to surface hidden patterns and present them in the best way to make them easy to understand by anyone without the need for deep Excel or SPSS skills. A host of analytics (such as key driver analysis to understand the underlying reasons behind customers' perceptions of their experience) are available to help enterprises focus on what matters to customers, employees, or partners. As with all good customer feedback management systems or platforms, it also provides an action management capability to ensure that the right people in the organization respond in a timely manner to prevent customer defections.

However, this doesn't explain why SAP thought it worth investing $8bn on Qualtrics.

What does explain it is SAP's moonshot, the Intelligent Enterprise, announced at Sapphire Now in June 2018. This vision is driving all development and acquisition investment, as SAP repositions itself for the digital transformation boom. It is within the context of the Intelligent Enterprise where this acquisition begins to make sense. However, to really understand SAP's motivation behind its acquisition of Qualtrics, we must consider what constitutes an "intelligent enterprise."

To survive and thrive in this increasingly volatile and complex world, any enterprise must sense change and respond fast in a coherent and integrated way. SAP's modern enterprise applications span the entire enterprise value chain, from the customer through to supply, and are all deeply embedded with AI capabilities – most often in the guise of machine learning and NLP. The foundations for the Intelligent Enterprise therefore already exist. What Qualtrics brings to the intelligence party is another vital triangulation point: attitudinal feedback. By synthesizing these various intelligence sources – operational, contextual, and perceptual – the ability to sense, respond and adapt at the right pace, and be persistently relevant to customers, will be supported.

SAP does not see Qualtrics as just an add-on to SAP C/4HANA. It will also be embedded in SuccessFactors to foster the right customer-centric culture, and outside the enterprise, to the network of partners within a supply chain, or potentially across the entire Ariba network of more than 3 million enterprises.

If SAP can spread Qualtrics across its entire enterprise portfolio, in combination with its other data and AI assets, it will have the ability to deliver an enterprise nervous system that will keep SAP's customers relevant. That would certainly make the $8bn investment a bold move by SAP. The challenge for SAP is to spread the faith, to ensure that its entire AI portfolio is brought to bear.

Appendix

Further reading

"SAP has a new moonshot – the Intelligent Enterprise – and SAP C/4HANA is the catalyst," INT001-000072 (June 2018)

Author

Jeremy Cox, Principal Analyst, Customer Engagement

jeremy.cox@ovum.com

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