Experience Bends to the Workforce, SAP Bends to Qualtrics
HR professionals — both leaders and practitioners — have been paying a lot of attention to the concept of employee experience over the last few years.
Changes imposed by the pandemic highlighted the importance of employee experience to an organization's growth and success.
As employers worked to create a more consistent approach to improving their employee relationships at every touchpoint, they focused their time, effort and spending on developing their relationship with their workforce. And that focus led to a hunt for reliable experience data.
An Unexpected Benefit
The Qualtrics XM Institute reports 72% of HR leaders said their company's senior executives are more focused on the employee experience today than they were prior to the pandemic, and about three-quarters (74%) said their teams are, as a result, more involved in the company’s strategic planning.
While this new employee-centric approach has helped businesses in many ways, it wasn't intended to be a long-term solution, Qualtrics stated. What it did, however, is spotlight a number of organizational needs at play in the contemporary business market.
“The disruption of the past few years drove home how critical HR and people leaders are for keeping a business running,” said Cecelia Herbert, principal catalyst at the XM Institute. “They provide stability and support that employees need in times of uncertainty.”
Herbert believes HR and corporate leaders have zeroed in on experience in an effort to adapt to rapid change and, in the process, have realized the value that results from becoming a more human-centric organization.
Related Article: Want to Improve Employee Experience? Identify the Moments That Matter
The Rise of the Employee Experience Data Market
As a result of this renewed focus on experience, efforts to measure employee sentiment are evolving.
Engagement has long been a key metric for understanding the employee experience, but more leaders now say they track well-being (66%), inclusion (55%) and whether employees’ experience meets their expectations (55%) rather than engagement alone (47%).
Provo, Utah-based Qualtrics is grounded in data, and its expertise is one reason the German software giant SAP engineered its acquisition, for $8 billion, in 2018. With Qualtrics, SAP saw the opportunity to wade deep into the waters of experience data.
But that lasted for just two years. In 2020 SAP spun off Qualtrics as an independent company, albeit one with financial strings to its erstwhile parent.
After an acquisition, an IPO and a buyout, all in the space of four years, the odd dance between SAP and Qualtrics is winding down. Sometime during 2023's second half, Qualtrics will come under the control of Silver Lake Management and Canada Pension Plan Investment Board. For $12.5 billion, they intend to take the company private.
The deal divorces Qualtrics from SAP, which had put its shares on the market earlier this year. SAP’s 71% of company stock makes it the survey and analysis company’s largest shareholder, so no one can say the deal’s a bad thing for SAP. When the company leaves Qualtrics behind, it will take with it some $7.7 billion.
Related Article: From Data to Action: How Companies Like Coca-Cola and KFC Are Addressing EX
Hills and Valleys
The relationship between SAP and Qualtrics may have been a bit unusual — an IPO after two years? Really? — but most observers believe the initial arrangement was a prime reason Qualtrics expanded its business around the globe.
Learning Opportunities
The deal was engineered by Bill McDermott, then SAP’s CEO, who departed in 2019 to take on the same role at ServiceNow. Under SAP, Qualtrics outperformed the expectations of a number of executives. In the first nine months of 2020, its revenue increased 30% year-over-year, to $550 million. Compare that to SAP’s full-year performance of $31 billion, which represented a modest 1.2% increase over 2019.
A number of executives and analysts say the reason SAP was so hot to part ways with Qualtrics is that its acquisition was engineered by McDermott, not SAP’s current CEO, Christian Klein.
Just two years after the acquisition, SAP said it would put the company up for sale through an IPO. The move, many said, was a strategic shift engineered by Klein. But most executives and observers said the truth is that the two companies never really meshed. While Initially Qualtrics generated good results, customers didn’t warm up to the two companies’ combined offerings.
When Klein became CEO in April 2020, his mission was to refocus SAP back to its core business. Several years later, that mission hasn’t changed. Rather, as CX Today's Charlie Mitchell suggests, SAP is “doubling down on its mission, lessening the focus on its ‘side projects’ and bidding a fond farewell to Qualtrics once and for all.”
From the start, the affiliation of Qualtrics and SAP has been somewhat unsettled. SAP never pursued the cross-integration of products that usually follows technology mergers, but that didn’t stop Qualtrics’ growth: The number of companies using Qualtrics software has risen from 10,000 in 2019 to over 18,000 today, SAP said — a clear indication of the growing need for experience data.
On January 26, 2023, SAP announced its intention to sell its Qualtrics stock as part of its plans to focus on — wait for it — its core businesses. The news of Silver Lake’s offer came just days later, at $18.15 per share.
Related Article: Technology Will Only Take You So Far With the Employee Experience
A Successful Collaboration
During SAP’s fourth-quarter 2022 earnings call, CFO Luka Mucic said the company would continue working with Qualtrics even as it closed out its ownership stake. “We have had a very successful collaboration on the go-to-market and technology front with Qualtrics, and we absolutely will continue this,” he said.
The two companies’ history illustrates the pitfalls of a large, older organization trying to merge with a younger one, Reuters' Karen Kwok wrote last month. “In theory, SAP could have supercharged the groups’ combined revenue by offering its software to Qualtrics’ customers and vice versa,” Kwok wrote. “But the fact that Christian Klein is now planning to offload the group while aiming to maintain a corporate partnership implies that SAP never needed to own the smaller company to do this.”
In a statement issued in March, Qualtrics said: “As the process continues to play out, we’re committed to achieving the best outcome for our company and our shareholders."
Yet, interestingly, the proposed buyout wasn’t widely discussed by either customers or Qualtrics staff at the company’s recent X4 Summit.
About the Author
Mark Feffer is executive editor of RecruitingDaily and the HCM Technology Report and an award winning journalist. He has been writing about Human Resources and technology since 2011 for outlets including TechTarget, HR Magazine, SHRM, Dice Insights, TLNT.com and TalentCulture, as well as Dow Jones, Bloomberg and Staffing Industry Analysts. He likes schnauzers, sailing and Kentucky-distilled beverages.
Connect with Mark Feffer:
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