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SAP & Qualtrics: The Acquisition That Shook the Market Research Industry

sap-and-qualtricsEarlier this month, SAP, the software giant, bought Qualtrics for $8 billion in cash and surprised the entire market research community, including us here at Communications for Research. Therefore, we thought it would be fun to explore why this deal took place and what it means for the market research community.

Why Did SAP Acquire Qualtrics?

First things first, let’s look at Qualtrics’ revenue for the year so far. According to Greenbook’s Blog, “in the first nine months of this year, Qualtrics had revenues of $290 million on which they earned $1.5 million – or 0.5% of revenue.” Therefore, it’s not unreasonable to assume “if the firm continues along its current growth path for the year of 87% and maintains its bottom line, the price paid ($8 Billion) will equate to 20.6 times revenue and 4,145 times net earnings.” So even though most of their expenses have helped them grow in terms of product and business development, shrinking their earnings, their current numbers don’t match up with an $8 billion valuation. In the end, a company like SAP will want to see their net income increase quickly to make their investment worthwhile. Bob Lederer of RFL Communications mentions that SAP projects Qualtrics’ expected growth of 40% in 2019 should be replicated for the next six years. This would definitely be a good start, but Qualtrics will need to hold about 65% of the online data collection market to get to the level of revenue SAP desires.

Next, let’s look at the market assumptions SAP could be making for this deal. First, SAP CEO Bill McDermott said “the deal would be transformative because SAP would be able to merge its massive trove of operations data with Qualtrics’ collection of user experience data.” However, looking at GDPR and our typical customer experience contracts, we know that this experience data typically belongs to the individual who provided the data or to the client who commissioned the research. All in all, clients of both SAP & Qualtrics could easily combine the two for maximum effect, but any dual clients of both companies should’ve been doing this before the acquisition. Therefore, this begs the question whether SAP sees this data as being owned by SAP.  Next, we think McDermott’s statement could be indicative of how SAP sees the future of business. As a market research company, we know consumer insights are critical to business success, so this could be SAP’s way to further integrate consumer insights with typical business processes. Gartner’s Andrew Frank mentioned in CMS Wire that this SAP-Qualtrics acquisition also signals a “broadening of focus away from specific techniques for audience targeting and promotional optimization toward a more holistic understanding of customer experience and more agile application of data-driven insights.”

How Will This Change the Market Research Industry?

For the market research industry, we should expect a rise in Qualtrics users and an increase in businesses looking for market research firms to develop studies. With SAP touching 77% of the world’s transactional revenues, their 455,000 customers would be prime targets for selling Qualtrics. This can introduce new Qualtrics customers to the idea of customer experience data where they may have to outsource respondent recruiting, study design and more.

Final Thoughts

So, does SAP know something we don’t? That remains to be seen in the years to come! Ultimately, we think the decision to buy Qualtrics makes sense, but the $8 billion valuation of the company does not. At CFR, we know how much Qualtrics and other online data collection platforms can help businesses conduct market research and get to the core of what consumers care about. Getting this data can inform critical business decisions to improve profitability, efficiency & growth. In SAP’s line of software, there was definitely a gap in experience data and if you want to understand your customers holistically, this data is essential.

As a market research firm who specializes in online surveys, we’re excited that Qualtrics will be introduced to SAP customers which will hopefully increase the need for companies like ours. All in all, anything that expands our industry and sheds the light on why market research is so important is a win in our book!

If you’re a new Qualtrics customer with SAP and need help designing the right surveys to reach your customers, contact Communications for Research today. With 20 years of experience and 500 online surveys completed annually, we can help create a custom plan for your business.

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