SAP, the iconic enterprise-software company that created the ERP market to help companies optimize internal operations, is now looking to turn the business-software industry upside-down by also becoming the world leader in the external realm of consumer sentiment, expectations and experience.
If SAP can do that, the company has a very good chance to move up from its current spot of #4 on my list of The World’s Top 5 Cloud Computing Suppliers.
CEO Bill McDermott yesterday vowed that his company’s $8-billion acquisition late last year of “experience management” pioneer Qualtrics will trigger “the biggest growth opportunity I’ve ever seen in my career.”
Qualtrics finished 2018 with revenue of about $570 million dollars and is currently growing at 45%, McDermott said on yesterday’s earnings call, meaning SAP’s hot new business is on track to generate about $825 million in 2019 revenue without any direct help yet from SAP’s sales organization.
“So if they’re growing 45% year-over-year without us, what are they going to do when you put 15,000 customer-facing assets next to them?” McDermott said on the call. “This is probably the biggest growth opportunity I’ve ever seen in my career.”
Beyond those gaudy numbers that will no doubt give McDermott further reason to continue making his claim that SAP is the fastest-growing SaaS player of significant size, SAP’s bullishness for Qualtrics is driven by the extensive differentiation it gives to SAP’s fairly new initiative to redefine the CRM market.
Here are a couple reasons why McDermott and SAP feel that way, which builds on their early perspectives that I analyzed just after the acquisition was announced in SAP Using Blockbuster Qualtrics Deal To Redefine the Software Industry:
- Several months ago, SAP launched its C/4HANA customer-experience suite, which it promised would transcend traditional CRM offerings by including data from the supply-chain part of the business and thereby deliver a more comprehensive and valuable view of the customer.
- Qualtrics further extends that high-value differentiation by reaching far into the demand side, all the way to consumer sentiment and experience—what McDermott calls “experience data,” or “X data.”
- As McDermott described it on the earnings call, “We are redefining the whole CRM space with C/4HANA and we’re growing that market in triple digits. On top of that, ‘experience management’ [Qualtrics] is being infused into our whole company as the biggest transformational idea in the culture. Every single sales representative—across the globe—has it in their bag and we now have complete and total synergy between Qualtrics and the entire SAP sales force.”
- In being able to combine that “X data” from customer experiences with the operational data (“O data”) from the ERP side that SAP has done for almost half a century, McDermott said, businesses can now “touch a company’s products, activate their workforce, move their brands” in synch across the formerly disconnected realms of operations and customer experience.
So can the company that created the internally focused market for operational applications nearly half a century ago remake itself around getting inside the hearts and minds—and wallets—of consumers?
The ebullient McDermott certainly thinks so: “With the synergy of Qualtrics and SAP, and by combining the experience data from Qualtrics with the operational data from the SAP intelligent enterprise, we think we have something incredibly special here.”
One of the best indications of just how special that opportunity becomes will be revealed throughout 2019 as we monitor the progress of Qualtrics—can it continue on its 45%-growth trajectory and boost its revenue from $570 million in 2018 to $825 in 2019?
McDermott’s overview of the marriage of X’s and O’s makes it seem inevitable, and given the entire industry’s focus over the past few years on the strategic necessity of delivering superior customer experiences, the SAP approach makes a great deal of sense to me.
“CEOs are focused on delivering 4 key experiences: customer, product, brand, and employee,” said McDermott in his opening remarks on the earnings call.
And with Qualtrics now formally part of SAP as of last week, SAP can offer an unmatched ability to combine experience management with “end-to-end operational power in 25 industries,” he added, noting that businesses lose $1.6 trillion every year when customers abandon them for competitors.
In McDermott’s view, “This is a direct result of an experience gap because people are just tired of being disappointed…. Experience has never been more important.” And SAP believes that with its $8-billion baby Qualtrics now in the fold, “We can give businesses of every size the human sentiment about their experience.”
Several weeks ago, in The Top 10 Cloud-Computing Stories of 2018, I pegged SAP’s efforts to redefine the enterprise-software world as #9 on my list of top stories for the year. If SAP can pull off what McDermott’s projecting for Qualtrics and SAP’s customers, then the rise of the experience economy will certainly turn out to be one of the very top stories—perhaps even #1—for 2019.
Disclosure: At the time of this writing, SAP is a client of Evans Strategic Communications LLC.
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