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With CEM market in sight, SAP must fit in new Qualtrics pieces

One of SAP's top priorities must now be integrating Qualtrics into the ERP giant's product suite, analysts and a customer said. But putting the pieces together may not be easy.

SAP's acquisition of Qualtrics may make it a power player in the emerging field of customer experience management....

Some customers and industry analysts said the purchase is an assertive plan by SAP to boost its CEM capabilities and redefine enterprise CRM.

The deal demonstrates that SAP takes the CEM market seriously, said Guy Nirpaz, founder and CEO of Totango Inc., a company that sells customer success software based in San Mateo, Calif.

"They're making a big bet on connecting customer experience data with operational data, so that's an extreme validation of the customer-centered economy. SAP is doing it for themselves and they are paving the way for their entire customer base," he said. "I think that it's the first step and we are only confined by our imaginations because there are so many things that companies can do to operate in a customer-centered fashion."

Qualtrics fills in gaps in SAP's CRM and customer experience (CX) portfolio, said llona Hansen, senior research director at Gartner.

"Prior to this acquisition, SAP didn't have anything similar provided to their customers," she said. "But the intelligent enterprise strategy they are aggressively following currently requires insights into patterns and correlations of customer behavior to measure from A to Z the customer journeys, employee impact, brand recognition and product acceptance. As part of the integration efforts SAP has to do, Qualtrics' product range is nicely adding value in a shorter period of time to the current SAP product range."

In the deal, SAP paid $8 billion for Qualtrics, a vendor of cloud-based customer and employee experience software based in Seattle and Provo, Utah.

Fueling the CEM market

Guy NirpazGuy Nirpaz

Totango provides applications, including DNA-CX, that help companies derive financial benefit from customer relationships, according to Nirpaz. This approach involves aspects like onboarding new customers, customer retention and support escalation management. Totango partners with SAP to extend its customer success platform into SAP S/4HANA and SAP C/4HANA.

The ability to marry SAP's operational data ("O data") with the customer experience data ("X data") that Qualtrics provides is valuable for Totango's platform, Nirpaz explained.

"From our perspective [voice of customer] and CX is just one data point. You've got support, marketing channels, you've got billing and payments -- everything that the company has buried in systems, spreadsheets and emails," he said. "We fold this into one system that represents the customer, so now you have the context of the customer and you can empower the front-line people with knowledge, you can enforce policies and processes in the company, you can turn the company into a customer-centered operation."

CEM market goes beyond

SAP's acquisition of Qualtrics presents a leap forward in a redefinition of CRM, said Joshua Greenbaum, co-founder and principal of Enterprise Applications Consulting.

"They have a lot of work to do to pull all these pieces together, but Qualtrics does give them a new story to tell that's very differentiating in the market," Greenbaum said. "One thing you can do is start measuring the impact that employees have on service delivery or service quality in a more direct way through Qualtrics."

They're making a big bet on connecting customer experience data with operational data, so that's an extreme validation of the customer-centered economy.
Guy Nirpazfounder and CEO, Totango

Qualtrics can also be extended to capture not just customer sentiment and experiences, but also employee experience, which can also be useful for an enterprise.

"You could also extend this into a B2B environment where you can look at the impact of change on a large industrial asset [for a company], and that's input that has not been there before," he said. "So, collecting that experience data from employees, from operators and users, from customers and prospects and then marrying it with that enterprise operational data is a pretty interesting opportunity."

Hansen agreed.

"This will support the SAP story -- not only in the CX market, but beyond it," she said, "which probably requires you to not compare it against Salesforce, but against other mega software vendors, which have a product range before and beyond pure CRM technologies."

The acquisition can help SAP extend its vision of the intelligent enterprise to a broader audience, Greenbaum added. However, Qualtrics adds even more pieces to the intelligent enterprise puzzle, and SAP faces a lot of work to fit it all together.

"The whole intelligent enterprise concept is predicated on this idea that you will have this common experience -- a process-driven experience across all these formerly siloed apps, and that means you better have a seriously integrated product suite, not just at the orchestration layer, but at the user-experience layer," he said. "The strategy may be good, but now you have to execute on it, and that's their big issue going forward."

Filling in the SAP gaps

Qualtrics' core product portfolio will likely be integrated not only into C/4HANA, but throughout the SAP enterprise.

"Qualtrics' core products can be grouped into four core areas: customer, employee, product and brand," Hansen said. "Surely, the customer or product might be a clear CRM technology available through the C/4HANA suite, but the other elements are clearly beyond pure CRM technologies and, hence, the decision to place it outside their core product lines such as ERP or CRM. Customers will leverage the Qualtrics technology and expertise across their organization, not necessarily only for customer analytics, [net promoter score] or other CX relevant topics."

Ultimately, the CEM market goes beyond CRM, Hansen explained.

"Succeeding against other CRM suite vendors with their C/4HANA product range is surely a goal SAP might be following," she said. "But the message SAP is sending currently into the market is more to satisfy existing SAP customers' needs across their organization in a seamless strategy, which is obviously a very wide and deep story to tell."

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