How Accurate Was SAP in Projecting Qualtrics as a Strategic Acquisition?

Executive Summary

  • What SAP said about its acquisition of Qualtrics.
  • What actually happened with the Qualtrics acquisition?

Introduction & Update

This article (mostly the latter part of the article) was published on the 1st of May in 2020. At that point, we had enough information to declare that we had predicted the Qualtrics acquisition as a failure accurately. However, as of July 27, 2020, so almost exactly three months later, SAP announced it is spinning off Qualtrics.

Our References for This Article

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Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

  • This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem. 
  • Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers. 

Reading the articles reporting on this event, this quote was interesting.

Making the point, CNBC quoted analysts from Bernstein Research, which said it believes “many SAP investors do not fully understand Qualtrics,” and that the spin-out might “help at least as it relates to better understanding its value.” – Tech Crunch

What that means is what I had predicted — there is no natural overlap between Qualtrics and SAP. That fact was evident the day the acquisition was announced. Any survey software can be used to obtain information from users and there is no integration between Qualtrics and SAP. There was never any reason for SAP to buy Qualtrics.

This is stated, although in a more politically correct way by Christian Klein in the following quotation.

Christian Klein, SAP’s chief executive…added that Qualtrics was “not that close to the core” of SAP and had not been integrated as tightly as other acquisitions. – Financial Times

Yes. Well, it is not only “not that close to the core,” it has nothing to do with the core whatsoever.

Perfuming the Pig

SAP needs to get as much as it can to recoup as much of the overpaid portion of the $8 billion as it can. So SAP has to make it sound like Qualtrics is a great buy — as the following quotation illustrates.

Christian Klein, SAP’s chief executive, said that while Qualtrics had “performed above and beyond all expectations” an IPO was now a “win-win” for both sides. – Financial Times

Not it isn’t. If Qualtrics obtains anywhere close to the $8 billion that SAP paid for it (that is for the percentage they are offering for IPO), we have a large cowboy hat that we will eat.

Insert: Prepare to Eat Cowboy Hat

(We spoke too soon on this topic. After writing this we reviewed several Wall Steet analysts’ articles that stated that the value of Qualtrics in total is around $11.4 B (so higher than the 8 B SAP paid). This is not due to Qualtrics itself, but to the overheated stock bubble that has been promoted by the Federal Reserve — which has been stimulating the economy. Furthermore, both corporations have seen no reason to invest as much as normal into their own companies (due to the drop off in demand from Coronavirus) and have instead decided to put that money into the market.)

The Logic Presented For the Acquisition

There was also a logic I had never heard of before, for the Qualtrics acquisition covered in FT.

SAP said at the time of the acquisition, which priced Qualtrics at about 20 times its annual revenues, that it would help entice companies to adopt the German company’s S4/Hana software, by offering insights on their employees and customers. “There are millions of complaints every day about disappointing customer experiences,” said SAP’s former chief executive, Bill McDermott said as he laid out the rationale for the purchase. “This is called the experience gap.” – Financial Times

This is a bit ludicrous.

This can be interpreted as saying that SAP’s S/4HANA is so problematic that it requires survey software to register all of the complaints? For more on issues with S/4HANA see our research S/4HANA Implementation Study.

SAP Says: Qualtrics is Great — Please Buy It

SAP is really piling on the lies to try to move Qualtrics.

Mr Klein said the IPO “also enables Ryan [Smith] and his leadership team to really also go after the market outside of SAP . . . maybe over time to do some targeting acquisitions and so on.” “At the end, it’s also about retaining the best people you have,” he added, suggesting that the move was partly made to mollify Qualtrics’ management. “With this move, of course, we also now have Ryan and the leadership team fully excited about the years to come.” – Financial Times

Ok, what does that mean?

Qualtrics never had anything to do with SAP in the first place — and most of its market prior to the acquisition was outside of SAP. SAP salespeople can’t even reasonably be expected to push Qualtrics without specific incentives.

The second part of the quote implies that Qualtrics’ management had tired or SAP’s typical heavy-handed approach (see the article How Effective is SAP in its Acquisitions?) for coverage of SAP’s historical success ratio with acquisitions, and see the article How to Understand SAP’s Upcharge as a Service, for how SAP has previously alienated the senior management of acquired vendors.

Breaking New Ground in Information Technology: Qualtrics Used for Covid Survey?

Most recently SAP deployed Qualtrics to gather feedback from its customers’ employees about returning to workplaces in the wake of Covid-19.

That is just funny. SAP was dying to come up with ways to leverage Qualtrics and could not figure out any. Really, what does running a Covid workplace survey have to do with SAP’s applications?


But SAP bobbleheads not better than to agree that this is ridiculous on any public forum. SAP could say they were using Qualtrics to perform alien surveys on the moon and those that make their income from SAP would bobble their head in instant agreement.

The Overall Pitch on Qualtrics

The “mini-IPO” of Qualtrics is extremely odd. This is explained in the following quotation.

SAP plans to maintain majority ownership of Qualtrics, which is co-headquartered in Provo, Utah, and Seattle. Qualtrics’ leadership team intends to remain in place, including founder Ryan Smith, who will be the largest individual shareholder. – Geek Wire

So the acquiring entity will be some minority owner. This means that just a fraction of Qualtrics will be sold. It will be a two-headed monster, and the acquiring or partially acquiring company will be basically powerless.

Something I cannot figure out is why is SAP doing this. I cannot produce a hypothesis because I do not have a sufficient background in finance. If anyone can guess as to what could be driving this odd mini-IPO, please comment on this article.

I had an immediate flash that SAP needs money. But I don’t have sufficient insight into SAP’s financial position to know if this is true.

Why Sell Just a Piece of Qualtrics?

Why is SAP selling just a piece of Qualtrics? Qualtrics has no value as a cross over item as McDermott promised. Why not just sell the whole thing — excluding whatever the Qualtrics management would keep?

By selling only a minority share, which is offering less control, it lowers the price for the percentage sold. If Qualtrics has no value to SAP outside of its miniature revenue (vs previous investment), why not sell the whole thing?

The Oddity of the Qualtrics Mini IPO

This move by SAP is extremely unusual. I cannot recall SAP or Oracle spinning off a recent acquisition. SAP has had many failed acquisitions, but they bleed out previous employees, and the product stagnates. The concept being that SAP is partially just buying customers. That is it is a monopolistic move. Normally, a failed acquisition can only be learned from observing SAP or Oracle projects and not seeing the application being used. Once acquired, the acquired vendor’s accounting becomes mixed up in the greater company’s overall accounting.

What SAP Said About its Qualtrics Acquisition

SAP made highly optimistic statements about how Qualtrics would become so central to SAP’s business.

The Truth About the Qualtrics?

As we covered in the article Does SAP’s Acquisition of Qualtrics Make Any Sense?, that the acquisition both made no sense as it had little relationship to SAP’s business, and that furthermore, the acquisition price was extortionate. We classified that acquisition as ridiculous and a sign of how illogical SAP’s leadership was.

We published our article on the Qualtrics acquisition in November of 2018. This article reviewing the Qualtrics acquisition was published in May of 2020, which is close to 1.5 years after our production that the Qualtrics acquisition would fail.

At the time, compliant analysts like Josh Bersin stated the following.

The word “experience” has taken over the software market, and for good reason. In today’s digital world, if your experience isn’t good, you just don’t do business with a company. But how do you understand and manage it?

If this was true, it was because SAP made it into a “thing.” The experience economy as a concept has dramatically declined in the months after this acquisition. As is typical of analysts, they presume that these companies’ executives know what they are doing. The evidence? Well, the company did it. This is found in the following quotation from Josh Bersin.

It’s clear that SAP sees a lot of opportunities here, and to me, this tells me something about scale.

It’s never easy to tell when an acquisition will pay off. It’s clear that the SuccessFactors acquisition was very successful for SAP, but there are other deals (IBM’s acquisition of Kenexa) that don’t always pan out as well.

That is a different point, but it not right.

Few SAP ERP customers use SuccessFactors, and even if it were true, it is not a reflection of SAP’s average success ratio with acquisitions. Which is quite low, as we cover in great detail in the article How Effective is SAP in its Acquisitions?

Analysts that write on SAP could never be bothered to itemize and rank the effectiveness of each acquisition. And as with most analysts, Josh Bersin then repeats statements that are made to him by SAP executives without questioning any of them.

The following is a perfect example of this.

If SAP can pull this off, they could build a set of tools that help every company behave like Amazon; deliver real-time feedback to managers about customers, prospects, and employees – in an actionable and useful way. That market is probably 10 times bigger than the “survey” market, and it leverages SAP’s expertise in data management, infrastructure, and enterprise solutions.

Misunderstanding How Amazon Gets Feedback From Customers

Amazon does not do that with survey software. They do that through how they set up their website and how the customer responds to their website. This is something that SAP has never done and did not know how to do before Qualtrics and still does not know how to do it today (so almost a year and a half after this article were written). The person who writes this does not know how either Amazon works, how it gets customer feedback, and how surveys have nothing to do with it or very little to do with it.

Josh Bersin continues.

It’s a big move and clearly, SAP has a big vision. I’ll be watching this closely and look forward to letting you know how it goes.

That is untrue.

Josh Bersin will only publish what happens if the Qualtrics acquisition happened to be successful; otherwise, as with other analysts, they will never bring up the topic again. That is how the analysts work, they make projections, where they never go back and hold themselves accountable or record their predictive accuracy. I have found this repeatedly in researching analyst writings. Did Gartner go back and measure their accuracy for what they wrote on IBM Watson as we covered in the article How Gartner Got IBM Watson so Wrong? Of course not. IT analysts follow no scientific approach, and this means zero measurements of previous projections.

Denis Howlett of Diginomica did barely any analysis in his article, which of course, was positive as SAP was a “partner” with Diginomica at the time. He primarily just used quotes from Josh Bersin, who, as I just pointed out, was mainly just using quotes from SAP executives.

Long story short, both Josh Bersin and Denis Howlett both got the prediction wrong.

Bill McDermott was supposedly incredibly charged up to work on the future with Qualtrics CEO Ryan Smith. Except he was not excited for that long, because he left SAP 11 months after Qualtrics was acquired. 

A year and a half after SAP made a big marketing push on “X and O Data,” no one is talking about this concept today. 

  • Overall, I never see Qualtrics discussed in SAP projects.
  • Even with many people reaching out to the website, I have no customers or other inquires that reach out even using the term.
  • The Qualtrics acquisition has done very little for SAP.

SAP does not break out its revenue per application. Therefore it is not possible to know if Qualtrics’ sales have gone up or down since the acquisition. The only real way to measure Qualtrics’ success is how often, or much Qualtrics is part of SAP projects or discussed or of interest by SAP customers.

Conclusion and Calculation

SAP and the IT Analyst and IT Media Scores

SAP receives a 0% accuracy for its projection that Qualtrics would become a major component of SAP’s strategy. The vast majority of IT analysts also receive a 0% accuracy for the analysts listed in this article. They repeat SAP’s talking points, as does IT media which did the same thing (IT media entities typically rely on SAP for advertising revenues and paid placements (ads that look like articles but are written by the vendor)).

Brightwork Research & Analysis Score

Our forecast for what would occur with Qualtrics has proven to be correct. Therefore we have allocated a 100% accuracy for this prediction to our long term Study into SAP’s Accuracy.

Ignoring Our Accuracy

SAP resources that have a problem with our research have refused to address this accuracy list, all supported by dated articles. They also refuse to discuss SAP’s incredible history of inaccuracy.

Link to the Parent Research Article

This is one of many research articles on a specific topic that supports a larger research calculation. For the overview of the research calculation for all of the SAP topics that were part of the study, see the following primary research A Study into SAP’s Accuracy.