SAP SE is a German-based multinational software corporation that makes the enterprise software to manage business operations as well as customer relations. It is one of the leading vendors of enterprise resource planning (ERP) software and other software applications which enable the customers to run their businesses in an integrated environment effectively. The company has set itself as the market leader in the enterprise application software and the center for the business technology resolution ( Bloomberg, 2018 ). The company helps the businesses to streamline their processes thus providing the ability to use real-time data to predict the trend of the customers in the business. Qualtrics on the other hand deals in the subscription software for data collection and analysis for market research, customer loyalty and satisfaction, employees’ evaluation and the website feedback. The major products being the provision of customer experience, research core, brand experience, and the XM platform. It majorly makes software for online surveys where it helps businesses understand their customers and the level of loyalty as well as satisfaction. The company provides a single system of record for all the experience data and helps in managing the customers, the brand as well as the product in this single platform.
The primary reason why SAP is buying Qualtrics is to increase its competitive advantage with the rivals such as Salesforce.com in the sale of software to the clients that want to understand their customer better. The purchase of Qualtrics, whose software gathers and analyses the data, is aimed at strengthening SAP to increase their offer to customer relations management ( Bloomberg, 2018 ). The $8 billion purchase will, therefore, boost the competitive advantage of SAP and help it provide the best services to the customers. Qualtrics is a fastest growing company, and its acquisition will be an added advantage to SAP as it struggles to gain a stronger foothold in the industry amid stiff competition from the rivals. The offer was made by SAP, and both the board of the two companies agreed to proceed with the acquisition which is scheduled to be sealed early 2019. Qualtrics, which collects data on the main four areas which include customers, employees, brand, and products is aimed at providing insight to SAP into how its customers feel so that it can improve on its service delivery and attract more customers. The $8 billion purchase is meant to be one of the biggest acquisition in Europe.
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After making an offer to Qualtrics, the purchase price is negotiated based on the current value of the company, its growth rate, annual revenue generation, and the customers. The total sales of Qualtrics in 2018 had exceeded $400 million with the growth rate expected to be more than 40% by the end of the year. Qualtrics was valued at $2.5 billion in the year 2017, and the major customers of the company are Microsoft Corp. and General Electronics Corp. currently, Qualtrics is one of the rapidly growing companies in the industry. The above statistics are what could have been used by the two companies to reach the purchase price of $8 billion. Even though the purchase price is almost four times the value of the Qualtrics, I think the purchase is a good move for SAP. This is because it will help strengthen SAP’s offering in the customer relations management sector and will increase its competitive advantage over its rivals. The move will help in the development of SAP in the long run as it will provide an opportunity to generate more revenue through increased customers experience and loyalty. It will also give an insight into how the customers of SAP feel about the products and services and identify areas to make improvements.
Reference
Bloomberg (2018). Retrieved from https://www.bloomberg.com/news/articles/2018-11-11/sap-se-to-buy-qualtrics-international-for-8-billion-cash-joditmt1
