While Salesforce’s CRM revenue is almost 10x that of SAP’s, newly named co-CEO Jennifer Morgan made it unmistakably clear in her first earnings call that SAP’s Qualtrics and CX business have become the primary growth drivers for the company.
With long-time CEO Bill McDermott set to step down Dec. 31, Morgan and co-CEO Christian Klein stepped up to starring roles in the Oct. 21 earnings call. Both opened by thanking SAP founder Hasso Plattner for his trust. They also graciously paid tribute to Mark Hurd, the CEO of arch-rival Oracle who died Oct. 18 after a month-long medical leave.
Klein focused his opening remarks on the company’s flagship S/4HANA ERP system. In a future article, I’ll explore those perspectives.
But to me, the most striking impression from the call was how Morgan clearly made Qualtrics and CX the primary focus of her overall commentary.
Qualtrics Takes Center Stage on SAP Earnings Call
After making the introductory remarks noted above, Morgan’s very first comment got things started. “Clearly our experience-management vision powered by Qualtrics is resonating with customers and is a key differentiator across all aspects of the intelligent enterprise,” she said.
Throughout her opening remarks, Morgan emphasized repeatedly the unique customer value of Qualtrics. She also described how she’s tying its experience-management capabilities more closely with SAP’s CX (customer-experience) business. For example:
Let me now highlight our strategic growth drivers in the cloud. We made a bold move with the acquisition of Qualtrics and customers are excited about the holistic experience-management platform Qualtrics provides in addition to what the combination of X and O-data can do.
There are two important points here. First, note how Morgan, in promising to lay out the company’s “strategic growth drivers in the cloud,” puts Qualtrics at the very top of the list. Second, she specifically calls out the fairly new concept of Qualtrics’ “experience-management platform” rather than just its standalone XM applications.
Morgan continued. “We’re very pleased with Qualtrics’ growth,” she said, “and we are starting to see the scale of SAP helping to drive and close pipelines, especially in the enterprise segment.”
She then cited Qualtrics as the pivot-point SAP can use to meet the emerging desire among customers to “move beyond systems of record to new systems of action and achieve breakthrough results.” Many big corporations are doing just that with Qualtrics. Morgan named Dish Networks, Slack Technologies, Akamai, U-Haul, Sharper Image, Stanley Black & Decker, and Garmin International.
SAP Evolves its Own Categories Around Qualtrics
Here are a few other broad strategic comments re Qualtrics and CX from Morgan’s opening remarks. They clearly are designed to show the broad and deep impact Qualtrics is having across SAP’s business. In particular, in the third bullet-point below, you’ll see that the infusion of Qualtrics technology into SAP’s HCM solution has led Morgan to rename the entire category.
- “Qualtrics’ volume engine is helping SAP to expand its footprint in new accounts and it’s helping us open doors for other SAP cloud solutions.”
- “…customers are choosing Qualtrics for its technology and analytics capability and the breadth of XM solutions across customer experience, employee experience, product experience and brand experience.”
- “With the addition of Qualtrics to SuccessFactors, we’ve redefined the traditional human capital category to Human Experience Management or HSM.”
- “Every company needs to understand the factors that impact employee experience to attract and retain their talent. And since integrating Qualtrics to the SuccessFactors suite, we’ve seen a tremendous demand in SuccessFactors’ customer base for Qualtrics. Since May, we’ve acquired over 300 customers for the Qualtrics platform.”
- Customer counts across the globe: “And when you add China, that’s another 400 customers. In Latin America, we’re approaching 800. Even in mature markets like Europe, we’ve seen significant growth to over 2,800 customers. UK and Ireland had triple digits new-bookings growth in Q3.”
- Across its ecosystem, including a new deal with Ernst & Young that includes EY adopting Qualtrics Employee Experience for its 260,000 associates: “We’re also making great progress lighting Qualtrics on fire in our partner ecosystem. We announced the partnership with Ernst & Young with EY delivering excellent practices and solutions to its clients through its People Advisory Services, and its Workforce of the Future solutions.”
A Key Salesforce Exec Jumps Ship for SAP
Morgan also indicated that she intends to drive closer collaboration across the formerly separate product lines of Qualtrics and CX, which SAP introduced about 18 months ago.
To drive that new effort from the CX side, Morgan has hired CRM/CX heavyweight Bob Stutz. Stutz joins (in fact rejoins) SAP from Salesforce, where he’d been president of its high-growth Marketing Cloud.
Emphasizing that SAP is “continuing to invest in our customer-experience portfolio,” Morgan said, “Bob Stutz, a leader who continued to redefine the CX arena at both Microsoft and most recently Salesforce, has rejoined SAP as President of Engineering in our CX business. Bob’s experience and foresight will take us to new places in the future.”
And to underscore the need for Qualtrics and the CX business to work together more closely, Morgan noted that Qualtrics has also been a growth driver for CX.
“In addition to accelerating SuccessFactors’ business in HCM, our CX business continues to benefit with the infusion of Qualtrics across our C/4HANA portfolio. We introduced the connector between Qualtrics to C/4HANA that developers and partners can use to build new integration scenarios. We’re starting to see organizations combining customer feedback and operational data to listen, understand and act.”
As I noted at the top, Salesforce’s CRM apps business is almost an order of magnitude larger than SAP’s combo of Qualtrics and CX. In Q3, the latter posted revenue of about $414 million, up 75%. On an annualized basis, that would work out to about $1.7 billion. For contrast, about 90% of Salesforce’s $16 billion in annualized revenue comes from its vast array of CRM apps.
A growth rate of 75% indicates lots of customers are liking what they see from SAP Qualtrics and CX.
The infusion of Qualtrics into SuccessFactors HCM and SAP’s CX portfolio show that Qualtrics can be a force-multiplier for SAP.
Morgan’s use of the phrase “lighting Qualtrics on fire in our partner ecosystem” and the huge deal with Ernst & Young indicate big potential among partners as well.
Bob Stutz leaving Salesforce to rejoin SAP and head up its CX business is a seriously nontrivial addition to the SAP team and loss for the Salesforce team.
And Morgan’s decision to put Qualtrics at the top of the list of growth drivers for SAP—whose cloud growth has been between 37% and 43% for the past several quarters—clearly shows how the company is placing Qualtrics front and center.
Disclosure: at the time of this writing, SAP was a client of Evans Strategic Communications LLC.
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