SAP plans to spin-outs its Qualtrics experience management (XM) software management business as an initial public offering (IPO) in the United States. However, SAP will retain majority ownership of that business.Terms, conditions and timing for the IPO were not disclosed. SAP said the transaction is not expected to have an impact on SAP's 2020 or longer-term financial targets.SAP acquired Qualtrics for $8 billion in 2018. But CEO Christian Klein seems focused on unlocking Qualtrics' current day-value.SAP says its primary objective for the IPO is to “fortify Qualtrics' ability to capture its full market potential within Experience Management," according to an SAP statement. "This will help to increase Qualtrics' autonomy and enable it to expand its footprint both within SAP's customer base and beyond.”
SAP Consolidates Leadership
Christian Klein, CEO, SAPThe spin-out announcement comes just three months after SAP announced it will ‘consolidate’ its leadership under one CEO. Previously, the company briefly operated under a co-CEO leadership structure, with Jennifer Morgan and Christian Klein sharing the helm after Bill McDermott exited to lead ServiceNow in October 2019. As ChannelE2E reported in April 2020, Morgan left SAP on April 30, 2020 and Klein remained to lead as sole CEO to “drive the cloud and application software business through the coronavirus pandemic,” SAP said.Fast forward to present day. SAP says its business is performing well amid the pandemic. “Business activity gradually improved over the course of the second quarter following the global emergence of the COVID-19 crisis primarily in the last month of the first quarter. Software licenses revenue, while still below normal levels, recovered more than expected. In particular, the APJ region had a strong recovery in software licenses revenue,” the company said in a statement.
SAP and Qualtrics: The Journey So Far
Qualtrics, under SAP's Cloud Business Group portfolio, has operated with a greater degree of autonomy than other SAP acquisitions; Qualtrics founder Ryan Smith remained as CEO, and the Qualtrics management team, personnel, branding and company culture were kept intact, and the company maintained dual headquarters in Provo, Utah, and Seattle, Washington.That strategy has seemingly paid off. In the statement announcing the spin-out, SAP CEO Christian Klein said 'SAP's acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40%, demonstrating very strong performance in the current setup.’ Klein went on to say that, with Qualtrics CEO Ryan Smith’s input, the companies decided “an IPO would provide the greatest opportunity for Qualtrics to grow the experience management category, serve its customers, explore its own acquisition strategy, and continue building the best talent.”
SAP and Qualtrics: What's Next
SAP, which currently holds 100% of Qualtrics shares, will retain majority ownership and has no intention of spinning off or otherwise divesting its majority ownership interest, according to the company. Ryan Smith intends to be Qualtrics' largest individual shareholder, according to the statement.This setup will position SAP as Qualtrics' largest and most important go-to-market and research and development (R&D) partner, according to the statement, while giving Qualtrics greater independence to broaden its base by partnering and building out the entire experience management ecosystem. By tapping into SAP’s more than 413,000 customers and global sales force of around 15,000, Qualtrics will be able to scale rapidly around the world, the companies said."When we launched the Experience Management category, our goal was always to help as many organizations as possible leverage the XM Platform as a system of action," Smith said in the statement. "SAP is an incredible partner with unprecedented global reach, and we couldn't be more excited about continuing the partnership. This will allow us to continue building out the XM ecosystem across a broad array of partners."
Sharon is a master technology storyteller and editor with omnichannel experience: books and print magazines, digital, webcast, blogging, podcast, live events and video and associated brand-specific social media content. From 1999 to 2003, she acquired and edited technology books and certification exam prep guides.
After a year spent in publicity and editorial at mass-market book publishers, she returned to tech publishing and, since 2004, explored B2C and B2B news, issues and trends in consumer, lifestyle, software, software development, AI, ML, networks, big data, hardware, security, storage, cloud, equity, inclusion, diversity, women in tech, career development, IT management, H-1B visa issues and immigration, education, training and learning.
Her previous role was as the managing editor at Techstrong Group in charge of Cloud Native Now, DevOps.com, Security Boulevard and Techstrong ITSM and their brand-specific social media. She currently serves as editorial director for CyberRisk Alliance’s channel brands, ChannelE2E and MSSP Alert and acting editorial director for SC Media UK. Drop me a note and let’s talk!
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