After months of discussions between the two companies, SAP announced Sunday afternoon that it has agreed to acquire user experience software vendor Qualtrics just before it was expected to make its debut as a public company.
SAP, best known for its database and enterprise-resource-management software, will pay $8 billion in cash for Qualtrics, which will continue to maintain its dual headquarters in Seattle and Provo, Utah. Qualtrics offers software-as-a-service that companies use to measure and manage their reputations with current and prospective customers as well as a similar service for internal use managing employees.
It’s another sign that legacy enterprise technology companies are willing to shell out cash in order to get in on a newer and growing market, similar to IBM’s $38 billion purchase of Red Hat two weeks ago. SAP believes that the combination of Qualtrics’ experience in managing user experience data will mesh nicely with its customers’ trove of operational data, like inventory and sales history, it said in a release.
In an interview with Forbes, SAP CEO Bill McDermott made it very clear that his company is eyeing Salesforce with this acquisition, saying “one of the traditional players in this space ordered too big a building.” Salesforce addresses this concept of user experience in its Service Cloud and Marketing Cloud products, but this market is changing quickly as data analysis becomes the most important part of customer interaction.
We’ve moved past the era of big data, as the Cloudera-Hortonworks merger made clear, and IT buyers increasingly want ways to share data across different parts of their businesses.
Vendors have responded in several ways to that trend this year, with companies like SAP, Microsoft, and Adobe teaming up in a data-sharing partnership among their mutual customers. It’s even easier to create those links between products under a single corporation like the SAP-Qualtrics deal will create.
Qualtrics co-founder and CEO Ryan Smith will have to wait a little longer before becoming the head of a public company, which was widely expected to happen some time this week after it announced plans for an IPO in October having raised more than $450 million in funding. He will remain in charge of the company, and Qualtrics will maintain its brand inside SAP’s Cloud Business Group.
Qualtrics, which brought in net profits of $2.5 million and just under $290 million in revenue in 2017, was looking to raise $200 million in the IPO.
While the company was founded in Utah in 2002, it opened a Seattle office in 2015 that quickly became an official co-headquarters. That office is led by Seattle tech leaders with impressive resumes, including former Amazon executive John Thimsen, who leads engineering; Webb Stevens, formerly of Avalara and head of product; and longtime Microsoft executive Julie Larson-Green, who was tapped last year to oversee design and culture. The Seattle office, located near CenturyLink Field, has more than 300 employees.
[Editor’s note: This post was updated several times as more information became available].