The Qualtrics IPO Announcement: 3 Key Questions SAP and Qualtrics Customers Need to Ask Themselves

In an interesting move, SAP announced that it is in the process of preparing Qualtrics for an IPO later this year.  While all details are still not clear, CFO Luka Mucic and Qualtrics CEO Ryan Smith went to great lengths in today’s earnings announcement to explain the benefits of such a move not only to SAP but to Qualtrics (and SAP) customers.  They also stressed that SAP would retain a large, majority ownership and that this was not intended to be a “spin-off” but that this was really more about providing Qualtrics flexibility to continue to innovate and increase functionality for customers.

Regardless of this positioning, current and future customers of SAP, C/4HANA, and/or Qualtrics should be asking themselves these three important questions:

1. How much control do I have regarding how my agreement governs Qualtrics?

In most cases, the answer is very little.  If you are a customer whose agreement predates the SAP acquisition, odds are that your terms vary from SAP’s standard terms which may be in your favor.  It will be important to get an understanding of those variances and determine what leverage or flexibility you have (or don’t have) to prepare for a future state where your  Qualtrics software will be owned by a separate legal entity.

2. If I am considering a major investment in Qualtrics or the C/4HANA suite, should I buy now or wait until the IPO?

Understanding SAP’s business practices and how to generate leverage is an important part of how to answer this question.  As SAP has included Qualtrics as a key component of the C/4 Suite, customers will need to not only understand how SAP licenses Qualtrics within the suite but also how to maximize any current spend opportunity to drive the best cost structure now.

In addition, customers will also need to drive the most competitive commercial terms and obtain clarity from SAP contractually on how (to the greatest possible extent) to establish predictability today rather than be subject to future uncertainty based on how the software and contract assets are treated post-IPO.

3. How does all of this fit into my plans to migrate from ECC to S/4 HANA?

This announcement certainly clouds the picture SAP has been trying to paint regarding its desire to move customers from ECC on-prem to S/4HANA in the cloud.  Extracting a major part of that future vision/platform and potentially setting Qualtrics on a different path from the rest of C/4 and S/4 does not make the migration path easier to understand.  It also doesn’t sell the value internally, especially given the current economic environment.

Understanding the frameworks, commercially and contractually, of how other customers are addressing their migration is imperative.  An informed customer can therefore approach SAP and proactively seek for SAP to provide a path forward that drives clarity and predictability not only for S/4 but C/4 and Qualtrics, thereby reducing risk and improving visibility on navigating this critical step in your SAP relationship.

Surprise announcements like these can throw a wrench in your SAP product roadmap.  Customers should be revisiting their plans and asking these important questions as they look to navigate their relationship with SAP and Qualtrics moving forward.  If you’re uncertain about how this will impact your current plans or what actions you should be taking now, you may want to speak to one of our SAP experts. Our SAP advisors have years of experience helping SAP customers through this type of event and can help your organization mitigate the risks associated with this change while maximizing transparency.

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