Blockbuster software deals have made headlines this year, with SAP’s $8bn purchase of Qualtrics becoming the latest in a series of acquisitions led by legacy tech companies vying to bolster their cloud businesses.
What does the acquisition mean in the context of the experience economy, one of the biggest global trends to have emerged in marketing in recent years?
Prior to the SAP-Qualtrics deal announcement this week, the last quarter of 2018 also featured Adobe’s $4.75bn acquisition of Marketo and IBM’s mega $34bn purchase of Red Hat. Whilst Adobe’s acquisition is intended to bolster its Experience Cloud platform and direct-to-consumer marketing, the IBM-Red Hat deal is intended to boost IBM’s offering in the growing hybrid cloud market.
Meanwhile, the purchase of online market research software company Qualtrics by SAP, best known for its financial software and enterprise resource planning (ERP) business, is intended to help move its customer experience initiative forward.
Some may view the M&A activity in the cloud computing space negatively, perhaps as another sign of disruption and the demise of business models. Faced with competition from the likes of Amazon Web Services, Google Cloud Platform and Microsoft’s Azure, not to mention start-ups, the struggle for relevancy is real for legacy tech. The deals represent a bid for growth in a changing market.
The Qualtrics deal, however, may also be viewed as an opportunity and serves as an important lesson for brands. The combination of operational data from SAP’s core business with Qualtric’s data on consumers, employees, brands and products or experience data (trademarked as O-data and X-data) presents a powerful proposition. By understanding what is happening and why it is happening, SAP-Qualtrics is intent on stitching together different pieces of the customer experience management puzzle.
After all, by making sure that companies react before consumer behaviours start influencing the balance sheet, companies will be in a better position to limit churn and retain their customers.
According to Econsultancy’s Customer Experience Management report, 71% of respondents cited ‘improved customer retention’ as the most important benefit of a CXM strategy – a finding not so surprising given that it is generally more expensive to acquire a new customer than to retain an existing one.
Whilst developing customer insight capabilities is an essential component of delivering a data-led CXM strategy, this same report finds that data gathering and interpretation as well as having data in the same place so that it can be connected are key challenges for businesses.
Enterprise data is notoriously messy and on multiple systems, often legacy ones. The other challenge of connecting this data is observed by Azlan Raj, VP of Customer Experience EMEA at Merkle. According to Azlan, another issue is “making sure that there’s the right infrastructure within the business, because one of the things you want is confidence within your data. It also allows you to get that full picture”.
The full picture is something that legacy software companies are now striving towards in a bid to offer a one-stop shop for customers. Experience management is about helping companies get a complete picture of an enterprise from the viewpoint of customers, employees and anyone else whose opinion matters to the business. By getting closer to that often mentioned ‘single customer view’, companies will be in a better position to anticipate and respond to customer needs.
And the brands that can react quickly to evolving trends with the rise of the experience economy are the ones that will prosper.