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What's next for SuccessFactors HR after Qualtrics IPO?

After it acquired Qualtrics, SAP said the experience management software company would be core to its SuccessFactors HR strategy. Then SAP decided to spin it out in an IPO.

After SAP completed its $8 billion acquisition of Qualtrics in 2019, it all but rebranded its HCM platform to "HXM" -- human experience management. That's how important Qualtrics is to SuccessFactors HR. With a multiyear integration effort underway, the two systems would be joined at the hip. 

On Sunday, SAP announced a new strategy: It will cut Qualtrics loose with an IPO but maintain majority ownership. 

The decision poses potential risks for SuccessFactors HR customers, including roadmap changes and integrations that don't go ahead as planned, according to analysts. But, they said, there are opportunities as well. The prospect of an IPO may help Qualtrics retain key talent and stimulate innovations.

Risks and opportunities

SAP has helped Qualtrics grow, said Josh Bersin, an industry analyst who also runs a professional HR training academy. By spinning out the company, Bersin estimates Qualtrics could be worth $15 billion to $20 billion. 

With the IPO, SAP gets a "ton of equity" in the independent Qualtrics, it gets its money back on the acquisition, and it has "a reseller relationship with one of the leaders in the market," Bersin said. 

But the IPO also creates a couple of risks for SuccessFactors HR users. Qualtrics could go in a different direction than what it planned as part of SuccessFactors, which could mean it "doesn't do as much integration as they had planned," he said. 

A longer-term risk is that Qualtrics could decide to partner with a competitor, such as Oracle, or be acquired by a competitor like Microsoft, Bersin said. "If SAP owns most of the company, I doubt they will do anything like that for a while," he said.

The good news for SuccessFactors HR is in the potential an IPO creates for innovation and product development. As part of SAP, there was a risk that Qualtrics could lose some of its best talent and "go to work for the next start-up," Bersin said.  

The Qualtrics platform measures employee experience (EX), product experience (PX), customer experience (CX) and brand experience (BX). It combines this experience data with business operational data, which made it especially appealing to an ERP vendor that covers all the operational bases. Its experience measuring tools, mainly surveys, can provide insight into how employees feel about the firm's direction or management decisions and then link that to the overall performance of the firm. 

What SuccessFactors says

SAP said customers can expect little change. 

We don't anticipate any change for our customers, including HR customers.
Samantha YerksSpokeswoman, SAP

"We don't anticipate any change for our customers, including HR customers," Samantha Yerks, an SAP spokeswoman, said in an email. "We continue to see synergies between Qualtrics and SAP's product portfolio and our go-to-market strategy," she said. Yerks pointed to the decision last fall to create the SAP SuccessFactors HXM Suite.  

"There are more than 630 companies using the combination of Qualtrics and SAP SuccessFactors," Yerks said. 

Trevor White, an analyst at Nucleus Research, believes the risk of disruption for SuccessFactors HR customers is low. There is a possibility of roadmap changes, as Qualtrics begins to separate itself from SAP. 

The Qualtrics leadership is "going to want to make a splash a little bit more, versus being a product within the SAP suite," he said. 

But SAP's decision to maintain a majority stake "says to me that they're committed to security as a product that will integrate," he said. 

SAP acquired SuccessFactors in 2012 for $3.4 billion, and since that time, the earlier leaders of SuccessFactors have left, noted Liz Herbert, an analyst at Forrester Research. 

Some SuccessFactors HR customers "would say the pace of innovation and their commitment to what they do has suffered because of being part of this mega software vendor," Herbert said. 

"SAP will still be an owner of Qualtrics," said R "Ray" Wang, founder and principal analyst at Constellation Research Inc. "The IPO is more about recouping the value of the IPO and reducing the cost of acquisition for SAP of Qualtrics." He expects SAP to continue with its integration plans. 

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