The News

On July 26, 2020, not two years after announcing the acquisition of Qualtrics, SAP announced its intent to take Qualtrics public. The timeline is yet to be communicated. What the press release basically says is that SAP’s cloud growth, including Qualtics was a ‘great success’. SAP itself wants to remain in control by keeping a majority stake in Qualtrics after the spin-off while Qualtrics founder Ryan Smith wants to be the ‘largest independent shareholder’. SAP insists in it being fully committed to the Qualtrics XM platform as a key element of its Intelligent Enterprise strategy, but with Qualtrics being a part of the SAP ecosystem instead of being a part of SAP itself. For your convenience the full press release is quoted here. WALLDORF — SAP SE (NYSE: SAP) today announced its intent to take Qualtrics public through an initial public offering (IPO) in the United States. Qualtrics is the market leader and creator of the Experience Management (XM) category, a large, fast-growing and rapidly evolving market. SAP intends to remain the majority owner of Qualtrics. SAP’s primary objective for the IPO is to fortify Qualtrics’ ability to capture its full market potential within Experience Management. This will help to increase Qualtrics’ autonomy and enable it to expand its footprint both within SAP’s customer base and beyond. “SAP’s acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40 percent, demonstrating very strong performance in the current setup,” SAP CEO Christian Klein said. “As Ryan Smith, Zig Serafin and I worked together, we decided that 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 will remain Qualtrics’ largest and most important go-to-market and research and development (R&D) partner while giving Qualtrics greater independence to broaden its base by partnering and building out the entire experience management ecosystem.” Qualtrics, which is part of SAP’s cloud portfolio, has operated with greater autonomy than other companies SAP had previously acquired. The founder and current management team of Qualtrics will continue to operate the company. “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,” Qualtrics Founder Ryan Smith said. “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.” SAP agreed to acquire Qualtrics just four days before Qualtrics was to go public in 2018, recognizing the potential of bringing together experience and operational data (X+O) to help organizations take action. SAP currently owns 100 percent of Qualtrics shares. SAP will retain majority ownership of Qualtrics and has no intention of spinning off or otherwise divesting its majority ownership interest. Ryan Smith intends to be Qualtrics’ largest individual shareholder. SAP is fully committed to Experience Management and the Qualtrics XM Platform as a key element of its intelligent enterprise strategy. SAP will remain Qualtrics’ closest and most important co-innovation and go-to-market partner. A final decision on the IPO and its conditions and timing is pending and subject to market conditions. Since SAP, as majority shareholder, will continue to fully consolidate Qualtrics, the transaction is not expected to have an impact on SAP’s 2020 or longer-term financial targets.

The Bigger Picture

As I have written back in 2018 in my analysis of the Qualtrics acquisition, data rules. This is still true, and I am still positive about the importance of combining transactional data with experience data. The value of data only increases these times, especially the value of volunteered data, as opposed to data that gets grabbed as a digital footprint by vendors via peoples’ activity on the web. The collection and use of data will be made increasingly difficult by regulations like the European Union GDPR or the California Consumer Privacy Act CCPA. That a focus on data protection has an impact is also shown by companies like Zoho expressing a strong emphasis on customer privacy. Browsers will be more and more strict with the way they deal with third party cookies. Safari got stricter, Google Chrome changed, Firefox, too. And then there are a lot of privacy orientated browsers like Brave, or even Tor. In addition, information that is volunteered by users, especially if asked for in meaningful and little increments that are in context, tends to be more reliable than data gathered via tracking users’ web exhaust. Means it is much easier to generate actions out of it. And please note my use of the words information and data here, as it is deliberate. What users willingly give is information, not data! This all means that the market for first person data will only become more important.

My PoV and Analysis

This news comes quite unexpected. Although, during SAP’s 2020 SAPPHIRE Now conference last month I learned that there is not only a Customer Experience (CX) but also an Experience Management (XM) stream … And I am not the only one who is sort of surprised. See Denis Howlett’s quite readable piece on Diginomica. Looking at the (non-existent) timeline of the IPO in the press release I would not think that there is any major impact in this fiscal year that is not caused by the surprising press release – in combination with the to be communicated CX strategy – in itself. And there is some uncertainty in the market that I observe at the moment. Btw, yes, I do know that there is a series of ‘strategy and roadmap’ webinars going on right now. These cover the next six to twelve months, at most. On the longer run, I do think that a going public of Qualtrics is a good move, probably even the best possible option. Why do I think so? Glad you asked … First and foremost I continue to think that the acquisition of Qualtrics was a good move. The price tag of $ 8 bn US has been real steep, but then this acquisition denied the competition access to the IP and the data that Qualtrics has. With a then planned IPO target value of $ 4.8 bn US, this means that SAP wasn’t the only pursuer. Still, it will be interesting to see the Qualtrics valuation when SAP acts on this announcement. Denis Howlett wrote that messaging might improve as a result of this announcement. “Removing Qualtrics from the equation allows SAP to simplify its market messaging for its core offerings and focus directly on S/4HANA which has to succeed if SAP’s future is to be cemented”. This is certainly a point, also in the light of SAP showing up in the current Gartner Magic Quadrant for Cloud ERP for Product Centric Enterprises only by way of a honorable mention – due to not having enough live customers. On the other hand, supply side processes, ERP processes, forecasts, rely on good data. And not having this data, or not talking about it, is not going to help the story of the intelligent enterprise. And then SAP insists in remaining “Qualtrics’ closest and most important co-innovation and go-to-market partner”, which means that the investments and the story stay pretty much the same. The one thing that changes is the representation of Qualtrics on the price list and revenue recognition. Placing Qualtrics as a partner solution is not necessarily an advantage. On top of that the CX story doesn’t get stronger, too. The timing of the announcement, on the evening before the release of the quarter an half year numbers, is strange. Is it because of the these numbers? Well, they are known for a week, since their pre-announcement of July 20. This press release basically showed a better than situation than expected in April. If I am wrong with this assessment – the subterfuge certainly worked … Else, in the light of the Qualtrics announcement the pre-announcement of the quarter numbers makes much more sense to me now. Looking at the strong cash flow and the updated cash flow expectations with an expected free cash flow of € 4 bn (up from € 3.5 bn), I do not think that SAP needs to sell Qualtrics for liquidity reasons. According to SAP’s Q2/2020 statement the Qualtrics revenues grew by 34 percent year over year in Q2. On the other hand, the Qualtrics segment margin degraded by a quarter from 5.6 per cent in Q2/2019 to 4.3 per cent in Q2/2020. This is probably due to the significant integration cost that needed to be spent (and continue to be needed) in order to make Qualtrics an integral part of SAPs solutions. I can only speculate that an activist investor like Elliot does not really like to see this. Especially after looking at the premium that SAP paid for Qualtrics. With Qualtrics becoming an own entity these number should somewhat go down, partly also because one could suspect that Qualtrics standalone can run a leaner development process than Qualtrics as part of SAP. What I do think is that making Qualtrics ‘independent’ keeps the doors into competitors’ ecosystems open. Previous experience with the acquisitions of Hybris, Gigya and Callidus show that traction in the non SAP markets gets lost when an acquired company becomes SAP. All these companies grew within the Salesforce ecosystem. These beachheads are gone. The addressable market has become far smaller. As an ‘independent’ company, Qualtrics can play in multiple ecosystems, therefore creating a valuable beachhead in more than one ecosystem. Why do I put the word independent into quotes? Well, with SAP being a majority shareholder the company will not be really independent, but independent enough to appear as an independent entity. To sum it up: I see a strong move that attacks the competition. Time will show the truth. What do you think?

Many analysts, including myself, have repeatedly written about us having entered a new normal, which is enforced by a so-called green swan event – an event that according to BIS is “extremely disruptive and that could be behind a systemic crisis” (brackets set by Thomas Wieberneit). Supply chains are broken, employees need to work from home, stores were forced to close for prolonged times, and so on. This has the potential to seriously harm the base function of a business, which is helping their customers solve their problems. Looking at the pyramid of customer expectations, businesses are often barely, if at all, able to maintain its lowest level – the level of effectivity – and are far away from making it easy for their customers or even providing them with a joyful experience when interacting and engaging with them. Figure 1: The hierarchy of customer expectations Yet, we are in an era where products and services themselves get increasingly deprecated and the experience becomes the main distinguishing factor for continued success. Still not all organizations are set up to deal with this. Most are not resilient enough to fend off or at least mitigate the disruption caused by a crisis. Some organizations are affected more than others. So are the people who work in these organizations.

• Salespeople cannot interact with their customers in the ‘usual’ way anymore. They cannot go out and visit them currently.
• Customer service professionals need to change their ways of collaboration with their colleagues, they cannot just ask their neighbour anymore.
• Marketing Teams cannot create and host offline events due to distance and meeting restrictions.
• Finance departments see challenges in creating invoices in time due to inaccessibility of information, advice, data and documents.
• Bonding between colleagues works different now, as there is no coffee corner anymore – nor the common smoke. Social interactions work differently now.
• Stores can only serve a very limited number of customers, if at all, again, due to distance and meeting restrictions.

These are different problems that need different solutions. Not solving them results in both, employees and customers, not being satisfied. However, looking at the examples above, two common themes emerge:

• People cannot interact with each other as they are used to.
• Processes, that rely on siloed best of breed implementations, break down.

The good news is that they have two common denominators: culture and technology. About the role of culture I have written a while ago: Employees make, and want to make, customers happy. Therefore, it needs a relentless focus on the customer and it is the role of management to make employees happy, so that they can do what they want to do. Culture is the foundation for a business to be an integral part of the solution of the problem facing its customers. Then, there is the question of technology. The ability of employees to provide customers with a good experience requires powerful applications, built upon a strong platform, which big companies like Microsoft, Oracle, Salesforce or SAP, but also emerging players like Zoho provide. Wisely selecting a platform and gradually integrating processes and data on it to serve people – employees and ultimately customers, is key to business resilience. Figure 2: The building blocks of a customer experience platform This platform provides four elements:

• A strong technology platform that holds and exposes the main capabilities that all enterprise software needs in order to be able to create a great experience: Analytics, integration, machine learning/AI, IoT services, blockchain, database access, security, no-code/low-code development services, to name just a few of the more important ones. The ability of organizations to innovate and while maintaining a stable core is depends on this.
• Insight, i.e. actionable information with the objective of achieving an outcome. Insight is what enables companies or individuals to turn raw data into actions that yield positive results for customers and therefore for themselves. This data may be structured or unstructured, transactional or behavioural, etc. Data may be first party, second party, or third party data. Through the use of analytics, data can be turned into information and through the use of advanced analytics and AI into insight. The services to enable this are delivered via the technology platform.
• Productivity is about the effective and efficient process automation, where possible combined with an efficient way for people to get their jobs done. Especially within a business, but also across businesses, people need to collaborate easily and efficiently. This requires a lot of tools, services, and a strong data sharing ability. It also requires people to interact with computers not in the computer way but the same way people interact. This is one of the main reasons for the rise of speech and voice interfaces. Efficient collaboration, based upon insight, is not only necessary for people, but for interacting software systems as well; it is crucial for an effective process automation.
• And finally, an ecosystem of customers and partners, that enables scale. This scale is achieved by building and nurturing an ecosystem of partners. Partners are developing solutions that augment the core ones; other partners implement solutions across the ecosystem. To be accepted, it needs to distribute the value it generates fair and transparent to all involved parties.

As said above, only few software vendors are capable of providing this platform, along with the relevant business applications and a culture that bases on being part of the solution, not the problem. One of them being Zoho, which recently invited me to their analyst briefing 2020. Many thanks again to Sandra Lo for inviting me to this enlightening event. You want to learn more about how you can set your business up to be able to deliver the same high customer experience in a post Covid-19 world? Then join me in a webinar on June 4 at 2 pm CET and discuss how you can leverage the opportunities created by this crisis. I am looking forward to discussing with you!

It is this time of the year. Both, my wife Nicole and I put in long hours throughout last year, and yes, the pre-Christmas-time was not exactly a vacation, too … So, we were looking forward to some downtime and a family cruise with the line that prides itself as being “the home of the smile”. But, hey, if you are in the customer experience business – you never really have full downtime. At the end of the day it is also impossible to not reflect your own experience. Hence, we also could not avoid to realise how simple things can turn something amazing into something mediocre – or even plain disappointing. The cruise industry is a highly competitive industry, too, with more and more customers having more and more choice. Cruise Market Watch predicts more than 27.6 million cruise customers in 2020. Ships are getting bigger and more comfortable – and the fleets are growing, too, with 25 more cruise ships being expected to enter service in 2020. At the same time, customer expectations are rising fast. And this does not only apply to the digital world, but also to the physical one. And a cruise is all about the customers’ experience, and nothing else. This is what they are selling with slogans like ‘premium all-inclusive’ (TUI Cruises). “After all, the best holiday feeling is: not being in the need to think of anything, but to be able to. Not needing to pay for it, but being able to try anything. Not needing to relinquish anything but being able to enjoy everything.” (original in German, translation by me) AIDA cruises states on its homepage that “Every cruise is a special occasion: During an AIDA cruise you experience a fantastic vacation, explore the best destinations worldwide and can get yourself regaled. In a relaxed atmosphere and with a great choice of activities you can fashion your vacation to your liking and live your love of adventure.” (original in German, translation by me) Carnival cruise’s mission is to “deliver joyful vacation experiences and breakthrough shareholder returns by exceeding guest expectations and leveraging our industry-leading scale.” Carnival also in 2017 started to connect the digital and physical worlds with their Ocean Medallion (here my take on it). I could go on and on with the promises of the various operators, but you get the picture.

Expectations are high, competition is cut throat, and promises are bold

This is the archetype of an environment where companies need to excel on experience to sustainably succeed. So, delivery to promise matters! This is also what Patrick Stokes, EVP Platform and Services at Salesforce has in mind when he says that “In 2020, companies will be competing on the experience they deliver to customers - not just their products, but making the entire customer relationship, from lead to purchase and beyond, as simple, personalized, and human as possible". Although he comes more from a 360 degree view angle than I want to pursue here. And no: Consistently exceeding customer expectations is not it – unless you want to initiate and sustain a vicious circle of rising expectations. But what about delivery to promise on a cruise ship? Cruise operators, as every other business need to operate with the three tiered pyramid of customer expectations. Customer needs from basic to higher order need to be met. There is no point in concentrating on the higher order needs if the basic ones are not met. Customer experience is about consistently fulfilling the customers’ needs and then using the chance to create little ‘wow‘ moments. The customers’ needs are you being available THEIR way and you reliably and accurately providing them with accurate and reliable information, then with what they really want. There is no chance of impressing/wowing customers at this level. Failing here, however, creates negative experiences. Think: ‚Your call is important to us – however, due to exceedingly high call volumes …‘, or different company representatives giving different answers to the same question, or the cabin not being available or the key not working for its door, or unfriendly personnel. The options to fail are manifold. From a cruise passenger customer journey point of view we are looking at four main phases of their vacation:

• Booking
• Check in
• On board
• Check out

Of these the on board phase is the longest one by far, while the other ones being the easiest to deliver on customer expectations. But then they are also the ones that are at the bottom of the customer experience pyramid. They are simply table stakes. Still, a smooth onboarding process sets the scene for the stay on board. If this process does not work, customers are annoyed right from the outset. A poor check out experience might prevent them from becoming repeat customers – although the memory might have faded until the next booking – or superseded by a more recent poor travel experience that is caused by airways or rail transportation. So, the stay is what matters. Here, again we have table stakes like a clean cabin, friendly and helpful and available service, appropriate food, little fine print, the actual availability of what is written in the prospects, to name but a few. Naturally, some of the offerings that one reads in the catalogue are additions to the base fare. Ease of booking additional services is an example for the second stage. A little treat for the kids when they least expect it, would go for stage three.

The Experience

Overall one can say that Aida cruises has optimized its processes. Booking (well, we had a little help of a travel agent, too) was smooth, check in fine, the cabins as expected, switching people of our group of 7 between cabins worked fine, too (This is a security topic; on a cruise ship it must be known in emergency situations people out of which cabin are already made it to the evacuation points). Associating the right credit cards to  the right cabins and people: ‘Of course, sir’. Only that it did not work. Checks were pretty consistently booked against the wrong card, which after the first incident leads to a drastic loss of trust – so we did it four times. And found mistakes four times. Of course, this also has an impact on the checkout process, where you feel the need to check the invoice in detail instead of just rushing through. After all you have a plane to catch… Food was OK, especially considering that there are nearly 2,500 people, guests and staff, who want to eat several times a day. Adding a beverage package went fine, too. OK, add a small chuckle when we were presented with an additional card for the beverage package; kind of really –a second card? But hey, clip it to your lanyard and go on. And no, it is not possible to have several beverage cards run against one room card. 5 people? Please give me your five room cards for swiping. Still, remember Murphy’s law: If it is possible to pull the wrong card … you will pull the wrong card. Of course it happened; more than once. And by the way, these mistakes cannot be corrected on the spot. So here you go to the reception desk. Even more annoying is the fine print to the packages. It doesn’t work everywhere. Get your coke here, but not there. The difference: Here it comes in a bottle, there it gets served out of a dispenser. So, it is about the price. Come on! There is an easy fix for this, which doesn’t cost a thing. It is hard to consistently drink up to the price of the beverage package. Believe me, I tried. Luckily there are some forward thinking waitresses who just say ‘I’ll bring you one from the restaurant next door’ – which almost fixes the original blunder. Sitting in the Aida bar ordering a drink – you need to be patient thereafter, even if it is not crowded. The reason: Lack of staff. Still, most staff smile at you all the time – which must be hard for them, given their work times and work conditions. Remember, this is the ‘meets needs’ level of the house, with a little detour into the ‘it’s easy’ side of the house. And important expectations weren’t met already on this level. I said it was easy to change the cabins. We opted for having 2 kids in one. They caught a fever so I asked for getting an additional card for their cabin to be able to check on them without waking them in case they are asleep. Impossible: ‘Sir, there are only two people in that cabin, so I can give only two cards’. Matter of fact. Just like that. Experience? Customer orientation? Getting the verbal equivalent of a slap on the fingers for pulling the daily schedule (which is there for the guests) from the staff side of the counter pales in comparison. I have seen that happen multiple times. Guess what! There is an easy fix for that. Just put it on top of the counter.

Build your processes from the customers’ point of view

One might say that most of the observations above are about little things. Some of them admittedly are. But then these little things add up. And some others are not so little. And then the list might go on. The real point is that companies more and more compete on experiences, not on products or services. This is especially true for cruise operators which happen to deal in experiences. So, what went wrong? Critical processes are not created wearing the customer lens but rather towards answering the question: How can I do this or that? This is inside-out thinking as opposed to the necessary outside-in thinking. The result are processes that work, but that are optimized for the company, and not for the customer. Hence they cannot deliver an engagement process that can result in the best possible experience, or only exceed customer expectations. And, belonging to Carnival Cruises, this is part of Aida’s mission. How can this be fixed? Surely not via consistently exceeding customer expectations. Instead go for excellence at the meet needs level of the pyramid of customer expectations, being good at making things for customers achievable with minimum (customer) effort, while showing appreciation through the smart creation of the occasional wow moment. In summary:

1. Make it effective Design your processes with the customer, not with internal or operational priorities, in mind. Look through the lens of the customer while designing them. This means building your processes so that customers do get the specific relevant offers through the right channel at the right time, or the answers they want. Make sure customers get products that they want, which includes the avoidance of much fine print. What do you think of a waitress being in the need to say to a kid with a beverage package that asks for a soft drink: ‘Sorry I need to charge you here but if you go to the board restaurant next door you will get it for free’.
2. Make it efficient Pay attention to details. Being available, meticulous and accurate is the foundation of creating consistent experiences. This includes making sure that customer expectations are met across channels. This doesn’t mean serving all channels, but the ones that are important to your customers - and that lie within the limits of your budgets … as frictionless as possible. Make it simple for the customer!
3. Make it enjoyable Think of and create little ‘Wow Moments‘ that convey human appreciation to the guest. These moments add up to a lasting great experience. They are also easier to achieve than big experiences.

 

The News

On November 11, 2018 SAP announced that it has entered a definitive agreement to acquire Qualtrics, the “global pioneer of the experience management (XM) software category”. Here is the full announcement for you to read: WALLDORF, Germany, PROVO, Utah, SEATTLE, Wash. — SAP SE(NYSE: SAP) and Qualtrics International Inc. (Qualtrics) today announced they have entered into a definitive agreement under which SAP SE intends to acquire Qualtrics, the global pioneer of the experience management (XM) software category that enables organizations to thrive in today’s experience economy.

• Together, SAP and Qualtrics to accelerate the new XM category by combining experience data and operational data to power the experience economy
• Creates a highly differentiated offering for businesses to deliver superior customer, employee, product, and brand experiences
• Ryan Smith to continue to lead Qualtrics; Qualtrics to maintain dual headquarters in Provo, Utah, and Seattle, Wash.

Under the terms of the agreement, SAP will acquire all outstanding shares of Qualtrics for US$8 billion in cash. SAP has secured financing in the amount of €7 billion to cover purchase price and acquisition-related costs. The purchase price includes unvested employee incentive compensation and cash on the balance sheet at close. Subject to customary closing conditions and attainment of regulatory clearances, the acquisition is expected to close in the first half of 2019. The Boards of Directors of SAP and Qualtrics have approved the transaction. Qualtrics’ shareholders have also approved the transaction. SAP CEO Bill McDermott said: “We continually seek out transformational opportunities – today’s announcement is exactly that. Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks. SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.” McDermott added: “The combination of Qualtrics and SAP reaffirms experience management as the groundbreaking new frontier for the technology industry. SAP and Qualtrics are seizing this opportunity as like-minded innovators, united in mission, strategy and culture. We share the belief that every human voice holds value, every experience matters and that the best-run businesses can make the world run better. We can’t wait to stand beside Ryan and his amazing colleagues for the next chapters in the experience management story. The best for Qualtrics and SAP is yet to come!” Ryan Smith, CEO of Qualtrics, said: “Our mission is to help organizations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions. Supported by a global team of over 95,000, SAP will help us scale faster and achieve our mission on a broader stage. This will put the XM Platform everywhere overnight. We could not be more excited to join forces with Bill and the SAP team in this once-in-a-generation opportunity to power the experience economy.”

SAP and Qualtrics Will Together Deliver the Transformative Potential of Experience Data (X-Data) Combined with Operational Data (O-Data)

XM focuses on obtaining and tapping the value of outside-in customer, employee, product and brand feedback. Combining Qualtrics’ experience data and insights with SAP’s unparalleled operational data will enable customers to better manage supply chains, networks, employees and core processes. Together, SAP and Qualtrics will deliver a unique end-to-end experience and operational management system to power organizations.

SAP Will Accelerate Qualtrics’ Growth and Further Its Mission by Offering Global Scale, Reach and Resources

Leveraging SAP’s more than 413,000 customers and global salesforce of around 15,000, Qualtrics will be able to scale rapidly around the world. SAP has a strong track record of accelerating growth for the innovative companies it acquires, as exemplified by the rapid success of SAP’s recent acquisitions. Qualtrics expects full-year 2018 revenue to exceed US$400 million and projects a forward growth rate of greater than 40 percent, not including potential synergies of being part of SAP. Following the closing of the transaction, Qualtrics is expected to maintain its leadership, personnel, branding and culture, operating as an entity within SAP’s Cloud Business Group. Ryan Smith will continue to lead Qualtrics, and Qualtrics is expected to continue to maintain dual headquarters in Provo, Utah, and Seattle, Washington. Qualtrics was advised on the transaction by Qatalyst Partners and Goodwin Procter, LLP. J.P. Morgan acted as financial advisor and Jones Day acted as legal advisor to SAP. The plan is to improve the ability to build “customer experiences” by combining SAP’s existing access to more than three quarters of business transactions with data about actual experiences, which is what Qualtrics does deliver. SAP pays the enormous amount of 8 billion USD for Qualtrics, a company that predicts to have revenue of 400 million USD in 2018. This makes it the biggest acquisition ever done by SAP. Additionally, a multiple of 20 on the revenue is high; even considering a growth rate of 40 per cent. Even more interestingly, SAP makes this an all cash acquisition.

The Bigger Picture

Data rules the world. The market of consumer data and data about business relationships is largely distributed between Google, Facebook, Amazon, Alibaba, Apple, the media companies, and Microsoft. Where there still is a gap, is in the actual linkage of transactions and experiences. This is what companies usually try to cover with surveys. Experience is not only about customer experience but also about other stakeholders, for example employees. On the other hand, customer experience, as a category, is not manageable. Customer experience is the customer’s perception of a company that was developed over time. Once could define it as the sum total of all interactions and experiences that a customer had with the company in this time. What is manageable, are the individual engagements that at the end of the day create this customer experience. At least it is possible to influence these experiences. So, on an atomic level companies can work on how they are perceived. And one of the core ingredients for this is asking the customers.

My PoV and Analysis

While I have my issues with “Customer Experience Management” being a software category Qualtrics is a good fit. It delivers a lot of data that is complementing SAP’s existing data sets, plus the AI capabilities that are necessary to convert the raw data into insight. Qualtrics is capable of providing insight into individual experiences, which then using SAPs vast product portfolio, can get used to improve those very experiences in real time. The coverage of not only customer experience but also the related brand experience and product experience plus employee experience that Qualtrics sells is a very good strategic fit for SAP. It emphasizes on the SAP Customer Experience Suite story that got unveiled during SAPphire and the intelligent enterprise messaging that surrounds it. As a side effect SAP gets access to a strong survey suite that augments the existing one. Qualtrics, on the other side, gets the power of a huge sales force and partner ecosystem. This should enable it to scale globally fast.

But what do customers get?

In the near term … not much. Integration of the two solution sets will take some time. Even more so, if the Qualtrics software shall get migrated onto the SAP Cloud Platform (which I doubt). An exception might be pre-trained models and/or the corresponding algorithms. And finally there is the 1,000 dollar question: How about the Open Data Initiative? ODI is all about connecting data. Adding the capabilities of Qualtrics to the mix is of value to all customers. Hence it is to all members of the initiative. It will be interesting to see how this pans out. If Qualtrics becomes part of it then ODI is truly open. Else it is a line of defence also against Microsoft (as Oracle and Salesforce are no members of ODI).

Businesses are in a difficult situation. Today’s customers demand more experiences and contextually relevant engagements than they are equipped to deliver. The secret behind the abbreviation CEM is more important than ever. This places the businesses on a difficult and challenging trail that they need to carefully navigate in order to be and stay successful. The business challenge is that technology helps everyone, especially customers. This is because to the increasing proliferation of consumer technology, it is far easier and cheaper for customers to implement and use technology to their advantage as it is for businesses. A director of merchandising of a 1 Bn+ retailer put like this: “By the time we catch up to technology it will have moved past us again.” Examples for the truth of this statement in the past decade include the meteoric rise of messaging services and, before that, social media, powered by smartphones that made the Internet ubiquitous. As a consequence of this today’s customer is less depending on company marketing- or sales organizations and has a far higher reach when it comes to satisfying an information need. Consequently, Google finds that a whopping 99.8 per cent of all online ads are simply … ignored. Sales representatives are on the verge of becoming irrelevant. An increasing number of studies find that customers contact a sales representative only after a product decision has been made. Other studies determine that customers are abandoning shopping carts already following a single poor service experience. While these studies often are commissioned by vendors there still are too many of them to not indicate that there is a problem. After all there is bound to be a fire where there is smoke.

Then and Now

The 1990’s customer happily believed in corporate messaging that got delivered via unidirectional channels like TV, radio, or the newspaper. Today’s customer is always online, digitally connected and socially networked. She trusts peers, ‘people like me’, far more than corporate executives, spokespersons, or consultants/analysts/influencers. This trend is clearly shown by the ongoing changes in the Edelman Trust Barometer and it gave birth to notions like ‘a company like me’ or the debatable one saying that ‘the customer is in charge’. Today’s customers are using technology to navigate their individual journey. This journey stretches across devices and channels. It is non-linear and proceeds at the customer’s pace, and it doesn’t end with the purchase. Customers are simply following their own preferences, not a company’s. Yet customers have precise demands to the companies:

• Customers want the company being available on their communications channels of preference.
• Customers want the company to know more about the product or service that they are inquiring about than they already know themselves.
• Customers want the company to know and address their intentions and not being bombarded with irrelevant and out of context messaging. Information they volunteer to the company needs to be used to their benefit.
• At the same time customers do not want their data being used outside the boundaries of their interests. They do not give a perpetual license to use their information.
• Most of all, customers want to feel valued by the company. And one of the most valuable commodities customers have is their time.

Pre- and post sales, companies need to address these demands by offering a menu of interlinked contact points that collect the right data and offer meaningful information in real time, so that the customers can proceed on their journey with minimum friction and loss of time. This includes the usage of the product or services – which, of course, doesn’t necessarily give or collect data (anyone seen a can of chili collect usage data?). Pre- and post sales, and interaction with products, are also why I chose the term contact points instead of the better known touch points, as the term touch points is nowadays somewhat delimited to marketing. Anyone having a better term please let me know… Companies that succeed in building this menu have established a technical foundation for engaging in a way that results in good experiences. Of course a technical foundation is not enough. Companies also need to cover the even more important aspects of people, process, or culture. But: Why do experiences matter? And how to get there?

Experiences Are Created Through Engagements

In an operationalized adaptation of a definition given by Paul:

“Customer Engagement is the ongoing interaction between company and customer, using contact points that are offered by the company and chosen by the customer.”

This is where the traditional notion of CRM falls short and where we need to turn it into Customer Engagement Management – CEM. CRM in a traditional sense, rightly or wrongly, focuses on making the transaction and is mainly driven by a strategic focus on internal needs. As a consequence there is no view on a long-term customer relationship and therefore the value added for the customer is comparatively low. Once can also see this in many traditional loyalty schemes that are rather built for ring fencing customers than for making them loyal. It is an inside-out view that emphasizes the interests of the company over those of the customer. What if a company took a different stance? A position where not the transaction and the company needs are taking center stage but customer interactions, conversations, and service and where strategic decisions are taken around fulfilling the customer’s needs? This way the company is able to offer a high value to the customer during a long-term relationship. Conversely, the customer shares this added value with the company through repeat transactions. The transaction is no more a goal but an engagement amongst others, an engagement that leaves an experience. In a way one can say that businesses serve themselves best by serving their customers best. But how does this tie into customer experience, I hear you ask. According to Wikipedia “Customer Experience is the sum of all experiences a customer has with a supplier of goods or services, over the duration of their relationship.” Of course there can be positive and negative experiences. And there is another catch: Experiences, good and bad, fade over time. The most recent ones supersede older ones. This is why companies can ‘turn around’ bad experiences with good customer service. But this observation also says that it pays off to be consistent – after all customer service can be expensive. On the other hand there is also no point in striving for consistently exceeding customer expectations. For one this ambition leads to a vicious circle; expectations rise endlessly.

The Simplified Maslov Pyramid of Customer Expectations

Similar to Maslov’s hierarchy of needs customer expectations form a hierarchy that stretches from basic to ones of higher order. It is simplified in the sense of having only three layers that start from rationality and bring more and more emotions into the picture. And there is no point in concentrating on the higher order expectations if the basic ones are not met before. Efficiently selling a customer something that she doesn’t want nor need is probably not going to be a (lasting) good experience. Customer experience is not about continuously exceeding expectations but about first consistently fulfilling the customers’ needs and then using the change created by that to create little ‘wow’ moments. First and foremost the customers need you being available their way and you reliably and accurately providing them, initially with accurate and reliable information, then with what they really want. There is nearly no chance of impressing or wowing customers at this level. Failing at this level, however, creates negative experiences and frustrations. Think “Your call is important to us – due to an exceedingly high call volume …” or different company representatives giving different answers to the same question., or a dress not being available in the right size in one store with the associate not being able or willing to look up whether it is available in another store. First, meet the needs! From then on make it easy and joyful for your customers. The secret sauce lies in finding the right way. What is easy and joyful for the customers? The easiest way to find out is usually asking them, even in times that are as digital as ours. But does it pay?

Improving Customer Experience Is Good For Business

It does. Meeting expectations provides the customer with a confirmation, a positive reinforcement. Consistently meeting expectations then leads to various positive results for the business, starting from a higher customer satisfaction, the chance of repeat purchases and leading to an improved and positive attitude towards the brand, ultimately creating a loyal customer who does not return because of a discount but because of being convinced of getting the best value. This is also confirmed in a number of studies that tie a focus on customer experience to tangible, measurable business outcomes. Focusing on a good customer experience through delivering the outcomes that a customer desires in an efficient and – for the customer – joyful way pays off for the business. Don’t look at yourself but at the customer and reap the benefits.

The most important tool that enterprise software vendors have in their respective arsenals is their platform. While Vinnie Mirchandani rightfully states that Enterprise Software Platforms have so far underwhelmed, Denis Pombriant proclaims them the new battleground. In my opinion it is not that new a battleground but as part of the Clash of Titans it is becoming more evident as a battleground. An enterprise software platform was always part of the battle for dominance in the customer engagement – or putting it into (marketing) industry lingo – customer experience market. It is actually an integral part of it. This is largely because of the ongoing commoditization of transactional business applications. But it was sexier to talk about shiny topics like engagement and experience than to talk about the grease and the machinery behind that drives and enables the technical delivery of engagements – note, that there are systems of engagement, but there is nothing like a system of experience. And now topics like chatbots, machine learning, AI, ambient computing, IoT, to name a few, made the machinery – the platform – the new black.

A – perhaps not so – brief history

When looking at the broad topic of CRM, customer engagement or customer experience, we have seen a lot of change happening since the early days of Sales Force Automation, SFA. Back in the early 90s one of the first topics has been SFA, with a focus on making a distributed sales force more effective and efficient. Contact management came even earlier, call center software and field service quickly followed. The emerging industry was dominated by little players that mostly got acquired by bigger enterprise software companies (anyone still knows a company called Kiefer & Veittinger?). Essentially we lived in a best-of-breed world. Nobody really talked about user- or customer experience. Times were all about efficiency. But what happened was that these point solutions brought an improved customer engagement, and with it an improved experience. Sales cycles shortened, got more predictable, which led to increased customer satisfaction overall. One of the players, Siebel, stepped up the game by coining the term Customer Relationship Management, CRM, and with it came the solution suite that increasingly covered all areas of CRM: Sales, Service, and Marketing. The advantage was clear: Having a highly integrated system not only allows for more efficient internal collaboration but also enabled one consistent face to the customer – better engagement possibilities and therefore potential for improved experiences again. The first real protagonist of this was SAP, but let’s not forget Oracle. In the mid 2000s Cloud Computing fully arrived, or rather took off. One could say, that this was also propelled by Salesforce with its then disruptive Software as a Service model. With this model we arrived at best-of-breed software again, as nimble SaaS players could offer quick solutions for departmental problems, something the big software houses could not do – nor did they want to. SaaS was born, and with it came the possibility to nimbly react to increasing customer demands, which in times of social media and the communications revolution that mobile devices caused, came very handy. The big incumbents realized this, too; some faster than the others. All of them, SaaS players or not, had their own development platforms, with different strengths, with or without own databases. This is important as it allowed them as well as their partners to efficiently enhance their software to offer more specialized functionality. Again, without talking about it, one result was better user- and customer experience through improved engagement. At the same time players like Google started to offer their environments as development platforms, too. PaaS – platform as a service was born. Add a vast number of little players and great software that got built using available open source technologies only. Shortly after, with the arrival of AWS, Infrastructure as a Service became a hot topic. However, a problem arose of all this, too. The many SaaS applications that were built using the different technology and development platforms had a hard time integrating, which ate up a lot of the advantages the SaaS applications themselves offered. Consistent engagement, and with it customer experience suffered. To address this, middleware services became part of PaaS offerings. Additionally there was also an increasing trend of consolidation on a smaller number of offered platforms, increasing the economies of scale for all involved parties. As a side effect the suite reappeared on stage, but with a twist. Instead of being a kind of supermarket it had converted to something more like a mall. Specialized software was integrated via a (fairly) common data layer, based upon one platform. While this is not entirely true you get the picture. This happened towards the end of the first half of the 2010s, and, along with increasing commoditization of enterprise software, gave birth to the ‘platform war’. Just that, sticking to military terminology, CEM, CEX, Martech, etc., have been the proxy wars. In came topics like chatbots, AI, machine learning, IoT, ambient computing. And this brought the platform topic into the foreground. A well-architected and comprehensive platform is the foundation for integrated business processes. This, in turn is the precondition for being able to deliver great engagements and therefore for the end customer to perceive a great experience. There is no experience without engagement. The platform is the customer experience platform.

But wait, what is a platform?

Now, this is a good question! There are probably as many definitions as there are enterprise software and infrastructure vendors. And these definitions are largely based upon the vendors’ legacy and core business. The industry largely distinguishes between two layers of platform:

• Infrastructure – IaaS
• Software – PaaS (and to some extent SaaS)

Infrastructure is the skeleton

While IaaS is fairly simple (no disrespect meant) as it mainly deals with the many hardware aspects of a distributed cloud platform, it is challenging on its own. And, supplying the compute, storage, and networking abilities, IaaS is literally fundamental. That makes it a part of the platform to reckon with. IaaS is a core element of Oracle’s strategy, and increasingly gets Microsoft’s attention. And then there are players like AWS, Google, Ali Baba, IBM, Rackspace, etc. that are providing cloud infrastructure to businesses as (a part of) their main business. The importance of IaaS is evidenced by all major enterprise software vendors heavily investing into their own datacenters. Although infrastructure is a commodity it is a commodity that the big software vendors are depending upon – at a scale that makes them vulnerable.

Software are the muscles

PaaS is more complex than IaaS. It is the foundation for building thriving application ecosystems. It therefore needs to supply all services that are needed to efficiently build, deploy, sell, and manage business applications and business application services (aka micro services). It also needs to provide the foundational services that enable business application developers to concentrate on solving business problems. That’s why analytics, IoT services, machine learning infrastructures, AI services, middleware, database engines, and much more, are part of it, too.

Choose your platform wisely

It is the software platform that lays the foundation for being able to consistently engage in a way that can deliver positive experiences. The IaaS part of the platform makes sure that the software platform itself can deliver with low latency and the performance that is necessary at any time. The ability to consistently engage in a way that can deliver positive experiences is why especially the PaaS platform is that important. And then there is the challenge of on premise software and/or “private clouds” as well as increasing regulatory pressure that places demands on the storage location of data with the latter becoming a non-issue soon, as every significant IaaS vendor will be able to support upcoming regional legislation – doing so is a matter of survival for them. The other matter of survival for them is whether and how they can attract business workloads to their infrastructures. And this means partnerships. No big enterprise software vendor – who all provided PaaS – will make itself dependent on one single, or only two IaaS providers. Which means that the software platform will remain the decisive factor. Of which we have largely four: Microsoft, Oracle, Salesforce, and SAP, discounting for specialists and ambitious startups like Freshworks or Zoho, amongst others.

So, which platform to go for?

As bland as it sounds, this is an individual decision. There is no one size fits it all. The main criteria are:

• Fit to the existing (on premise) back end
• Fit of current offering to current needs
• Fit of offering in 3 years to perceived needs
• Adaptability to changing needs
• Ecosystem
• Willingness to accept a given IaaS by choosing a PaaS
• Cost

The four vendors have very different strategies. All of them have their own infrastructure, but Microsoft and Oracle strongly prefer its own, while Salesforce and SAP are partnering, which also helps drive cost down. Microsoft, Oracle, and SAP are full suite vendors, with offerings covering the full value chain, while Salesforce concentrates on the customer side of processes. Microsoft on top of this has a strong productivity suite and essentially ‘owns’ the office. Microsoft, Salesforce and SAP are running thriving ecosystems, with Microsoft and Salesforce clearly having an edge over SAP. Oracle is less strong. All four are investing heavily into important technologies like machine learning, blockchain, VR and AR. Oracle’s investments into AI based database security is something unique in this area; until Microsoft goes that route, too – followed by SAP, which has least data on database attacks – but likely lots on attacks on the application server. Microsoft, followed by SAP have best access to data, Microsoft via LinkedIn and its stake in InsideSales, SAP via the Ariba network and now Gigya.

Tl;dr – Which platform will win?

In brief: The race is on. My personal view is that Microsoft, Oracle, and SAP have an edge over Salesforce, as these companies offer more of the value chain, in breadth and depth. Salesforce, on top of it, is not overly profitable. The company surely provides high value, but also at a high price. What if other vendors provide (or are perceived to provide) similar value at a lower price point? After all one major driver for a move into the cloud is lowering cost. On the other hand at least Oracle and SAP, probably even Microsoft, can learn from Salesforce about eco systems.

My advice?

Look out for what Microsoft is offering, especially if you are not (yet) a large enterprise but consider yourself upper end of mid market. If your concern is the whole value chain and you want to grow, look for SAP. Look for Oracle if you are an Oracle shop. If your main, or only, concern is customer engagement, have a good look at Salesforce. But always keep your existing infrastructure in mind.  

The News

Well, it is already more than two weeks ago that this news hit the wires, but SAP announced the acquisition of Gigya, a leading Customer Identity and Access Management (CIAM) platform vendor. Gigya got placed in the top position of Forrester’s Wave for Customer Identity and Access Management Platforms Q2 2017, a position that is owned by SAP, if the company manages to address customer (and hence analyst) concerns that arise from the merger. SAP, in turn, with its SAP Hybris branded software, provides a suite of commerce and engagement solutions that allow organizations to build and leverage in real time a 360 degree view on the customer, across channels and devices. Gigya is an SAP (Hybris) partner since 2013 or so, and has integrations with SAP Hybris Ecommerce, SAP Hybris Marketing and SAP CRM. SAP intends to make the Gigya platform part of its Hybris portfolio. The transaction is expected to be closed by end of 2017.

The Bigger Picture

The CIAM market is evolving fast, coming out of the area of providing social logins with the purpose of simplifying web site logins only a decade ago. This purpose remains but along with solving registration problems there are now a lot regulation challenges that are to be addressed. Just think, management of consent and preferences across sites, or GDPR, which imposes data residence requirements on top. With the additional data collection capabilities of CIAM solutions there is quite an upside for CRM vendors – especially for ones with strong marketing automation and profiling capabilities, like SAP. There is an increased ability to accurately address individual customers based upon their behaviour and across devices, therefore improving engagement capabilities, which in turn serve the goal of better experiences. This will become more and more important in an emerging IoT world, where a user will have many devices. The combination of managing logins with profiling enables moving IoT scenarios away from being device centric to becoming customer centric. This is more of a revolution than of an evolution.

My PoV and Analysis

This acquisition is a great move by SAP because it improves SAP’s solution portfolio on at least two dimenstions:

• SAP now is a considerable CIAM player
• CiAM adds important glue to the current offerings

SAP itself so far is not known for its abilities in the area of Identity Management – especially outside of SAP applications. With acquiring Gigya this changed. After completing the transaction SAP boosted itself from a nobody into the CIAM pole position. The acquisition nicely rounds off the Hybris suite of products and adds something that Microsoft acquired with LinkedIn, or Google and Facebook have natively: Data about preference and behaviour of customers, across many sites. This data does not only allow for increased profiling capabilities that enable a more accurate and relevant customer engagement; it also forms an invaluable source for additional, data based offerings, from Data as a Service to the delivery of AI as a service. This, in turn fits into the Leonardo concept. Thinking further than ‘just’ Hybris, SAP now has a software that can help modernizing its own (internal) identity and access management and something that can be used as an improved SSO. There may be some benefit for the GDPR offerings of SAP, but then especially requests to delete personal data regularly need to be fulfilled in several business systems, so I wouldn’t put too much emphasis on this topic. SAP already had the technological foundations for this before the acquisition. On the concern side we will see how Gigya moves on from a (trusted) independent vendor to become part of a larger entity. This certainly has the potential of introducing some bias and raises questions like: How will other vendors’ software still be supported? Think of marketo, to name but one. SAP needs to provide reliable guidance to Gigya prospects and customers – as well as partners – fast. I can already see a tsunami of FUD being created. Where I do perceive a real issue is the direction the CIAM market itself seems to take. It looks like being built upon an inside-out thought that targets at delivering benefits to the businesses and seems to address customer/consumer interests only as an afterthought. A solution that focuses on adding value to companies by being valuable to their customers’ needs to be built around the outside-in notion that all collected data first and foremost belongs to the customers/consumers instead of selling more accurate targeting of ads as a value to them. The inside-out notion can be read in the Forrester report and becomes abundantly clear in Gigya CEO Patrick Salyer’s statement that got quoted in the SAP announcement: “Combining the data matching and enrichment capabilities of Sap Hybris Profile with Gigya’s consent-based identity data and access management platform will allow us to identify consumers across channels and offer a robust single consumer profile. This is a vital step for digitalizing businesses because companies need to be able to draw accurate conclusions seamlessly across all channels, including web, mobile, in-store or connected devices, and the Internet of Things, as well as collect data about consumer preferences. Together we are well positioned to drive more effective marketing, sales and service through data, while the customer stays in control of how much data is shared.” The consumer as an afterthought – and we all know what choices usually are offered to consumers: Accept our terms or go away. SAP now has the chance to prove me wrong.

A short while ago Craig Rentzke from Helpshift pointed me to a particular episode of CXOTalk, featuring Kevin Henrikson of Microsoft and professor Anindya Ghose from NYU. Henrikson is responsible for Microsoft’s Outlook for Mobile, a personal information manager (PIM) app, whereas prof. Ghose comes more from a B2C angle, with B2C being more concerned with convenience. This interesting episode deals with the future of mobile computing and given that, apparently about how mobile apps will (have to) look like and what it is that vendors should do and what they should not do with the apps.

The Now

Naturally, the discussion immediately zeroed in on two topics

• the purpose of the app
• and data

The purpose of the app mainly determines two things, which are first the way that users are presented with information and are engaging with the app and second the data that gets collected and used in order to (positively) influence the user experience while considering their privacy. The data that gets collected needs to be used to provide the users with timely and relevant information, which does not only benefit the vendor but also, and chiefly, the user. That the data collection ‘behaviors’ of especially B2C apps are not hitting that objective is probably the industry’s worst kept secret. The apps collect more than necessary and use it for a very wide range of purposes, mostly wider than the users are aware of. They basically strip the user of their personal data. This realization was also what led a friend of mine and me found Epikonic, with the clear intention of giving users a choice who they interact with instead of ‘being chosen’ by companies (sorry for this shameless plug, actually, well, not so). On the productivity app side the picture is far better. Users need to be able to do their job efficiently and easily. In the case of a PIM app this means that users are checking it frequently and need to be able to find and do what they need with minimal time spent, including getting support. Being a user of Outlook for Mobile I can say that the team of Microsoft and Helpshift are succeeding here. The app collects telemetry data and can suggest appropriate attachments and certainly provides very relevant information to the service center in case of a call for support. The proof is more than 100 million installations that are getting served only on Android. However!

The Then

I do think that both discussion partners did not look far enough into the future of what mobile apps will be. They remained on grounds within the current paradigm, which is a mobile app that serves a specific purpose and that resides on a mobile device- aka smartphone, competing for real estate on the phone’s main screen. Yes, that paradigm covers more use cases than currently deployed, including food and drink ordering from the airline app to the flight attendants without reaching out for the button on the ceiling or using the built-in screens – if they are there at all. And this describes only one possible user initiated use case in one particular industry. Still, this paradigm is challenged already now.

• It is hard to make users use an app for a longer time, think of (re-) engagement campaigns
• Mobile devices are powerful enough to not require specific - very limited - app functionalities that serve one purpose. Think of apps become multi-purpose again
• The single 2D screen itself becomes less important, think of smart watches, wearable sensors, AR, VR, and holograms
• Scalability becoming a main theme. Think automation and bots
• Interaction metaphors, other than those limited to a 2d screen are emerging – think of voice, conversations, eye tracking
• Apps are becoming intelligent. Think of artificial intelligence, in particular deep learning
• And then there is the Internet of Things.

There is a short-term future and a long-term vision. Helpshift is perfectly positioned for the former. Knowing CEO Abinash Tripathy, he also has a good idea for the long-term play.

The Next Level

Which goes beyond the smartphone. The app will be mobile – more so than now. The smartphone will no more be THE frontend that it is now. It will stay the switchboard of our lives that it has become, but it will move into the background, like the PC and laptop did. It will become more of a personal server. With lots of little personal devices that serve specific purposes, and other personal servers, situationally connected to it to support the user’s wishes in the here and now. This will lead to more intelligence at all levels, the personal device, the personal server, and the (interconnected) back ends. And all these little devices will have different UI’s and interaction metaphors, like VR, AR using eytracking, holograms that can be manipulated, etc. But most of all with speech becoming more and more important. I am looking forward to Helpshift participating in shaping this future. Be prepared.

For a while now I am contemplating about why companies choose one custserv solution over another. After all the market is pretty crowded. Vendors have a hard time to differentiate themselves. Just looking at G2Crowd one finds 88 Help Desk Solutions. Larger organizations are likely to be influenced by Gartner’s Magic Quadrant on Customer Engagement Centers or the Forrester Wave on Customer Service Solutions. Smaller organizations are probably looking more at the new breed of peer-to-peer review sites, like the aforementioned G2Crowd or GetApp, TrustRadius, Capterra and others. Many companies conduct research and establish an RFP process to determine the best fit; some see a bottom-up approach from team level to corporation. A kind of ‘shadow IT’ emerges to solve a team’s particular problem. This solution over time could get corporate blessing and may even become the main solution. A clear and reliable roadmap is mandatory for all vendors, so no difference here. Same for share of mind – this has become table stakes. But what is it that makes one vendor win over another? Are there patterns? To get more insight I asked some smart people who stay unnamed here – but you know who you are!

So What Are Contributing Factors?

The good news is that there seem to be only a few factors. Based on the discussions I can roughly group them into six categories. Here they are, in no particular order:

• A particular feature is needed or desired
• Suite- vs. Best-of-Breed thinking
• Size of the customer organization
• Relationship building
• Referrals
• Departmental adoption

Of course they are not mutually exclusive. Let me briefly dive into each of them.

Need of a Particular Feature

This is something that helps nimble specialty vendors that either already offer a very particular feature, e.g. support for mobile applications, a Google-like search through an FAQ, an FAQ that is available offline, or the philosophy of treating service requests as a conversation instead of coming from a ticket point of view. The former emphasizes on the customer, the latter on the service provider. With the probable exception of the philosophy approach this contributing factor does not provide a vendor with a lasting advantage; successful features can – and will – be copied in a short time.

Suite vs. Best-of-Breed

Helpdesk software should not be a silo of its own but be integrated into the other business systems. As one of my contacts said “there is some convergence”. However, integration is a very complex topic. Some vendors are therefore offering tightly integrated software, usually on cost of some breadth or depth of functionality and are successfully selling this as an advantage. Customers that go the suite way are usually more interested in a holistic approach than a complete fit to all needs. On the other hand Best-of-Breed vendors are focusing on providing the best solution while maintaining a small footprint and while increasingly offering integration via platforms. This is usually achieved by having prebuilt integrations and partnerships with platform vendors and therefore by joining (or creating) an ecosystem of vendors. Still, customers opting for Best-of-Breed often look more into a strong functional fit to their requirements.

Size of the Customer Organization

As one of the persons I talked to said, “You cannot be wrong if you decide for IBM” was a slogan back in the 80s that pretty well describes the behavior of large organizations. Risk averse, following the mainstream – almost driven by fear. Although this is no more that prevalent, one can still observe that larger, more centralized organizations favor the incumbents over new best-of-breed solutions. This results in a tendency towards suite solutions. Organizations that give their units more independency tend to be more nimble, like smaller organizations, and are more accessible for best-of-breed and departmental solutions.

Relationship Building

Relationships are a powerful tool. Vendors that are able to demonstrate that they are not only after a sale but also want to become reliable partners to their customers can get a distinct advantage, especially when showing an outside-in focus that focuses on continuous benefits to the customer. Strong relationships serve as a barrier for competition, and create the opportunity for internal as well as external referrals.

Referrals

Referrals are the strongest marketing that a vendor can use. Regardless of best-of-breed or suite, referrals get earned by building a relationship and delivering up to promise. This is doubly true in times where trust implodes and is in crisis mode with people mainly trusting “someone like me”. Be it the groqing out of a department of a solution, or the win of an additional customer, satisfied customers who turn advocates are key.

Departmental Adoption

Land and expand! This is a proven strategy for small and aggressive vendors, enabled by cloud delivery models. Especially in organizations with decentralized decision-making this is a good approach to get functional pain points alleviated quickly, albeit often at the expense of a corporate strategy.

What Does It Mean?

Different criteria have different impacts and need to be looked at from different angles. However, one thing is clear: Relationships and referrals are key components in the mix. Suite- as well as Best-of-Breed vendors are well advised to build strong partnership relationships with their customers. For both types of vendors this brings new customers and for Best-of-Breed vendors it additionally opens the door from the department into the main enterprise.

Suite Vendors

For big suite vendors it is hard to do a departmental sale. Examples for this category of vendors are SAP, Oracle, and Microsoft, or formerly Netsuite, probably also Zendesk. Their solutions are regularly (with some exceptions) geared to the large enterprise where also the deals are bigger. Relationship building encompasses building relations to a number of stakeholders and correspondingly takes more time. These vendors need to be able to make a strong point on easy process integration plus getting the right feature-set into the solution. Their being confined to the enterprise market is their biggest problem and they need to be able to act like Best-of-Breed vendors. The emergence of <take your pick> clouds shows that they are working on this.

Best-of-Breed Vendors

In contrast to suite vendors, Best-of-Breed vendors can concentrate on particular, important and distinguishing features. With that they also focus on a smaller set of industries and customer sizes. Due to their focus they are often able to maintain an advantage. Good examples here are Helpshift, or Freshworks and, surprisingly, Salesforce. An odd assortment? No. Helpshift is a pureplay, albeit with a focus on bigger customers. Freshworks and Salesforce offer a variety of solutions, with Freshworks covering the SMB market and Salesforce the upper M and enterprise markets. I do not name them suite vendors, as both sell disjoint products that can be integrated via a common platform. Salesforce here became big by using a ‘land and expand’ strategy, which it still uses. For vendors in this group it is important to show the right feature fit for their audience plus the ability to integrate into other systems, to not get marginalized. Helpshift has the clearest focus with a strong, matching feature set, and a tight integration into Salesforce. Freshworks and Salesforce are offering a number of specialized applications that can integrate through their own platforms – and offer marketplaces to attract specializations that they do not offer themselves. And there is Nimble, which is in a different area, but has a very interesting strategy. The company positions itself as the ‘entry drug’ into a larger ecosystem, with a tight focus, augmented by a clear growth path for their customers. And with relationship sales par excellence. In conclusion: There is a simple framework but the secret is in the mix. And the mix differs for each company. Use the right arguments for the right customer.