Experiences are becoming a major competitive advantage for companies - and that is especially true as we've watched the world shape and re-shape and how industries are looking to be able to become more connected to their end customers, understand how to better engage their employees.

A bold post-pandemic vision perhaps, articulated by Zig Serafin, CEO of Qualtrics, the Experience Management specialist that attracted so much buzz back in January with an IPO that raised $1.55 billion. It was the climax of a floatation journey that began back in 2018, with plans to go public at that point put on hold when the firm was acquired by SAP. Now it’s partially spun-off, with SAP as its largest shareholder, and just handed in its first set of numbers as a publicly-quoted firm.

Total revenue was $213.6 million in the fourth quarter, up 24% year-on-year, with a net loss of $14.5 million, compared with a net loss of $147.3 million for the comparable period a year earlier. For the full fiscal year 2020, revenue was up 29% to $763.5 million, with a net loss of $272.5 million that was down from $1,007.6 million in 2019. Subscription revenue for the full year was $575.4 million, up 34% year-on-year, while professional services accounted for $188.1 million, 17% up on the previous year.

Other stats of note:

• North of 300 customers spending more than $100,000 were added in 2020.
• The firm ended the year with 74 customers spending more than $1 million annually, up 72% year-on year from 43 customers at the end of 2019.
• Total revenue outside the United States was $211.3 million, now accounting for 28% of total.

Certain uncertainty

So, what lies ahead in 2021? Uncertainty is one certainty, says Serafin, and that’s not a bad thing for the enterprise software category Qualtrics is carving out:

COVID just proved, and the pandemic that we've all been living in has proved, that every business problem - no matter what industry you're in, what organization you're in, what size of business you're in - is an experience problem, especially in moments of uncertainty - and there's uncertainty all the time, right? People are trying to figure out how to connect with their customers, know what decision to make about where they take their product next, understand how to evolve, the way that you operate and facilitate or enable your customer. What we've seen the pandemic do is create a lot of momentum that's accelerating the importance of getting the experience dialled in, especially when time matters.

That means organizations need to recognize that Experience Management is becoming as critical to business success as the likes of CRM or HR and that experience data is becoming the most valuable in what Serafin badges “the next normal”:

With the acceleration of digital, all it takes to switch jobs or service providers is a few clicks. Organizations who don't actively design and continuously improve their everyday product, customer and employee experience, will simply not be competitive. That's why Experience Management, the category that we continue to pioneer, is one of the fastest-growing markets in software with a $60 billion total addressable market.

It’s a market in which Qualtrics is claiming a 10 year head start over rivals, with Serafin pointing to 13,500 customers, including the likes of Adobe, HSBC, Cardinal Health and GEICO Insurance, as well as more than 200 state and local governments which use Qualtrics for contact tracing, symptom checking and patient assessment in their COVID response.

The customer proposition is straightforward, he adds — organizations want to get their hands on the right kind of data:

We're seeing companies increasingly reaching out. They're trying to understand, ‘Hey, how do we use this platform as part of some specific problem that we have’. And once they solve that problem, they expand into solving other areas, and then other teams and departments in those companies start to collaborate and work on the data that's there. Over time what you're finding is, it's blossoming inside companies. They say, ‘Look, the relationship between my customer is tightly correlated to what I'm doing in my product area. It's tightly correlated to the way my brand is perceived’.

And at the core of all of that is the experience data set, he explains:

It's one of the most important data sets that could be flowing into an organization...people’s emotions, people's perceptions, people's feedback and input that they're giving you about where to take the business next. We've seen that play out substantially during the course of the pandemic, especially as businesses are re-shaping themselves.

Partners

Partnering is also a critical part of the Qualtrics message, with the firm boasting more than 100 integrations with enterprise systems of record from firms such as Salesforce, ServiceNow and Zendesk, as well as, of course, SAP.  It also partners with major systems integrators and consultancies, including Accenture, Bain, Deloitte and E&Y.  Such partnerships are mutually beneficial in delivering enhanced customer value, says Serafin:

If you look at the larger landscape, many of the large tech vendors are increasingly viewing experience management as key to the way that they can help enhance and add value to their underlying systems of record or system of engagement that they might have. If you look at a ticketing vendor, if you look at a workflow vendor, if you look at a CRM vendor, if you look at an HR systems vendor - the list is long - we can now partner with other systems of record. It doesn't require a lot of incremental work on our platform because of the way we've designed the ability to couple data, pull data into our platform, easily automate actioning and solutions that can be built on top of our system. We've got cutting-edge programs that are being built on the platform that then connect with platforms or systems that customers have made investments in.

All of this adds up to building out the category as a whole, but even with Qualtrics claimed decade-strong lead over the competition, that's something that takes time, he admits:

There's no book you're reading from when you're building new categories. What you're paying attention to is customers. You're paying attention to the things that people are not telling you. And then you focus on a set of core principles, building a great platform - fundamentally important, especially if you're playing the long game.

That long game view is important, he concludes, as 18 year old Qualtrics is really only just getting started:

If you were to ask how big this category was 10 years ago, people would have massively underestimated the opportunity. Only two years ago, 2.5 years ago...it was about a $40 billion addressable market. We're looking at $60 billion today. And that's just because we're seeing companies re-wire the way that they're making decisions around this important data source and the way that they're operating their businesses.

So is there innovation and new product opportunity over and beyond what we have? Absolutely. Do we have things on the road map? Absolutely - ones that we haven't announced yet. And the fact that we're a public, independent company also gives us a lot of optionality around being a thoughtful and strategic player in the long run, on both organic and inorganic investments that we end up making.

My take

A strong start to life as a public company. Serafin makes a compelling case for the importance of Experience Management and at a time when the emerging Vaccine Economy will lead to most organizations re-assessing their post-pandemic operating models, with all the implications that will have for their relationship with customers and their own employees. The right time, the right place, the right offering? Time will tell, but the long game omens look good.