SAP acquired Qualtrics in early 2019 for $8 billion, just before it was about to complete it's own IPO.

Analysts and investors welcomed the news and SAP's share price rose sharply to a record high. The IPO, if it goes through, will likely occur later this year or early 2021 and free up billions of dollars of cash. Given current valuations in the industry SAP will almost certainly come out well ahead on their investment and will still retain a stake in the publicly-listed Qualtrics as one of the majority shareholders.

However this is not just about the numbers and turning a quick profit. The IPO of Qualtrics marks a significant change in strategy for SAP and the first major divestment ever made by SAP SE.

SAP is signalling to its customers that it is returning to its core base of business process execution. SAP CEO Christian Klein is setting SAP back on track to focussing on what has historically made SAP the dominant force in its industry: large-scale, enterprise-wide applications to run businesses in multiple industry verticals.

Those who attended SAPPHIRE in 2019 will recall that SAP's theme was centered around Experience Management and so-called "X Data". McDermott hyped the benefits of marrying X-Data and O-Data, but that message did not resonate with many SAP customers.

So what changed?

Primarily it comes down to the departure of former CEO, Bill McDermott. McDermott's performance with acquisitions was mediocre at best. He led some disastrous acquisitions, such as Sybase, and passed on what would have been a monumental play for SAP: acquiring Salesforce when he had the opportunity. The divestiture of Qualtrics could not have happened without the McDermott departure late last year. He has invested too much emotional captial as this being the future direction of the company.

Now that SAP has opened up the idea of divestiture, it makes one wonder what might come next. Some solutions fit neatly with SAP's vision of an end-to-end single, integrated solution for enterprises and business networks: HANA, S/4HANA, Ariba and BusinessObjects, to name a few.

Some analysts speculate that SAP BusinessOne or ByDesign could be next for divestiture. Although all of these solutions have gained a solid foothold and (especially in the case of B1) have acheived some degree of success, they do not fit neatly with the vision of a single end-to-end enterprise solution.

SAP Cloud Platform is another problem area for SAP. SAP will not win a battle over platform-as-a-service for custom application build against the likes of Microsoft Azure or AWS. The longer that SAP fights this battle the greater the pain and the losses.

Many were scratching their heads on McDermott's announcement about the Qualtrics acquisition for $8 billion last year. Nobody is scratching their heads this time around. Divesting Qualtrics makes sense for SAP both financially and strategically. Investors will cheer the numbers, but customers will benefit the most in the long-term as SAP regains its focus on what they care about most.