The SQM file extension stands for "Software Quality Management" and "Software Quality Metrics," both of which refer to Microsoft's software monitoring system that evaluates the quality of software. The SQM file type runs in the background to report any errors and monitor usage statistics.

The Microsoft SQM program runs SQM files every 24 hours to make sure that software is functioning smoothly and to gather information about how customers use it. Microsoft uses this data to update and fix issues with a variety of software, such as Microsoft Office Suite and Windows Live Messenger. SQM files are log file types containing information about performance levels, run errors and usage data.

The SQM system gathers data anonymously from computer users and can be deactivated or denied. Software quality monitoring is part of Microsoft's Customer Experience Improvement Program, or CEIP. If a customer voluntarily accepts to participate in the CEIP, information is gathered about the user's hardware and software configurations and trends of use. This data shows software engineer teams at Microsoft how their customers are using the tools of their software, which allows them to implement any necessary changes such as updating software designs, fixing technical issues, and integrating software with new systems. It is an important process in future software development.