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8/27/2012
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Inside IBM's $1.3 Billion Kenexa Buy

IBM social business group's move mirrors acquisitions by SAP, Oracle, and Salesforce.com to add online recruiting and talent management to product suites.

Enterprise Social Networks: Must-Have Features Guide
Enterprise Social Networks: Must-Have Features Guide
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IBM's social business unit announced a $1.3 billion acquisition of Kenexa, a cloud software provider for recruiting and human capital management, mirroring similar moves by SAP, Oracle, and Salesforce.com.

The big vendors are recognizing that people-centric processes like recruiting, training, and talent management are a natural match for social business. Within the last year, SAP acquired SuccessFactors for $3.4 billion, Oracle acquired Taleo for $1.9 billion, and Salesforce.com acquired Rypple, a startup using social recognition and goal setting to improve employee performance. Saba's People Cloud strategy to build an enterprise social platform branching out from its training and talent management products also fits into this pattern.

Alistair Rennie, general manager of social business for IBM, said the combination of Kenexa's cloud software, outsourcing, and consulting services with IBM's enterprise social networking and analytic technologies would benefit companies seeking "to drive human capital innovation, productivity, and change from their employees."

[ Need to pull the pieces together? Read How Smart Businesses Reorganize For Social.]

Judging from the way it markets itself, Kenexa so far has emphasized the benefits of exploiting social media connections for recruiting, as detailed in a company blog post and a white paper on "Going Beyond Facebook And Linkedin."

Rennie said one of the main questions Kenexa can help businesses answer is "How do I find the right people?" However, Kenexa's contribution will not be limited to recruiting, but also extends to areas like employee compensation and retention, he said. "We're looking to take what they know about how to find the right people, compensate the right people, and retain the right people, and combine it with our assets in social business."

Rudy Karsan, CEO of Kenexa, said social media is a particularly valuable resource for recruiting because "we can use social to find where people congregate, whether live or over the Internet."

The Wall Street Journal noted this $1.3 billion purchase of a public company was a change from IBM's usual pattern of acquiring smaller, private firms. Because this puts IBM in competition with SAP, a key partner, it also reflects a shift in IBM strategy toward competing more in the applications market, in addition to partnering with applications firms through its consulting arm.

Kenexa is also attractive because it includes a consulting business, meaning that it in addition to providing technologies it offers the services to help organizations implement them, Rennie said. Buyers are typically looking to achieve a business outcome more than they are looking to buy a technology, he said.

IBM expects the acquisition to close by December.

Follow David F. Carr on Twitter @davidfcarr. The BrainYard is @thebyard and facebook.com/thebyard

Social media make the customer more powerful than ever. Here's how to listen and react. Also in the new, all-digital The Customer Really Comes First issue of The BrainYard: The right tools can help smooth over the rough edges in your social business architecture. (Free registration required.)

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David F. Carr
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David F. Carr,
User Rank: Author
8/28/2012 | 10:34:35 PM
re: Inside IBM's $1.3 Billion Kenexa Buy
Seems like they want to expand their app footprint, but are still sensitive about not pissing off too many partners.
NucleusResearchHP
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NucleusResearchHP,
User Rank: Apprentice
8/28/2012 | 10:05:46 PM
re: Inside IBM's $1.3 Billion Kenexa Buy
Although Rennie says he's not interested in ERP, there are plenty of CRM and service applications that are very much driven by the types of engagement and interaction that seem to drive IBM. I'm looking at any type of application where conversations occur or human performance is effectively measured as a potential IBM target going forward after this Kenexa acquisition. Should be interesting to see how the enterprise app vendors deal with IBM coming into all of their high margin areas in the name of Social Business.
David F. Carr
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David F. Carr,
User Rank: Author
8/28/2012 | 2:29:10 PM
re: Inside IBM's $1.3 Billion Kenexa Buy
This morning I had a follow-up conversation with Alistair Rennie, general manager of social business for IBM, who wanted to clarify IBM's evolving acquisitions strategy. While I noted that IBM has a history of partnering rather than competing with application vendors like SAP, Rennie said what's shifting is really "the nature of applications themselves."

Using Geoffrey Moore's concept of systems of record vs. systems of engagement, IBM sees its investment opportunity in systems of engagement, which is where social software apps for engaging with consumers, employees, and partners fit.

"We have no desire to enter the ERP space or the core HR space -- we have some very productive and health relationships with a bunch of partners in that space," he said.

Kenexa's technology is in a category of product less focused on transactional HR than on engaging and understanding employees and potential employees, which is how it fits into the social graph of the business, Rennie said. "By bringing together the social graph and the business, we can enable a new category of applications."
Deb Donston-Miller
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Deb Donston-Miller,
User Rank: Apprentice
8/27/2012 | 10:20:40 PM
re: Inside IBM's $1.3 Billion Kenexa Buy
This acquisition really makes sense, and continues the horse race in the enterprise social space among IBM, SAP, Salesforce.com, Oracle and others.

Deb Donston-Miller
Contributing Editor, The BrainYard
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