IBM and Kenexa: A Marriage Made in Workforce Heaven?

I woke up today thinking it was just another Monday morning, but before the caffeine I consumed had a chance to settle, big news broke as IBM disclosed its intention to acquire Kenexa, a provider of recruiting and talent management products, for $1.3 billion. The transaction is expected to close in Q4 this year.

Kenexa — which operates globally in 21 countries — has 9,000 customers worldwide spanning a range of industries such as financial services, pharmaceuticals, retail, etc. and consists of 2,800 employees globally.

Given the plethora of acquisitions we’ve witnessed in the not-so-distant past, is this merely an attention-garnering ploy? And what impact, if any, will this have on the industry? I jumped on a teleconference call to find out.

The Rise of Social Business

So, what was impetus behind the move?

In a global study of 1,700 CEOs conducted by IBM earlier this year, just 16 percent said they used social business platforms to connect with customers; during the next three to five years, however, that figure is expected to jump to 57 percent. The acquisition comes as IBM sought to apply a combination of social business and analytics to front-line business operations.

“Social media has pervaded the lives of consumers and it has helped them connect with each other in new ways and share information and locate expertise,” said Alistair Rennie, general manager of social business at IBM. “But as that’s happened, there’s been a fundamental shift in the enterprise where business leaders are looking for ways to leverage similar technologies, but [in] the context of their workforce to generate real value — the ROI of social business — by helping people be better at what they do from a work perspective.”

At the end of the day, one of the offspring that the marriage between IBM, a leader in enterprise social software, and Kenexa, a leader in the integrated talent management space, is expected to produce is what they term a new-generation platform for a smarter workforce.

“Kenexa has always applied a science-based view to key processes of locating the right talent, progressing the right talent, helping talent perform better – and their reliance on science and deeper understanding of HR analytics combined with our depth in analytics and big data and expertise is a perfect fit,” Rennie said. “Our combined capabilities around services — whether they be transformational consulting services or recruitment process outsourcing — combine perfectly to create an outcome-driven perspective for our clients.”

Rudy Karsan — Kenexa’s CEO, who said he would stay on along with the rest of Kenexa’s management team — used an interesting analogy to explain one of the drivers of the acquisition.

“In a sense, we’re doing what Amazon did in the retail market — they [used] social in terms of trying to increase their sales … you used to get these emails or this commentary when you were purchasing from Amazon which says, ‘If you like this, here are other items you [may] wish to purchase’ – that was social and analytics in a very early stage. Think about the ramifications associated with that technology and methodology and what it would mean in the working world as these solutions get rolled out globally through major enterprises.”

Beyond This Deal: What’s the Bigger Picture?

This isn’t the first tech company to move into the social space and up the ante for social media in the workplace — in June of this year, we saw Microsoft acquire Yammer for $1.2 billion, and Inc. bought Buddy Media for $689 million, as a recent New York Times piece points out.

If you haven’t already, or if you just want a refresher, be sure to read our analysis on other similar acquisitions in the vendor space not too long ago: Oracle acquiring Taleo; SAP acquiring SuccessFactors; Salesforce acquiring Rypple.

So even though we’re officially coming to the end of the summer season, the competition among enterprise technology companies appears to still be white hot — and we’ll be waiting to see who makes the next move.