Inside IBM's $1.3 Billion Kenexa Buy

Enterprise Social Networks: Must-Have Features Guide

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."

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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.

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