Well in the HR and talent management market, the number of chairs is starting to get smaller, so everyone is grabbing for a seat.
Today IBM announced the acquisition of Kenexa for $1.3 billion (42% premium to the company's closing price last week). Kenexa is a consulting, content, and technology company which plays in many different parts of the talent management market, and was a slow-growing company playing in many high-growth markets.
After SAP's acquisition of SuccessFactors and Oracle's acquisition of Taleo, it was just IBM's turn. The talent management consulting and technology business is over $4 billion in size and IBM just couldn't afford to grow at organic rates.
IBM: Building the Smarter Workforce
This acquisition is all about IBM's move into the global talent management market. IBM calls it building the "smarter workforce" (a la building the Smarter Planet). CEO's tell us that their #1 challenge is developing stronger global talent, and this acquisition is all about IBM increasing its business in many areas of this huge market.
Kenexa plays in the talent acquisition market (strategic recruiting), the employee engagement and retention market (keeping employees happy and monitoring when they're not), in the training market (maintaining and building skills), and in the performance management market (managing employee goals and performance).
Let me briefly highlight some of the business areas IBM has just acquired.
Recruitment Process Outsourcing:
Kenexa is one of the leading provider of recruitment process outsourcing, a robust and fast-growing business which helps companies with their end-to-end talent acquisition needs. Kenexa is a leader in this market, offering a wide range of services including employment branding, sourcing, recruiting, and underlying technology. Kenexa is a key provider to Ford, UnitedHealth Group, WalMart, and many other major corporations.
Talent Management Technology:
The talent management software market continues to be very hot, and this gives IBM its own branded solution.
Kenexa provides one of the top two recruiting platforms (tied neck and neck with Taleo-Oracle, and also offers and end-to-end talent management offering (The Kenexa 2X Platform). Kenexa also offers a leading learning content management system (which plays in mobile learning, a fast-growing market).
Over the years IBM has stayed out of the HR applications business and today provides consulting services around Saba, SAP, Taleo, and other HR software products. But IBM acquired Cognos, SPSS, and wants to sell more software, so this move gives the company a new opportunity.
Will IBM rebrand Kenexa's 2X platform as IBM-logo offerings? We're not sure yet, but we can expect such a move and for sure the company will stop working closely with Taleo (now owned by Oracle, a company IBM does not enjoy working with) in the recruitment market.
The talent management software market is expanding in size every year, and even though SAP and Oracle are heavily invested, the market is still young and IBM can deliver talent management software to organizations in many continents. If it were me, I'd take Kenexa's technology and throw it into the IBM Software Group (which has a dedicated sales force).
This is not to say that IBM Global Services will not continue to partner with other software providers going forward, but over time I can see a "Lotus-like" strategy taking hold. (The company aggressively sells Lotus tools, but also provides consulting around many third party products).
Employee Assessment and Workforce Performance Consulting:
Kenexa is the #2 provider of employee assessments in the market (After SHL, which was just acquired by Corporate Executive Board). This business is one of the fastest-growing, most profitable businesses in talent management. These are the validated tests and underlying technology that help businesses assess and hire great people.
Will IBM light a fire under this business? Likely yes. The company has more than 200,000 consultants around the world working on IT implementation and other strategic business processes. With Kenexa assessments IBM can help its client assess, hire, and train these people. The assessment market alone is over $1 billion today and it's one of the highest margin businesses in HR.
Kenexa's strength in I/O Psychology gives the company a powerful consulting opportunity in performance consulting. IBM can now leverage Kenexa's strength in this area and sell workforce performance consulting, a service nearly every company can benefit from. (Read "The Science of Fit" for more information on this topic.)
A BigData Play:
By the way, Kenexa's assessment business collects a lot of data – data about people and how they perform. As IBM ramps up its analytics services at an accelerating rate (more than 200 IBM statisticians are looking for new problems to solve), the company can now leverage Kenexa's vast array of employee data to help companies identify the "Best" sales poeple, the "Best" leaders, the "Best customer service reps,"… you get it.
And, by the way, Kenexa owns one of the largest databases of compensation data (salary.com acquisition), so IBM can grow and invest in this service as well, increasing its competitive position against Mercer and Towers-Watson.
HR Transformation and Consulting:
Even bigger than all these wonderful opportunities, Kenexa over the years has started to position itself as a trusted vendor to senior HR professionals around the world. The company has rebranded itself for HR buyers: "To Us, Busines is Personal"- and this message has been resonating. Throughout the world HR executives are struggling with their operational expertise and ability to execute – Kenexa's strong clients, coupled with IBM's outsourcing and consulting, now accelerates IBM's offering into HR transformation.
Strong Cultural Match:
I think these companies will work well together.
We've worked closely with Kenexa for many years, and this is a company with strong roots as a strategic service provider to HR. While IBM's HR consulting business is not its biggest focus area, it is an area which the company takes very seriously. Over the years IBM's outsourcing and global consulting groups have developed strong client relationships in many global businesses. It's not that hard to go into these accounts and sell Kenexa products and services.
Remember also that internally IBM is one of the greatest leadership and HR companies in the world (we've had many IBM execs speak at IMPACT). With Kenexa's team and new offerings, the company can dramatically grow its presence in the global HR and talent management markets.
Remember the game of musical chairs? You have to sit down somewhere – and once you do, you can move around and jockey for position.
The HR and talent management markets are just too big for a company like IBM to feel left out. Kenexa brings many strategic offerings to the company today, with much more to come.
(Bersin & Associates follows these and many other vendors in the HR and talent management markets, we will be conducting a member webinar with more details on this and other recent acquisitions on September 21, stay tuned.)