News that IBM plans to spend $1.3 billion to buy Kenexa, a provider of cloud-based HR solutions that's based in Wayne, Pa., has many observers saying the same thing: That Big Blue is aiming to compete harder against Oracle and SAP.
Many sources point to Oracle's purchase of Taleo in February 2012 for $1.9 billion and SAP's acquisition of SuccessFactors in December 2011 for $3.4 billion as reasons why IBM wanted to do the same thing.
This is a short-sighted view of today's news. While it's true IBM will compete against these other players in SaaS-based HR solutions, that's not quite the point.
IBM, like Oracle and SAS before it, sees a gold mine in a company like Kenexa. It's not just because the horribly named human capital management (HCM) market is lucrative and growing like a weed. Kenexa, like the companies Oracle and SAP purchased, is a SaaS-based business application provider. It offers analytics in a social networking context -- conforming to IBM's vision of social business.
Just a few paragraphs into its press release about the Kenexa acquisition, IBM's statement lays it out plainly:
The adoption of social business technology is supporting the growth of big-data and the need for analytics in the enterprise. A recent global IBM study revealed that 57 percent of CEOs identified social business as a top priority and more than 73 percent are making significant investments to draw insights from available data.
That paragraph, which stands oddly on its own in the middle of IBM's statement, didn't land in there by accident. HCM, with its emphasis on analytics based on interactive engagement with human beings, is an essential piece of the enterprise SaaS market. It's also related to other enterprise applications that IBM sells: enterprise resource planning (ERP), customer relationship management (CRM), supply chain management, and business process optimization, to name a few.
When you think about it even a little bit, you'll see the commonalities among these areas of software expertise. And perhaps like IBM, you'll ask about moving into HCM: Why not?
If you're still not convinced, consider how Kenexa describes itself in its own 2011 annual report:
We believe that by delivering our products via SaaS, we materially reduce the costs and risks associated with traditional enterprise software application implementations... [W]e complement our software applications with consulting services, outsourcing services, hosting operations, data security and proprietary content.
Those elements Kenexa describes are a good addition to IBM's roster of social business/analytics solutions, regardless of what the competition is doing. And it's ready made: Kenexa has about 2,800 employees in 21 countries. That's industrial-strength support for the social business/SaaS solutions IBM's looking to own.
Of course, swallowing and digesting a new company isn't easy. But IBM does it regularly. Further, by waiting to make its move, IBM has paid less for Kenexa than its competitors did for their HR SaaS companies. Indeed, there's talk that SAP overpaid for SuccessFactors.
Nothing in enterprise software is ever guaranteed. But when it comes to acquiring the particular expertise companies like Kenexa offer, IBM may have made the best bet.
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— Mary Jander 
, Executive Editor, Internet Evolution
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