Why IBM Bought Kenexa: To Reach A New Business Technology Buyer

Here's the Tweet-length version of the analysis:

"3 bullet analysis of Kenexa: 1) IBM needs to sell to biz tech buyers. 2) IBM bought an HR app suite - good. 3) Is salesforce.com next?"

Okay, so let's tease that apart a little bit.

  1. I think IBM buying Kenexa, with 2011 revenues of $291M in non-GAAP revenue, and 8,900 customers, is a good thing. A quick look at the 2011 10-K reveals that of the $291M in non-GAAP revenue, $212M or 73% of it is subscription revenue related to its human capital management software and outsourcing services. And it sells that software to an HR executive, a customer that IBM does not currently have.
  2. The HR business executive is increasingly responsible for the technology to improve workforce productivity in addition to hiring, training, and compensation management. Systems of engagement that "empower people to take action in their moments of need" are the future of software-based productivity improvements. We've automated the heck out of transaction and highly regular processes. Now we need to automate the ad hoc processes that limit human, hence business, productivity.
  3. IBM has its eyes firmly fixed on improving workforce productivity through systems of engagement, including social business software. And that's where IBM's Social Business goals intersect with Kenexa's business model: Sell software and services to a business executive, then help that executive improve workforce productivity through the smart application of analytics, social connections, search, information capture, activity alerts, and real-time communications - the software anchors of social business.
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