The Kenexa/IBM deal – The consequences for the HR solution space
A number of analysts have pondered questions like:
- Why did IBM buy Kenexa?
- Was the Kenexa offer price appropriate?
- What will this deal mean to Lumesse, SilkRoad, Cornerstone On-Demand, etc.?
I, too, thought about these questions and more when I heard of the deal earlier this week. But after listening to the conference call IBM did Monday, I think we’re not looking at the true, bigger impact of this deal.
IBM’s announcement is more telling than some analysts picked up on. IBM positions the Kenexa acquisition as a way for them to sell a new service offering to CEOs. They’re bundling Kenexa Talent Acquisition/Management solutions with their social media chops, analytics, and more (e.g., Lotus Notes?) to deliver a more socially empowered workforce to their clients.
This positioning could be really big. Not the part about mixing social and HR (that’s been/being done by many firms). No, the big ah-ha is successfully selling this to CEOs. You see, most HR software firms and Human Capital consultancies still sell to HR executives not CEOs. Selling complex HR solutions to non-HR executives is a rare competency I seldom see in any firm.
HR solution sellers, in my experience, are often academics or ex-HR practitioners. Their command of non-HR business processes or their ability to sway the Executive Committee is often limited. I've seen the eyes of executives glaze over when an HR person wants to talk to them about 'engagement', 'organization design' and 'performance management'. There's a critical translation step missing in a lot of these conversations. Business leaders have to understand how these HR concepts and innovations translate into tangible business results. This is IBM's forte. And, it looks like they know how to do this re: a souped up, more modern vision for HR solutions.
Just look at this slide IBM used on the call Monday:
This slide speaks volumes as to IBM’s intent. They see how social media, analytics and human capital can be used TOGETHER to create all new processes and transform businesses. And, they’re right. (see my post last week on)
What too many HR software firms and HC consultancies do is look at new technologies as one-off technologies that will deliver one-off benefits. This kind of linear thinking is what keeps most HR technology sales limited to HR executives only. It’s not compelling to other business leaders and it’s not driving big business benefits.
IBM is basically throwing it down. They’re going to take their more expansive vision for HR technology (it includes HR, social, collaboration, analytics and other technologies) and show how it can impact a business not just one department (i.e., HR).
If your firm sells HR technology, you probably need to find a solid, strategic consulting partner (think IBM competitor) that can both sell to CEOs successfully but also has the skills in other technologies (e.g., analytics, social media and more) that your firm lacks. Why? IBM has just raised the competitive stakes in your space.
If your firm is a niche reseller/implementer of HR technologies, you will find more of the higher margin work going to consultancies that can tie HR and other innovations to the entirety of a business. Fewer businesses need a new payroll package. More businesses need solutions that drive more top-line revenue. If you can’t connect your services to the latter, you’ve got a problem.
Now, will IBM be successful selling this to CEOs? Who knows at this stage. However, that's not the point. If IBM wants to move their HR/HC practice in this manner, you can bet Accenture, et.al., will be in hot pursuit, too.
Bottom line: This wasn’t a typical tech M&A deal where a big firm is buying the innovation/patents of a newer, much smaller firm. It’s a deal that redefines how HR technology will be sold. It shows how HR technology must be fully included with other technologies to deliver the kinds of business benefits that businesses (not just HR) need. It’s a deal that will eventually resonate with CEOs. It’s a deal that may mark the delineation between business and HR-only systems. And, that last point may be the most transformative one for the HR software space.