IBM and Kenexa ... Is it really about Social or is it about Analytics? and Workday and HireVue strike a cord with investors
When I think of IBM or wwwwww.kenexa.com one of the last words that would come to my mind is Social. IBM has bet big sights on Analytics with their acquisition of Cognos a while back. Although Cognos was a power house in the Business Intelligence Space, their Human Capital offering was a very very minor product offering that truthfully did not see much traction. IBM of course does play in the HRO outsourcing space and manages some very large clients with this offering, but traditionally they have counted on third party suppliers to supply the technology, as they have never owned their own. (except Payroll and HRIS). Now with the acquisition of Kenexa, they should be able to eliminate external licensing costs whereby improving their margins on these deals.
When I think of Kenexa, the word social also does not come to top of mind. Once again Analytics does. In my humble opinion no one in this space does a better job at systematically providing a top solution that combines assessments with the hiring process to offer companies the ability to truly hire the best candidates for the right positions. This is all done via very deep analytics across their assessment platform and is unique to their market position.
Now although Kenexa was striving hard to play in the total Talent Management Space, very little revenue came from the Performance Management Module or Compensation Module. In fact, before the acquisition of Salary.com, most of their revenue came from the talent acquisition business and RPO product line. The RPO product line (a European acquisition) went through some very hard times early on in the recession, but have made a nice come back recently.
Kenexa was a firm that was very well run financially. They raised minimal capital compared to their peers and operated with positive Net Income in many of the recent years. Ultimately this hurt their top line growth. They did not have the money to buy the market buzz that people like Cornerstone OnDemand or SuccessFactors/SAP did.
Although Kenexa lists 8,970 as the number of customers, many of these clients are smaller Salary.com clients (pay for a salary Grade). We would estimate over 7,500 clients fit in the model. Look for IBM to unload this consumer part of the business which will official declare our friends at Payscale a winner in the community.
IBM is a firm that sells ROI. This should be a good fit for them if they can jump the fence from a traditional IT buyer to an HR buyer. Let’s be realistic people. VPs of HR do not turn to people like IBM to fix their “HR Issues”. Lets hope IBM can change that quickly.
In terms of Social, both firms will require a lot of uplifting to be competitive to others in the Industry. I had to laugh when I saw this slide in the IBM deck… Does everyone know TD bank barely lets their employees on Facebook or any social media site? To use them as a example of social is just wrong.
On another note, Workday IPO is getting closer. With a planned debut in October, they plan to raise up to $400M . This is a firm with very deep pedigree and expertise. Estimated revenue is $250M on a loss of $90M. A perfect example of the opposite of Kenexa: A unified platform, deep investment, lots of media buzz. You can be guaranteed this firm will be worth much more than the recent value of SuccessFactors, Taleo or Kenexa.
And finally a very niche vertical player, HireVue, has raised an additional $22M in a series C round (Series A $6M, Series B $5M). HireVue eliminates and structures the traditional interview process. They partner with all the talent management firms while competitors include GreenInterview and Montage.
