Kenexa is offering a cash-per-share agreement that should work to complete the transaction. More complicated will be figuring out how to retain the talent at salary.com; that company has been decreasing in sales and size of the organization over the last couple of years and has struggled to reduce operating expenses.
Its recent quarterly SEC filing showed a loss of more than $5.5 million on $9.7 million of revenue. It’s obvious that salary.com needed to find a buyer fast or face closing its doors. In contrast, according to its most recent quarterly SEC filing, Kenexa generated a $1.1 million profit on $44.8 million of revenue.
Kenexa provides software, content and services for hiring and retention of workforces around the globe, along with its businesses in recruitment process outsourcing and employment branding and surveys. As I have tracked the company over the years, its major software focus has been on recruiting, onboarding and training, which has helped many organizations transform their human resources processes and workforce management. Kenexa’s clients include Aetna, Facebook, Lowe’s, Wal-Mart and other global organizations.
Kenexa has been busy rolling out a new platform and set of applications called Kenexa 2X. It needed to migrate its customer base in recruiting applications there and to bring additional applications to market for performance, compensation and other areas to compete against other talent management and HRMS providers. The company has put significant time and resources into rebuilding its cloud platform for software as a service.
Recently Kenexa announced mobile device capabilities for RIM BlackBerry and Apple iPhone; the application is not yet available on the Apple App Store, which makes me believe it is not entirely ready. Generally the HR and talent management applications market has been slow to bring new capabilities to employees, managers and management on mobile technology, so this could be attractive. On the other hand, Kenexa has also brought forward new employee and manager portals, but the reality is that most organizations already have too many separate portals to navigate across and would prefer applications or components that integrate into their master corporate or employee portal.
For Kenexa this acquisition will fill a compensation software gap in its portfolio; although it markets such a product on its Website, for practical purposes it does not have adequate software of this kind available today.
Our vendor and product assessment called 2009 Value Index for Total Compensation Management did not include salary.com because the company and product were in transition, but it is still in our evaluation process for the rest of 2010. Our benchmark research on the competency and maturity of buyers for total compensation management found opportunity for vendors as most organizations still manage silos of compensation software in HR and each line of business and try separately to track incentives and rewards; few have integrated compensation to performance management software.
In addition most continue their use of spreadsheets here and have not adopted dedicated software as we think they should for such a critical process. Kenexa was still evolving its performance management applications for appraisals and reviews, goals and objectives; it is likely to set these aside and utilize salary.com’s performance management applications.
Kenexa still lacks depth in workforce analytics, which as I have written is a critical part of a complete package, and though Kenexa claims to have an offering and talks about its success, that is nowhere to be found on its Web site. This is another area where it may acquire or license someone else’s analytics and business intelligence technology; Kenexa has to do something to compete effectively against other talent management providers including Plateau, Softscape, SuccessFactors, Taleo and now ADP, which recently announced its acquisition of Workscape.
It is attractive that salary.com brings thousands of customers in compensation and performance along with a valuable library of cross-industry competency and role definitions that help organizations hire and benchmark the performance of their workforce.
Kenexa CEO Rudy Karsan stated in the acquisition announcement call that the brand, product, data and talent pool of salary.com will help his business. I would say that the software assets in applications are necessary for Kenexa to remain relevant in talent management, and utilizing some of the core competency and content should further boost Kenexa’s efforts. The rest will not help Kenexa get to market faster than its current R&D pace. As well as accelerating that pace it needs to add breadth and depth in workforce analytics and also planning, which is a new point of competitive differentiation in the market.
The good news is that now Kenexa should be able to be more relevant to HR and hopefully other senior executives who care about their workforce. It is in a stronger position to convince them that dedicated applications can meet their evolving needs better than their legacy HRMS from the 1990s.