August 27, 2012 – IBM announced it will pay $1.3 billion in cash for talent management vendor Kenexa Corporation in a bid to pump up its enterprise social network and collaboration.

Kenexa provides software and cloud-based offerings, as well as consulting, for real-time workforce processes and integration of social data.

Mark A. Smith, CEO and chief research officer at Ventana, said that Kenexa has struggled to make a big splash in the broader talent management software market, and has not had “much presence” in the social and collaboration area aside from a few applications and the purchase of the compensation management provider, Salary.com.

“If IBM wanted a lot of services folks and outsourcing business, then you get them with Kenexa but they are not the type that help IBM in social business to be adopted further by business in the short or medium term. Kenexa is not the strongest player in talent management market for IBM to acquire, but maybe the [$1.3 billion in the deal] is worth the people,” says Smith. “Not exactly sure yet, but I hope to hear more convincing communication from IBM in the days and weeks ahead.”

This is the third, billion-dollar acquisition in the HR/talent solutions space in the last nine months, following SAP’s buy of SuccessFactors for $3.4 billion and Oracle’s $1.9 billion payout for Taleo in February. Those deals were part of what Corum Group stated earlier this year is likely to be a banner period for mergers and acquisitions across the talent management software market.

Kenexa is based in Wayne, Pa. and its customers include Starbucks, Whirlpool and the U.S. Navy. In a media call on the deal, IBM Social Business GM Alistair Rennie said that, with little overlap in social, analytics and HR offerings between the two providers, IBM would look to develop a "next-generation platform" for enterprise social data and work.

The deal is expected by IBM to close in the fourth quarter of 2012 and its operations and 2,800 employees will be folded into IBM’s Software and Services Group. It is IBM’s eighth deal of the year, and biggest since the April buy of data search and navigation provider Vivisimo.

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