Can HRO be Social, Smart, Quick, and Effective?

Linda Merritt, HRO Research Analyst, NelsonHall

Smarter Workforce and Smarter Commerce are the two major themes of this year’s conference for customers and business partners at IBM Connect 2013.

IBM is Messaging, Managing, and Delivering

First, I want to complement IBM on the clarity and alignment of its strategy with action. I have not seen this level of aligned organization and action across such a large and complex corporation before.

Building out under the Smarter Planet umbrella, IBM is bundling its many products and services, coordinating internal research and development, making targeted acquisitions, working across product and organization lines, and communicating clearly in its go-to-market campaigns. Given the great number of successful Smarter Workforce client case studies being presented, the proof points are already building to show business value can be delivered.

Smarter Workforce Supports Smarter Commerce

Smarter Workforce and Smarter Commerce are each separate service lines that can be coordinated to achieve greater business impact. Each is a combination of the IBM Platform for Social Business (social networking, social analytics, and social content) bundled with other new and existing products and services. Under the hood is a myriad of product lines making it work operationally, all tied together by messaging:

• Smarter Workforce: Activate the workforce to improve productivity and unleash innovation
• Smarter Commerce: Delight customers to increase loyalty, advocacy, and revenue.

Balance Individual Focus with Collective Value

Jonathon Ferrar, IBM vice president of Smarter Workforce, talked about the need to be social, smart, quick, and effective. Other words that were used a lot included community and relationships. Connecting communities of practice and building relationships, not for social intimacy, but for learning, leveraging, and leading to delighted customers and achieve business success.

Embedded throughout the social aspects of the services is a focus on the individual user that takes into account ease of use, mobile device access, points of need, and other behavioral aspects that are built in to increase collective business value creation.

Kenexa is Key to Smarter Workforce

The Kenexa acquisition closed in December 2012 and it is already being integrated into current offerings and it will be a key to plans for enhanced Smarter Workforce services as early as the second half of 2013:

• Kenexa’s software platforms for recruiting and learning will be used for RPO and learning BPO services as well as integrated with the social business platform
• Kenexa’s behavioral science expertise will be used to inform leadership, organizational, and talent management services and add to the analytics component.

IBM’s HRO services will be impacted by the changes. New options will be available to existing and new clients as talent management, learning, and RPO are brought together.

A lot of complexity remains to be managed, but it would be great to see IBM set a new high bar for making its services, client workforces, and HRO social, smart, quick, and effective!

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IBM Accentuates its RPO and Talent Management Offering by Acquiring Kenexa

Gary Bragar, HRO Research Director, NelsonHall

Although a bit smaller than the $1.9bn Oracle paid for Taleo (coincidentally at $46 per share as well) and the $3.4bn SAP paid for SuccessFactors, I believe that IBM’s acquisition of Kenexa, a cash transaction at $46 per share or ~$1.3bn and closing in Q4 2012, will have a much more immediate and larger impact than the aforementioned acquisitions.

Both Taleo and SuccessFactors were specifically acquired for their talent management (TM) technology. Beyond the strength of Kenexa’s technology, however, is the provision of TM services including:

• Consulting
• RPO
• Employee engagement
• Leadership development.

According to an IBM study conducted earlier this year, 71% of respondents cited “human capital” as the leading source of sustained economic value, above products and services innovation and significantly higher than technology. Kenexa, as a HCM and TM provider, will compliment IBM’s TM offering, which focuses on the full TM life cycle of attracting, developing, rewarding, and retaining talent. Specifically, IBM’s TM offering includes:

• Recruiting
• Learning
• Performance management
• Compensation
• Succession management.

In addition to its multi-process HRO (MPHRO) offering, which includes TM, IBM also specializes in providing workforce strategy transformation, social technology, and analytics to predict and measure performance.

While RPO is part of IBM’s MPHRO offering, it also provides RPO on a standalone basis to GM. Kenexa’s RPO capabilities, however, will accelerate IBM’s RPO market share, making it one of the largest RPO providers globally with clients headquartered in North America, Europe, and Asia Pacific. Kenexa also delivers RPO services in Latin America including South America in ~25% of its contracts.

Kenexa’s BrassRing technology is one of the two most widely used applicant tracking systems in RPO contracts. Kenexa also brings its Kenexa 2x Recruit platform, which in addition to recruiting and learning contains the following performance management modules:

• Goal setting
• Competencies
• Performance appraisals
• Compensation
• Career development and pathing
• Succession planning.

NelsonHall estimates that Kenexa has more than tripled the size of its RPO business since 2006 with brand name clients including Ford and multi-regional contracts with Baker Hughes and Eli Lilly.

IBM’s price of $46 per share is a 42% premium over Kenexa’s August 24^th close, but it will be well worth it. IBM is getting much more than software technology; it is getting assets, including human talent that can make a HCM difference. IBM’s plan is to combine its approach to social business, analytics, and TM to transform business processes to create smarter workforces with measureable business results. Given Kenexa’s record of growth and IBM’s experience with integrating acquisitions, this sounds like a good plan and a great business opportunity for both companies.

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