- Major Studies
- Market Assessments
In a surprise move that has generated a lot of buzz and questions, Microsoft has acquired social networking site LinkedIn for a reported $26.2 billion, the largest acquisition in its history. The play will allow Microsoft to extend its reach in social networking and business productivity. The move also extends Microsoft’s cross-platform software strategy with Office 365, Cortana, and Microsoft Dynamics. If Microsoft can properly assimilate LinkedIn, it could increase Microsoft’s attractiveness to business customers.
Microsoft CEO Satya Nadella is doubling down on his cross-platform strategy, whether that means accepting previously unheard of ideas like Cortana on iOS or Office on Android. It also means breaking down the walls between apps, especially mobile apps that have historically had only one function, such as calling an Uber or booking a flight. Recently announced changes to Office 365, for example, allow people to dial contacts from CRM via Skype while still looking at a document in Office. To provide that experience across platforms, form factors, and applications, Microsoft must accelerate its ability to provide new functionality and must reach new audiences and platforms. Acquiring LinkedIn does that.
One obvious advantage to the purchase is the ability to add LinkedIn’s social feeds to Microsoft’s flagship product, Office 365. Pushing relevant LinkedIn stories to a feed based on the topic of a current project could provide relevant information (and of course, ad revenue).
The True Value of LinkedIn Is in Data
Adding LinkedIn feeds to Office 365 is a nice touch, but the true benefit to enterprise buyers might be in the greater value it could bring to Microsoft’s business applications. LinkedIn’s platform for HR professionals and recruiters is an obvious example, because LinkedIn is considered a “jobs” site. But people also use LinkedIn for sales leads, information on potential customers, and other needs more readily associated with CRM. This could benefit Microsoft’s Dynamics CRM.
Traditional providers of sales contact information are woefully inadequate. Data is incomplete, out of date, or just plain wrong. LinkedIn often has much better, more complete, and more current information, because it is directly maintained by the contacts themselves. The same information that recruiters use for finding new hires is of enormous value to salespeople identifying or qualifying leads.
From the point of view of the software buyer, Microsoft Dynamics becomes much more attractive if public data from LinkedIn can be integrated directly into the system. It allows Microsoft a competitive advantage in terms of data quality that should be attractive to customers. Salesforce.com does offer contact data through its 2010 acquisition of Jigsaw (now Data.com), a crowdsourced business directory, but LinkedIn’s data is more complete, because, as noted, contacts directly maintain their own information.
The possibilities are interesting. Cortana could transform from digital assistant to digital HR pro as she digests the LinkedIn database and helps find top candidates. Likewise, she could brief a salesperson en route to a call with a new prospect, identifying common interests or mutual connections. As we reported in our Technology Trends 2016 study, user satisfaction with HCM and CRM applications can be problematic. Major complaints include an inability to keep information current, ineffective search, and poor user experience. Enriching Microsoft’s services and tools with LinkedIn data could go a long way to improving user satisfaction.
One note of warning: while the acquisition makes sense from a strategic point of view, Microsoft has famously been late to some markets and has struggled to assimilate large purchases before. Its purchase of Nokia, for example, has led to billions in charges and has done little to improve Microsoft’s mobile footprint. Another example is Microsoft’s $1.2 billion purchase in 2012 of the social networking platform Yammer, which has lost ground to competitors.
In his letter to employees about the acquisition, Nadella explained the move:
“I consider if an asset will expand our opportunity — specifically, does it expand our total addressable market? Is this asset riding secular usage and technology trends? And does this asset align with our core business and overall sense of purpose?
The answer to all of those questions with LinkedIn is squarely yes. We are in pursuit of a common mission centered on empowering people and organizations. Along with the new growth in our Office 365 commercial and Dynamics businesses this deal is key to our bold ambition to reinvent productivity and business processes.”
That analysis seems correct. However, it remains to be seen if the Redmond giant can break its streak of recent ineffective large acquisitions. If it can meld a large organization such as LinkedIn into its operation, it could significantly boost its ability to provide new functionality and improve customer experience. Enterprise buyers should watch new Microsoft offerings closely. A successful integration could give end-user organizations some new and interesting alternatives.