After growing into the world’s largest professional online network, LinkedIn is being acquired by Microsoft for $26.2 billion in cash. This is the largest ever acquisition in Microsoft’s history, and 20 times larger than its acquisition of Yammer. How important is this acquisition for LinkedIn, and for Microsoft? And how significant is it for the broader HR market, given than LinkedIn has become the de-facto depository of professional career histories?<\/p>\n
This is Fosway’s point of view.<\/p>\n<\/div>
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With over 430 million members and growing, LinkedIn has built a key position in the professional career market. It is a huge resource base for people seeking background context on professional contacts, and is a core online tool for many as they seek to extend their professional networks.<\/p>\n
LinkedIn is used heavily by recruiters who pay a premium for enhanced access and search tools, but LinkedIn has been slow to exploit broader HR synergies and potential. But its acquisition last year of Lynda.com shows broader intent to monetise other segments of the talent lifecycle, including learning.<\/p>\n
Whilst relying largely on personal honesty for accuracy and completeness, LinkedIn still has better information on employee career backgrounds and changes than most in-company HR systems. This has led to growth in its usage to support corporate talent processes and integration with corporate HR applications to extract information from it.<\/p>\n
LinkedIn is a key social content channel for business Over the past couple of years, LinkedIn has also emerged as a key content channel for companies and marketers as other more general social channels lose their potency. LinkedIn Groups are a great way of targeting content to specific business user communities, and via its ownership of SlideShare, it also controls a popular way of sharing PowerPoint presentations. Another point of relevance for Microsoft.<\/p>\n The acquisition still needs to be approved by LinkedIn shareholders and is expected to close by the end of the year. So in the short term, little is likely to change. After the deal has closed, LinkedIn will still be running as a separate business unit headed by current CEO, Jeff Weiner.<\/p>\n Beyond that, it\u2019s really too early to tell what the real impact will be for both Microsoft customers and for LinkedIn customers. Given the differences between the two business, there seem to be very few points of immediate overlap or add-on, and therefore the real questions are around longer term cross-synergies.<\/p>\n Whilst there has been a little market noise about members removing their profiles from LinkedIn due to the acquisition, this is muted currently. Though there are likely to be particular sensitivities around changes to data security and to the user experience for LinkedIn members.<\/p>\n LinkedIn may be worth billions, but it doesn\u2019t make a profit. To justify that kind of price tag Microsoft will have to leverage value back to the aggregated business, despite its stated intentions to leave it alone.<\/p>\n Whilst the earnings impact of the acquisition to Microsoft is only slightly negative (less than 1%), Microsoft can only recoup its investment by either aggressively monetising LinkedIn or by utilising the LinkedIn network and data to drive broader Cloud revenues. Neither option is likely to be attractive to LinkedIn members who should perhaps value their data privacy more than they seem to do at the moment.<\/p>\n There is a potential to cross-sell Microsoft\u2019s solutions such as Office365. Given the majority of LinkedIn\u2019s member audience (and arguably value) is in its business audience, how Microsoft does this will be critical or it could risk alienation of its member audience.<\/p>\n From a pure HR perspective though, the really interesting opportunity is the potential to connect more parts of the talent lifecycle than LinkedIn has managed historically. Microsoft does not currently really play in the recruitment space, where LinkedIn is a core repository of data and an important tool for recruiters, and now a point of integration for recruiting systems.<\/p>\n Despite broader talent positioning, LinkedIn\u2019s offering outside of the obvious recruitment context is patchy and rather unconvincing. The synergies following the acquisition of the Lynda.com learning offering are still rather under-developed, and it\u2019s still largely down to members themselves to exploit the broader talent potential of their LinkedIn network.<\/p>\n The other obvious connection is the potential to leverage LinkedIn profile data in the Dynamics ERP platform. Whilst a solid mid-market option, Dynamics has lacked real differentiators, especially in the HR space. Tighter integration with LinkedIn (and with Lynda.com) could offer an opportunity for Microsoft to build more momentum in the HR systems market \u2013 in particular, to focus on talent processes rather than core HR (or ERP functionality).<\/p>\n The other opportunity for Microsoft is to develop a set of talent-related services aimed at professionals that are independent of their company systems. LinkedIn already provides an independent self-managed career history and a professional networking database, as well as learning content. Why shouldn\u2019t it also provide tools to actively help you develop your network, build virtual teams of independent people, provide due diligence on potential employers, validate career path options and so on. The potential list is endless. None of this fits with Microsoft as it is today, but there\u2019s no reason to think it isn\u2019t a direction that could be explored more actively.<\/p>\n Microsoft and LinkedIn have emphasised that the LinkedIn members and data are and will remain a segmented world with cross-connections only at the agreement of the members.<\/p>\n That sounds fine in principle, but the reality of \u2018agreement\u2019 in these circumstances can turn out to be much more passive than it should be. It is often a lot harder to avoid signing up for something than it is to actively agree to it. The European Union in particular has been hot on challenging the global technology vendors for what it perceives as misuse of a dominant position in one market, to create unfair advantage in another.<\/p>\n Whilst HR and talent management vendors will look at this carefully, in reality, we think it is unlikely to change their view of LinkedIn as a data repository to be accessed and integrated. Microsoft is not a major competitor in the HR space as yet, and whilst it does bring them more into play, it is unlikely that they will view the move as overtly negative. It may even create opportunities for them to form part of a broader HR ecosystem connected into Microsoft\u2019s customers and LinkedIn members. For specialist application providers that could be a big prize indeed.<\/p>\n Longer term, it completely depends on the reality of how Microsoft (and the LinkedIn sub-business) tries to monetise LinkedIn. All of this is of course hypothetical at present. The key point is that this is a major move by Microsoft, which ultimately will have to deliver a significant return or value to justify it.<\/p>\n<\/div> For further Fosway analysis relating to this topic, please see the following papers or resources:<\/p>\n \u2022\u00a0\u00a0 \u00a0Fosway Core Insights: Talent Market Consolidation<\/a> To talk to us about our research on learning and talent systems, or to discuss what it might specifically mean for your organisation please contact us directly.<\/p>\n We will use our independent expertise to provide you with the guidance you need to accelerate and de-risk your decisions. We have a wealth of experience, tools, research and profiles at our disposal.<\/p>\n We don\u2019t have any products to sell and we have no vested interest to bias your outcomes. We concentrate on pragmatic, independent advice.<\/p>\n The analysis and recommendations made in this document are based on the information currently available to Fosway and from sources believed to be reliable.<\/p>\n Fosway disclaims all warranties as to the accuracy, completeness or adequacy of such information. Fosway will have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations hereof.<\/p>\n Opinions expressed herein are subject to change without notice. All content is copyright Fosway limited unless otherwise identified. All rights reserved.<\/p>\n<\/div><\/div><\/div>
\n<\/strong><\/span><\/p>\nWhat should you do?<\/strong><\/span><\/h2>\n
All change but no change?
\n<\/strong><\/span><\/h4>\nHow will Microsoft monetise LinkedIn as an opportunity?
\n<\/strong><\/span><\/h4>\nConnecting the talent dots…
\n<\/strong><\/span><\/h4>\nSegmented worlds, or not?
\n<\/strong><\/span><\/h4>\nImpact on other HR vendors?
\n<\/strong><\/span><\/h4>\nRecommended Fosway Reading<\/strong><\/span><\/h2>\n
\n\u2022\u00a0\u00a0\u00a0 Transforming HR in the Cloud<\/a>
\n\u2022\u00a0\u00a0 \u00a0Fosway Core Insights: SaaS Impact on Talent and Learning Systems<\/a>
\n\u2022\u00a0\u00a0 \u00a0HR Critical Realities Research Series 2015-16<\/a><\/p>\n<\/div>Accelerate and de-risk<\/strong><\/span><\/h3>\n
Accuracy of information and warranties
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