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With its deal to buy LinkedIn for $26.2 billion, Microsoft is positioning itself to remake talent management by acquiring new learning, recruitment technology and social networking tools for business and integrating them with its office software.
Holger Mueller, a vice president and principal analyst at Constellation Research in Cupertino, Calif., said it is too early to tell for certain but the purchase could signal that Microsoft Office 365 could one day become a core cloud-based HR system with new abilities to track employee information, performance and data. "There is a lot of potential and implications with this purchase," Mueller said.
With more than $3 billion in annual revenues, LinkedIn ranks among the top five HCM vendors, he said. LinkedIn, the world's largest professional network, last year also purchased online learning website Lynda.com and is noted for its recruitment technology.
LinkedIn also provides a tremendous amount of data to possibly improve Cortana, the personal assistant for Microsoft's Windows 10, Mueller said. "It will for sure affect the future of work."
Microsoft CEO underscores talent management in deal
In an email to employees, Microsoft CEO Satya Nadella cited the importance of talent management in acquiring LinkedIn. "In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes," he wrote.
Microsoft, based in Redmond, Wash., will pay $196 per share for LinkedIn, almost a 50% premium on the closing stock price on Friday. LinkedIn will retain its brand, culture and independence and Jeff Weiner will remain CEO of the social network, Nadella said.
Analysts said the deal could be effective for several reasons.
John Sumser, principal analyst at HRExaminer, said the purchase is a phenomenal way for Microsoft to expand the reach and capacity of its Microsoft Office productivity tools. With the purchase, Microsoft is focusing on its strengths as a provider of productivity software, he said.
"It seems to me the meat of the deal is to turbo charge the performance of the people who use the system."
Microsoft gets learning management
With the purchase, Microsoft obtains LinkedIn's online learning library of courses at Lynda.com; SlideShare, the world's largest cache of PowerPoint presentations; and tools such as Rapportive, which shows users everything about their contacts right inside their inbox. Those assets, for example, bring important context to Microsoft's productivity software, Sumser said.
SlideShare could lengthen the lifecycle of PowerPoint by another 10 to 15 years because it makes it easier and more relevant to use PowerPoint, he said. For example, an employee creating a PowerPoint presentation for the first time can go to SlideShare and find an existing presentation that meets his needs.
Jenna Filipkowski, director of research at the Human Capital Institute, said LinkedIn is one of the best and most-used social media platforms for recruiting. LinkedIn provides businesses and recruiters access to one of the largest social networks.
In recruitment technology, LinkedIn, based in Mountain View, Calif., offers several tools including the ability to search for the ideal candidate, reporting and analytics and viewing full profiles of more than 400 million members. Businesses can also brand and attract talent with a careers page, personalized recruitment ads, sourcing and referrals.
LinkedIn vital as social network for business
Filipkowski said the purchase is a natural fit between the two companies in light of the importance of talent and technology in the knowledge economy.
"HR professionals and recruiters use LinkedIn all the time for finding new employees for their organizations and finding contract talent, and they also use Microsoft products for connectivity and performance. It is a natural alignment in connecting talent with technology."
Brian Sommer, founder of research firm Vital Analysis, expressed mixed feelings about the deal but thinks it ultimately represents a huge opportunity in talent management for Microsoft. Microsoft could benefit by applying its "incredible" artificial intelligence and analytics tools to LinkedIn's database of professional profiles, he said.
"If that technology got a hold of your LinkedIn profile, it can map out and figure out where and how your career has progressed," he said. "It could either extrapolate or predict what your next career level is going to be, and knowing that, it could suggest or recommend certain kinds of training."
A weakness of LinkedIn, Sommer said, is that while middle managers are well represented in the LinkedIn member database, there aren't many blue-collar and contingent workers, top executives or recent college graduates. "LinkedIn could do a better job of getting some of these other constituents in there. Microsoft will help them with that."
Brent Skinner, principal analyst at Nucleus Research, said it makes sense for Microsoft to enter the talent market space, and the acquisition of LinkedIn is a logical step.
"The MS Office Suite is where vast numbers of employees already spend most of their time, by default. It's a matter of approaching talent management from the workforce's perspective."
Skinner said the purchase shows the need for talent management vendors to establish or grow partnerships with Microsoft. Applications by SilkRoad, for example, can already work hand in hand with Office 365, he said.
Additional reporting by David Essex.
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