IBM Corp is set to buy Kenexa Corp for around $1.3 billion. This will allow the technology giant to go into the human resources software market where it will compete against Oracle Corp and SAP AG. The deal fortifies the importance that slow-growing technology companies place on fast-growing, web-based software firms with products that are less vulnerable to the economic crisis because they don’t have upfront costs for licenses, installation or dedicated hardware.
The Germany-based SAP recently bought Kenexa’s rival SuccessFactors for $3.4 billion last December. Oracle bought Taleo Corp for $1.9 billion in February. The two companies also bought other cloud companies, such as Ariba Inc. and RightNow Technologies.
80 percent of Kenexa’s revenue comes from subscriptions and consulting services. This will allow IBM to advance towards higher-value software as domain and service expertise. Kenexa’s shares increased almost 42 percent to a record high of $45.92 on the New York Stock Exchange Monday. Shares of Cornerstone OnDemand Inc. also went up 7 percent at $26.82 in afternoon trading.
IBM’s acquisition of Kenexa signals the company’s move in finding a foothold in the cloud-based software market. It will compete directly with SAP, Oracle and Salesforce.com, which is the largest maker of web-based software.
The business applications market is crowded. There are plenty of private producers of HR programs, such as Silicon Valley Workday, which is founded by ex-PeopleSoft executives. The company recently filed for an initial public offering.
IBM is going into the field of delivering business applications via the web as its new CEO Ginni Rometty tries to find her spot in the 100-year-old company. IBM is considered as one of the most conservative computer technology companies in the world.
IBM has focused its software division on databases, email, operating systems, and middleware, which are programs that help run computer networks. It is not in the business of selling applications such as human resources software, until now.