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Can Microsoft Dominate the Talent Engagement Market Like it's O365?
With Microsoft dropping the bombshell that it will acquire LinkedIn for $26.2 billion, the market is awash with speculation over the price of the deal and what Microsoft’s long-term strategy will be for the social network. Back in February of this year (and off the back of LinkedIn’s pummeling in the stock market), HfS took a look at the company’s relevance to today’s HR ecosystem. What emerged from that analysis was that while the platform did have some fundamental issues to address, it was still a heavy hitter in the modern HR world. So the question, at least in this context is: What does Microsoft plan to do with LinkedIn’s HR element?
Talent solutions (comprising hiring and learning, and development services) remain LinkedIn’s bread and butter, accounting for 65% of Q1 16’s revenue. But the offering also remains the company’s growth engine, with year-on-year growth of 41% for the quarter. LinkedIn has made steps to consolidate its strength in this field through the acquisitions of Connectifier, through which it upgraded its recruiting tool to enterprise buyers, and Lynda.com to launch its learning platform. So what will be Microsoft’s play here? HfS has identified three opportunities for the software giant in this regard:
- Business as usual: First, Microsoft could just carry on riding the cash cow and continue to harvest the substantial growth talent solutions is enjoying. Of course, minor functionality improvements to the hiring capabilities of LinkedIn could be included through the inclusion of Skype IM/calling, and greater compatibility with Office docs to augment learning tools. However, given the sheer scale of this acquisition (we estimate at a cost of $250 per active LI user), Microsoft is unlikely to be satisfied only to continue in this vain.
- Create the complete talent engagement experience: Therefore, Microsoft will surely look to augment LinkedIn’s recruiting capabilities back into its current suite of offerings as it attempts to provide a complete talent engagement ecosystem. Satya Nadella alluded to this in the initial press release. Possible examples of this include linking the Office suite to LinkedIn, whereby LinkedIn could make suggestions on contingent workers to assist in current project delivery based on what is been created in the Office toolset. This seems slightly incongruous, although it could potentially open up an entirely new market in the recruitment world whereby entire contingent communities could develop to support this offering.
- Develop real HCM platform capability on Dynamics. Third, and most interestingly, Microsoft could look to dramatically enhance the HR capability of its ERP Dynamics platform. The obvious place to implement LinkedIn would be in the recruiting and learning modules of the platform. The employee information available from LinkedIn could also be used in workforce development by auto-filling e-forms, leveraging data such as interests and volunteering and using LinkedIn interactions to predict potential employee churn and matches for job opportunities. Of course, there are privacy concerns that would have to be addressed here, but the obvious benefit this level of data and analysis could provide to Dynamics users is substantial.
The Bottom Line: The HCM platform and social media possibilities are huge, but will require a razor-sharp focus. As HfS analyst, Oliver Marks, wrote this week, this acquisition could either be “Microsoft’s MySpace” disaster or a masterstroke in taking a lead position in the social technology media world. Microsoft does have multiple cards to play following this acquisition. What is most notable, though, is the lack of clear strategic direction and a sense of “let’s wait and see.” From a recruitment and learning perspective, Microsoft could be on the cusp of something great here, with potential offerings that speak right to the heart of the As-a-Service Economy, embracing intelligent automation and actionable data. The company could look to grow out all three of these opportunities into distinct offerings.
The notion of Microsoft Dynamics developing into a real contender to established HR platforms such as SuccessFactors and Workday could now be a possibility. The platform would have a massive competitive advantage in terms of recruitment capability and employee data access over any of the established players in this field.
Microsoft proved itself ahead of the market by successfully converting its office suite into the As-a-Service O365 platform, which has edged out legacy email platforms and turned the tables on Google for Business. Now it needs to do the same in the HR area with its massive new talent engagement asset.