IBM will buy Kenexa Corp. for about $1.3 billion to enter the Web-applications market and compete with Oracle and SAP, adding another campaign to the information technology services arms race.
IBM’s first move will be in the human resources software market, but the deal is important to everyone in sectors where IBM has a presence and competes against Oracle and SAP. These three large players are moving into more Web-based software markets that will shift how they develop modules and services for their customers.
The business applications market will now be a realm where the big players can offer their own distinct and branded platforms, as well as provide integration of these with other software they sell. IBM has said acquisitions would play an integral part in its expansion, but the move suggests they are also core to its ability to stay competitive in existing markets.
The push means IBM and others expect more resilience and protection by offering Web-based platforms, as they were less vulnerable to losses in tough economic times because they lack customer investment in dedicated hardware and installation as well as provided customers with a variety of licensing and usage payment options.
Salesforce.com, one of the largest producers of Web-based software, is expected to feel the squeeze from IBM's purchase if IBM can translate its new knowledge and expertise into Web products that offer the same low prices and quick service as Salesforce.com.
Kenexa has just under 9,000 customers in industries like financial services, pharmaceuticals, retail and consumer services.
In December 2011, SAP spent $3.4 billion cash for SuccessFactors, a Kenexa competitor, and Oracle entered the space this February with its $1.9 billion purchase of Taleo Corp., a rival to both SuccessFactors and Kenexa. Similar purchases dot the landscape between these two including the cloud-technology buys around RightNow Technologies and Ariba. - Geoff Whiting