On June 13, Microsoft announced that it had entered into a definitive agreement to acquire LinkedIn, the world’s largest social networking platform for professionals. This marks yet another major acquisition in the tech world in 2016, following close on the heels of Salesforce’s acquisition of Demandware, NICE Systems’ acquisition of inContact and Vista Equity Partners’ acquisition of Marketo.

This is one of the costliest acquisitions, if not the costliest, in Microsoft’s history. To put it in perspective, when Microsoft acquired Nokia in 2013, the final deal was valued at approximately $7.9 billion. At $26.2 billion, the deal to acquire LinkedIn is more than three times that.

Microsoft serves a wide set of stakeholders across the enterprise. In addition to the billions (!) of Office and Outlook users in businesses around the world, Microsoft also offers solutions for customer experience management, human capital management (HCM), and, of course IT. The acquisition of LinkedIn has the potential to impact all of these stakeholders, but I would like to focus specifically on the customer experience and HCM spaces.

Customer Experience

Findings from our recent CEM Executive’s Agenda study revealed that creating a unified view of the customer journey is one of the top challenges facing customer experience executives. For its part, LinkedIn contains a wealth of data that sales, marketing, and service employees could use to build comprehensive account profiles. If Microsoft can successfully enable the easy integration of LinkedIn data into Dynamics CRM, for example, this will seriously boost its ability to improve sales productivity.

Marketers also have an important role in managing customer experience. Specifically, they are involved in, among other things, building brand awareness and retargeting current clients for cross-sell and up-sell opportunities. LinkedIn provides an excellent source of customer insight, particularly for B2B and B2B2C marketers. Once again, if Microsoft can successfully integrate LinkedIn with Dynamics CRM, it will provide marketers with the insights needed to personalize their marketing and multi-channel campaigns.

The benefits outlined above are also applicable more broadly to employees in customer experience and service roles. The ability to build a comprehensive buyer profile through seamless integration of Dynamics CRM and LinkedIn would be invaluable for those looking to ensure that clients receive personalized service and consistent messages.

Human Capital Management

There are two interesting ways that the LinkedIn acquisition could help HCM practitioners. The first one, naturally, would come in the form of making it easier to find and interact with candidates. LinkedIn is the social resume for professionals around the world. If Microsoft succeeds in providing recruiters and HCM executives with a platform to find and manage talent, it would be a very interesting development in the space.

While not yet universally adopted, video screening and interviewing of candidates can bring serious cost reduction and increased efficiency to recruiting. Integrating LinkedIn with Skype for Business could be a real innovation if it meant making video interviewing capabilities a key part of the talent acquisition platform.

Potential Pitfalls

Adding the world’s largest professional social networking platform to its product portfolio is clearly a unique differentiator for Microsoft, one that its competitors – SAP, Oracle, and Salesforce – will find difficult to replicate; there just isn’t a similar platform as widely adopted and used as LinkedIn. However, this also represents a potential pitfall that Microsoft will have to carefully manage.

There are plenty of businesses currently using LinkedIn services in conjunction with solutions not provided by Microsoft. Turning these businesses into Microsoft clients is certainly a key opportunity for them. However, this will not be a move welcomed by competing software providers.

As a result, we might see some of these providers partner with other firms to build alternatives to LinkedIn. If that should happen, while it wouldn’t impact the health of LinkedIn in the short-term, it could pose a significant threat in the mid-to-long-term. In fact, looking at the enterprise communications market after the Skype acquisition, we highly anticipate investment to be directed towards start-ups and emerging firms providing professionals with creative ways to network and do their jobs.

In summation, this acquisition marks a strategic move not just for Microsoft, but also for enterprise software providers as well as customer experience and HCM practitioners. However, as is the case in most acquisitions, how Microsoft manages the post-acquisition activities will determine whether today’s announcement will be a success or a Nokia-like failure.

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