It's a bad time to be a large customer in the HR universe.

The Shifting Landscape: IBM Joins Buyers’ Club

I want to start by trying to enumerate my biases on this one. I’ve gotten to know the management team at Kenexa over the past couple of years at Analyst confabs and industry events. Prior to that, I was on the Board of Directors at Salary.com when we sold the company to Kenexa. Huge numbers of my friends and colleagues are Kenexa veterans. I’ve hired, worked for and collaborated with lots of people who were either bought by or worked for the company

At the heart if the Kenexa juggernaut is a fellow named Rudy Karsan. Rudy has made an enormous number of people wealthy in the years since he first started the company that became Kenexa. Generous and visionary, Rudy earned the deal with IBM over the course of almost 25 years.

So, you can be sure that I am happy to see that the company and the man had a big success this week.

This is the third shoe to drop in the top level consolidation of the HRTech Industry. I’m sure you can recite the litany: SAP Bought SuccessFactors; Oracle bought Taleo; IBM buys Kenexa; Workday’s IPO is scheduled for October (maybe during the HRTech conference).

So, what’s going on and what does the new landscape look like?

It bears remembering that 70% of acquisitions fail. (The figure is somewhat higher if you eliminate private companies from the calculation.) Acquisitions fail (don’t end up adding value to the buyer) for reasons ranging from cultural fit to product mix complexity.

In each of the three major acquisitions, the actual purchase was a relative rounding error. The purchaser in each transaction could do the deal with pocket change. While the $1Beelion figure is substantial in HR Circles, it’s chickenfeed to the buyers.

There will be more acquisitions. Likely targets include large HR Consultancies like Mercer. Hefty HRIT companies like Ceridian or ADP also seem like interesting potential acquisitions. You can’t really claim to do all of HR without the core HR Functionality and a broad base of core customers.

Workday will need to really make hay in order to expand its footprint to remain competitive with IBM, Oracle and SAP.

You could be forgiven for understanding these three acquisitions as a way of limiting Workday’s access to the market. While the company possess admittedly superior technology, one look at the operations of any of the three acquirers will let you know that technology is secondary in the enterprise software business.

It’s a bad time to be a large customer in the HR universe.

Can you imagine the headaches IBM will face as it tries to sort out the cats and dogs that make up Kenexa’s business. There’s an Applicant Tracking System, an Assessment Business, a Talent Management Suite, a consumer website for salary information, a number of emerging strategy services, a significant in house employment branding agency and a large RPO.

You can be sure that they won’t all be left standing a year from now. The operation is so complex (Taleo has the same issues) that keeping track of who does what to whom is liable to become strategic (just because you can’t do much till you figure this out.)

Meanwhile, the predictable reorganizations and reshuffles are liable to misunderstand the real value creators in the mix. It’s going to be a great time to be an industry analyst. A little bit of insight will go a very long way.

But, it’s going to be really, really good to be Workday if they can quickly acquire the functionality required to satisfy unhappy customers who are fleeing from the competition. (Can you spell Lumesse?) It’s going to be good to be in the Workday ecosystem.

All of this makes it even more important that you plan on being at this year’s HRTech Conference. More industry resumes will be cycled between colleagues this year than in all of the years past put together. Expect frenzied networking to be the norm.