What does LinkedIn’s acquisition by Microsoft mean to you?

The acquisition marks yet another step in Microsoft's evolution into largely a business services company that is betting high on online services. It is now potentially a more credible digital transformation partner for you

Microsoft’s acquisition of LinkedIn for $26.2 billion—which makes it the second largest tech acquisition after Dell-EMC in the last ten years (or may be fifteen)—has created a lot of buzz. Unlike Dell-EMC it is not a consolidating acquisition but a value creating acquisition. So, there’s a lot of discussion still on the rationale of acquisition, with special emphasis on if $26 billion is a fair (read ‘too steep’) valuation. And of course, what impact it would have on Microsoft? This is contrast to consolidating acquisitions where the discussion, right from day one, is on integration.

 

I will avoid that discussion except for pointing to one source: LinkedIn CEO Jeff Weiner’s letter to his employees. It’s, of course, the official version but at least factually, it’s authentic. I have full faith in your ability to make your own conclusions.

 

Let’s quickly get into our topic: what does this mean for you—the enterprise IT managers?

 

First things first. We must keep in mind that the company that we are discussing here is Satya Nadella’s  low decibel but more confident Microsoft, and not Steve Ballmer’s high decibel and reactive company.

 

A lot of things would fall in place if we start with that. Under Satya Nadella—actually a little before him—Microsoft started transforming into a more business solution company than a personal tech company. It had no other way. After it was attacked from both sides by Google and Apple, it had its knee-jerk reactions such as acquisition of Nokia. They failed. In the last quarter (JFM 16), its phone revenue declined 46%. The quarter before that had declined 49%. Those data points just indicate it has given-up on that business.

 

In short, Microsoft is now more seriously pursuing businesses. And that is why it is important for you to know what to expect.

 

Productivity is big business for Microsoft and it is the most important player out there. So far, productivity solutions (by Microsoft or anyone else) have focused on efficiency through automation.  But that seems to have run its course. There is not going to be big gains though automation anymore. The focus now seems to be overall effectiveness than just efficiency. LinkedIn is all about real people. When you juxtapose efficiency with real time, real people; the effectiveness increases dramatically.  That is disruptive. 

 

We get a cue from Weiner’e letter. “For LinkedIn, it was to connect the world’s professionals to make them more productive and successful, and for Microsoft it was to empower every individual and organization in the world to achieve more.”

 

A good integration, with say Office 365, will mean it removes a lot of manual work that many front-ending executives do. In effect, many try to create their own private (at individual/group/enterprise levels) LinkedIns. Now, they can have the real thing seamlessly integrated.

 

Of course, your HR head, who unlike the marketing head, is a fairly good friend of yours, can have his recruitment process far more integrated with the productivity suite. Why, he can even turn his years-long dream of making corporate social networking actually work, a reality.  Be prepared, despite all the claimed seamlessness, it is coming your way to make it work.

 

For the marketing head, in the short-term (that is in the canteen over chai in the next 3-4 days), you can show who is the boss. All said, at the end, Microsoft is a tech company and LinkedIn is a new generation social media company. And if you have one of those CMOs who has always dubbed LinkedIn as uncool, as compared to Twitter/Facebook, it is your moment to get even. Whichever way you look at it, USD 26 billion is a lot of money, especially when you consider that Microsoft had paid just USD 6 billion for an iconic brand like Nokia. And if he says Microsoft itself is a loser (yes, it has lost quite a few games), tell her it’s Satya’s Microsoft we are discussing, not Steve’s.

 

While value add to productivity suite of Microsoft is a no-brainer, another not-so-difficult to imagine value enhancer is LinkedIn’s content. It is not for no reason that the so called CCC (content, communication and collaboration) is one of the top segments within SaaS market. LinkedIn is rich in rich content. That is a huge value addition in today’s game: digital transformation.

 

Content is the second big reason behind the move.

 

The mention of SaaS brings the other big thrust of Satya. There, you have already felt the impact—if not in SaaS specifically, maybe through Azure. Intelligent cloud, as Microsoft calls it, is a growing business for the company. Various reports indicate it is today the second largest cloud services vendor after AWS and growing faster than the leader. LinkedIn integration just adds more intelligence to its intelligent cloud.

 

“Essentially, we’re both trying to do the same thing but coming at it from two different places: For LinkedIn, it’s the professional network, and for Microsoft, the professional cloud,” said Weiner in his letter to employees. That leaves little for imagination.

 

With this, Microsoft can claim, with a little more credibility, that it is a true partner in your digital transformation journey, rather than the IT journey.

 

In short, it is three factors—search for the next enhancer of organizational effectiveness (seamless communication with real people), wider portfolio of online services, and content—that have made Microsoft go for LinkedIn. And you will experience the impact of all three in times to come.

 

For you as a CIO, one of these has a wider implication beyond Microsoft/LinkedIn. That is the increasing importance of content and ability to create content in the digital transformation journey. That will manifest itself in various ways. It is closely linked to collaboration but an excellent collaborative tool will not ensure a great ability to manage creation and dissemination of content in a way that will enhance business effectiveness.

 

That is something to think about.

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