In a recent move, Microsoft Corp.'s has acquired LinkedIn Corp. at a high budget of $2.6 billion which is the former's biggest acquisition so far. It has thrown caution to the wind given the past where many such acquisitions by software companies haven’t turned into great successes down the line. Misgivings have always been there when we look at earlier acquisitions of Microsoft. Acquisition of Nokia Corp. in the year 2014 resulted in write down of more than the $9.4 billion it doled out for the purchase of the same. Little did help deals for Yammer Inc. and Skype Technologies that were bought keeping in mind reinforcement of Microsoft's social and digital credentials.
Companies and products work in synergism. This holds all the more true for Microsoft's Office productivity suite which now serves online, primarily, and LinkedIn's database of professional executives in numbers exceeding 400 million. From what Mr. Satya Nadella, Microsoft Chief Executive officer (CEO), believes social networks and productivity software are to be conceived as dual concept covered under a larger umbrella of one entity. Here's what he said to The Wall Street Journal (WSJ)," It is like professional network and professional cloud coming together and we are going to work toggling between them. Then, why should the both be not considered as one?"
The core demographic of Microsoft comprises of LinkedIn's users along with the latter serving as a network and platform that users identify with. What Microsoft needs to is prompt the users of LinkedIn to use and adopt that identity across different products. Accessing those users will give a humungous quantity of data that could offer products and insights within Microsoft that can eventually be monetized which might not have been possible for LinkedIn to do. Mr. Nadella has already zeroed in some of these factors when he went for sales meeting with relevant participants and LinkedIn's potential experts to help Office notice when an individual is working on a suitable task.
Microsoft's CRM (Customer Relationship Management) software, which is used for identification and track of sales leads, ranks fourth in market share. It is one of the most popular enterprise CRM players in a market which includes the likes of Oracle Corp., Salesforce.com Inc., and SAP SE. Though Salesforce is the market frontrunner, its market is ill- defined and it holds only a minority of the whole. The arrival of LinkedIn could bolster even CRM for Microsoft as it has its own product- LinkedIn Sales Navigator that works like CRM. And with LinkedIn comes the privilege of data and reach any CRM would yearn for. What better vehicle than LinkedIn for the relaunch of Microsoft's relationship management?
If Microsoft was shrewd enough to buy LinkedIn, the latter wasn't less worthy of it, either. It was the best time for LinkedIn to be sold. LinkedIn issued an outlook of gloomy sales when talks were on of its sale and its shares fell by as much as half in one single day. As per Michael Wade, innovation and strategy professor at IMD (International Institute for Management Development) which is a Switzerland-based business school- LinkedIn has not been able to prove its potential for some time. It has not advanced its capability beyond serving as a platform for recruitment and job- search. So far, it had done a very poor job of bringing users online regularly and engaging them in the expansion of professional network apart from once in a while search for jobs. Of the total count of 400 million users, only one-quarter of it visits the website every month.
Under the leadership of Microsoft's previous chief, Mr. Steve Ballmer, the company strived for driving users to Windows and its other platforms which meant acquisitions were integrated with Microsoft products and innovation to develop new features slowed down. That still leave unanswered the question as to why the deal may succeed given the way Microsoft worked earlier. The biggest argument of this deal's likelihood for success is Mr. Nadella. He was a shot in the arm for Microsoft and he completely changed the face of Microsoft since he started working as its CEO. He is willing to go that extra mile to reach people where they are. Devices running Alphabet Inc.'s Android mobile OS (Operating System) or Apple Inc.'s iPhone OS is a fact of lesser importance to him. He is looking forward to allowing LinkedIn- its autonomy, which will be similar to Microsoft's engagement with Minecraft maker Mojang.
All of this would require Mr. Nadella to walk a tightrope with two ends of synergy and autonomy. The larger the room he gives to Jeff Weiner, LinkedIn's CEO- the lesser is the profit for Microsoft's products. But we are talking about Mr. Nadella here. If he has the guts to metamorphose a legacy and giant as big as Microsoft, LinkedIn which is just 13 years old- could be a piece of cake.