With the single acquisition of LinkedIn, Microsoft has quickly gained the ability to fundamentally disrupt multiple segments of the enterprise applications marketplace. Microsoft is also making a “big bet” that the acquisition will also quickly revitalize various aspects of its own product portfolio and open new market opportunities for the company.
LinkedIn has built the biggest network of business professionals in the world with approximately 433 million members. Although it has also built a series of services to enable users to capitalize on the network, LinkedIn has not built tight integrations with specific software vendors (ISVs) to leverage its functionality in a seamless fashion. The Microsoft acquisition aims at changing this situation and making the LinkedIn interface even more important in the daily lives of business users.
Here are some of the market segments and competitors that will be affected by the acquisition.
Customer Relationship Management (CRM)
Ask salespeople where they spend the bulk of their time on a daily basis and it’s very likely they’ll say they start and end their day on LinkedIn. Its various news feeds and the ease of reaching out to new contacts makes LinkedIn an increasingly important prospecting tool. It has become the centerpiece of their sales efforts in the same way Facebook is at the heart of many people’s social lives.
However, little of this sales activity is recorded by salespeople in a company’s CRM system. Salespeople are notoriously reluctant to spend time inputting their actions into an enterprise application. Now, Microsoft can develop integration methods that will enable this information to be imported into Dynamics and allow LinkedIn to become the “system of record” and primary user interface for the salesperson.
Salesforce Automation (SFA)
LinkedIn includes a number of services that help salespeople identify and pursue new prospects and improve their productivity. For instance, Sales Navigator helps salespeople build their sales pipelines and track their progress.
LinkedIn’s services can also be used by sales managers to measure performance and better administer their sales resources.
LinkedIn’s marketing tools enable organizations to create and target their online advertising campaigns and track their effectiveness.
LinkedIn has an enormous contact database that can be tapped for market campaigns and segmentation purposes. It also has a potent content marketing engine, multiple social marketing services and plenty of analytic capabilities.
Competitive implications – Salesforce.com is most likely to be impacted by the LinkedIn acquisition. With this move, Microsoft has usurped Salesforce’s vision of the power of social selling and undercut the value of standalone CRM, SFA and marketing automation systems.
Collaboration and productivity applications
The LinkedIn acquisition will also enhance the value of Microsoft’s Office365 application suite by encouraging users to quickly activate a specific solution to respond to a LinkedIn-generated opportunity.
The most obvious example would be to initiate an email communication, but it also could be to develop and deliver a Word doc or Excel spreadsheet. A salesperson might also be inclined to engage a prospect (or existing client) via Skype.
Competitive implications – Alphabet’s Google Apps are going to be particularly challenged by this new combination. Although many organizations moved to Google Apps because of their ease of use, a significant number have become disenchanted with the limited functionality and lack of a vibrant social network.
Recruitment and training
LinkedIn has become a pivotal component of the corporate recruitment efforts of many organizations. Its job listings attract lots of candidates, and its user profiles are perfectly designed to help recruiters target potential applicants.
LinkedIn has also added a strategic training tool with its acquisition of Lynda.com. The site is purpose-built for online instruction. These capabilities add an entirely new human capital management (HCM) dimension to Microsoft’s corporate portfolio.
Competitive implications – This move puts Microsoft in a good position to compete with YouTube, SAP’s Successfactors and Oracle’s Taleo.
Competitive implications – In the same way that Facebook search created a significant threat to Google’s search engine capabilities, LinkedIn’s search function could also pose a challenge to Google as Microsoft seeks to align the LinkedIn search engine with Bing.
LinkedIn hasn’t sought to position its network as an ecommerce mechanism to date, but whenever you create an ecosystem of 433 million professionals, the potential to facilitate commercial transactions beyond online advertising, etc. is too significant to ignore.
Competitive implications – Amazon will certainly be paying attention to how Microsoft tries to expand the economic value of the LinkedIn network.
Microsoft’s CEO, Satya Nadella, wasn’t shy about discussing the potential benefits of the LinkedIn acquisition on the company’s Azure cloud services during the acquisition press conference.
To start, LinkedIn will produce plenty of demand to store more data on the Azure Infrastructure-as-a-Service (IaaS) and to leverage its computing power to perform various analytic tasks.
You can also expect Microsoft to escalate its efforts to encourage ISVs to build new apps on the Azure Platform-as-a-Service (PaaS) that tie together LinkedIn, Office365, Dynamics and other Microsoft elements into third-party solutions.
Microsoft became the biggest software vendor in the world by fostering a vast third-party developer ecosystem, but it lost a lot of its luster as the world moved to the cloud and mobile. Nadella’s cloud- and mobile-first initiatives have reenergized its ISV partners, and the LinkedIn acquisition should give them exciting new social networking opportunities.
Competitive implications – Amazon Web Services (AWS) will have to pay close attention to these developments because it lacks Microsoft’s third-party developer experience and a comparable PaaS to support it.
These are just a few of the potential areas in which the LinkedIn acquisition can help Microsoft recast the competitive landscape and redefine specific application categories. But Satya Nadella and LinkedIn CEO Jeff Weiner have an even bigger vision to create a new “Economic Graph” that would enable their joint entities to capture data points regarding the business activity of their combined users, which could be resold as a new set of information services to guide corporate strategies and public policies.
Of course, Microsoft has failed to capitalize on major acquisitions in the past, and few acquisitions of this magnitude fulfill their initial promise. However, Nadella and Weiner appear to understand the key obstacles they need to overcome in order to realize their joint vision.
I’m sure there are many executives in the companies mentioned here (and elsewhere) that are already working hard to determine how to respond to this move as the competitive landscape shifts.
Jeffrey Kaplan is the managing director of THINKstrategies, founder of the Cloud Computing Showplace and host of the Cloud Innovators Summit executive forum series. He can be reached at email@example.com.