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IBM Taps Into Talent With Kenexa Buy

Stocks in this article: IBM KNXA SAP ORCL ARBA

NEW YORK ( TheStreet) -- Talent management may seem a strange move for hardware and software giant IBM (IBM), but the company's $1.3 billion deal to acquire Kenexa (KNXA) marks the latest stage in the company's broader cloud strategy.

Kenexa, which sells recruitment and talent management software, has chalked up an impressive customer list for its HR Web applications and consulting services, including Starbucks (SBUX), CVS (CVS), Boeing (BA), GE (GE) and Ford (F).

IBM sees Kenexa as a way to bolster its social business offerings, technologies for connecting workers across their organizations, as well as feeding into the company's massive business analytics push. As with most things in tech these days, cloud features prominently in the acquisition.

" Kenexa has a talent management platform that's cloud based -- it also has the capability for performance management and recruitment," Alistair Rennie, general manager of social business at IBM, told TheStreet. "We have got a very aggressive cloud solution portfolio that we have been very aggressive about," he added.

"Integral to the deal is Kenexa's cloud-based technology and consulting services which aim to provide customers with optimal workforce deployment in critical business functions," noted Brian Marshall, an analyst at ISI Group.

The Wayne, Pa.-based company is also the latest in a string of companies snapped up by tech heavyweights eager to boost their cloud credentials. Earlier this year, for example, SAP (SAP) announced a $4.3 deal for Ariba (ARBA), which followed its $3.4 billion purchase of SuccessFactors last year.

Elsewhere, Oracle (ORCL) grabbed cloud-based HR solutions provider Taleo in February, while IBM acquired DemandTec late in 2011.

IBM, as part of its five-year roadmap announced in 2010, said that it plans to spend $20 billion on acquisitions by 2015. Over the past three years, the company has made 25 purchases, and has closed eight acquisitions this year.

At least one analyst thinks that Kenexa strengthens IBM's applications strategy, in addition to its Software-as-a-Service (SaaS) efforts.

"We view the acquisition as strategically significant in advancing IBM one step closer to the applications and SaaS market," noted Rick Sherlund, an analyst at Nomura Equity Research, in a note released on Monday. "Following Oracle's move into hardware and SAP's move into the database market, both of which position these leading app companies more in IBM's traditional markets, IBM has perhaps fewer reservations about participating in the apps and SaaS market."

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