IBM faces off against Oracle and SAP AG in human resource software market

A $1.3 billion deal between technology giant IBM Corp and Kenexa Corp will see IBM absorb the human resource software firm and bring them into close competition with the likes of Oracle and SAP AG.

These two rivals recently made large acquisitions of their own in order to enter the HR software market, with Oracle buying up Taleo Corp for approximately $1.9 billion in February 2012 and SAP AG buying Kenexa competitor SuccessFactors for £3.4 billion last December. These acquisitions were complemented by their other purchases in cloud computing such as RightNow Technologies and Ariba Inc.

The fact that IBM (considered by many to be the most conservative computer technology firms in the world) has decided to enter the business applications market and take on more established players like SAP and Oracle demonstrates how healthy the market’s growth is. Analysts of the Nomura Group said:

"Following Oracle's move into hardware and SAP's move into the database market, both of which position these leading apps companies more in IBM's traditional markets, IBM has perhaps fewer reservations about participating in the apps and software-as-a-service market."

Web-based software solutions are increasingly becoming a more attractive option for both private sector businesses and government institutions who want to cut operating costs without losing access to critical ICT services. Without the need for expensive program licenses, dedicated hardware or installation procedures, a variety of new web-based software firms have been able to supply both public and private sectors with this solution. Increasingly, medium-sized companies offering these services are being snapped up by the bigger players such as IBM, SAP and Oracle.

"This is a big step," said Nucleus Research analyst Rebecca Wettemann. "This brings the arms race up a notch." she said, predicting stiff competition between these providers as they each seek to improve their HR business software offering. Further acquisitions in this area have already been anticipated as by ISI Group analyst Brian Marshall who said:

"IBM has previously suggested the return on software acquisitions is the best it has seen in recent years. We expect continued acquisition activity this year."

Not to be left behind, Oracle and SAP AG have been advertising increased recruitment drives internationally. With almost 1,000 SAP jobs available globally, the Germany-based company is currently preparing itself for further expansion in the HR business software market. Similarly, Oracle Corp has listed hundreds of new openings in key locations across the US, Europe, the Middle East and Asia Pacific.

With IBM’s entry to the market via Kenexa’s ready-made customer base of 8,900 spread across financial services, pharmaceuticals, retail and consumer industries, Oracle and SAP now find themselves with a significant new competitor to consider.