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June 14, 2016

If data is the new oil, then Microsoft has just bought a big data enterprise rig in LinkedIn

Analysis: Microsoft needs to get integration right in order to unlock the potential of LinkedIn's big B2B data.

By Ellie Burns

No-one has surely escaped the huge news that Microsoft is set to buy social networking site LinkedIn for a staggering $26.2bn.

Technology and business commentators have been quick to highlight that the buyout is a strategic move by Microsoft to push further into the enterprise – and it’s a smart move to make. While Microsoft is a household name among consumers, its value is driven by B2B customers, as Ewan Parry, Partner at OC&C Strategy Consultants, explains:

"In many markets, software distribution is now shifting from these reseller networks towards cloud solutions bought directly by end business users, a challenge Microsoft has been grappling with for some time. "This deal is yet another step on Microsoft’s journey to bypass traditional resellers and build direct links to business end-users."

The thinking behind the huge billion-dollar buyout is clear to see – but what is Microsoft actually buying for $26.2bn? They have bought the one thing that every business today is fervently chasing – data. More precisely, the data of 433m users, of which 105m are active every month. Suddenly the $26bn price tag for the amount of data on offer seems to make more sense – a point highlighted by Martin Moran, EMEA SVP and GM at InsideSales.com, who said:

"Microsoft’s acquisition of LinkedIn today is a big data buy. LinkedIn has the most unique pool of data in the social media business because it’s focused on business professionals, so it’s more valuable to B2B-focused businesses. The relationship, career and general interest data of over 400 million people is normalised and anonymised, and that’s what makes this stunning sum of money make a lot of sense. Well-curated and relevant data is considered equivalent to be the crown jewels for enterprise software businesses today."

Microsoft has another ace up its sleeve when it comes to this acquisition – not only has it acquired this huge amount of big data, but it has the technology and capability to unlock the potential of such a data set. Now it can integrate the data with its technology to offer comprehensive technology and services to enterprises and the people working in those companies.

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Suddenly, Microsoft has pushed a little further into the enterprise space, squaring up to other major players such as Alphabet and Salesforce.com. Daniel Domberger, Partner at Livingstone said:

"Every professional should take notice – the deal between these two technology giants might transform their working days. Both Microsoft Office and LinkedIn are synonymous with professional business and this deal could cement the presence each already has in the professional working world. Aligning Outlook, Office 365 and Exchange with LinkedIn’s huge data network is the key to unlocking the potential here – providing technology and services both to enterprises and to the people working within them. It may also finally deliver Microsoft some meaningful Social capability."

Although this is not Microsoft’s first foray into the social media market – in 2012 it acquired Yammer – the data is a game changer and provides many opportunities. Martin Garner, Senior VP at CCS Insight said:

"There are many opportunities for integrating Microsoft services with LinkedIn including Office 365, Exchange, Outlook, Skype, CRM (Dynamics) to challenge Salesforce.com more successfully, its enterprise messaging service Yammer, its newer graph services such as Delve, as well as its cloud computing services. It is also a fantastic resource for Microsoft’s artificial intelligence efforts providing a huge amount of data mining opportunities. However it will be a substantial integration challenge to do this quickly and extract maximum value from it."

As Garner says, the challenge lies with integration. Critics point to the fact that Microsoft has been historically very bad when it comes to integration, with the fact that LinkedIn is remaining independent further fuelling this argument that it may take a long time for any value to be derived from the social networks big data.

However, it is all there for the taking. Microsoft has bought a social network unique in user base, or should I say unique in data. Microsoft is chasing the enterprise, with this deal providing a major foot in the B2B door. However, can Microsoft unlock the potential of LinkedIn’s big data? Integration is the challenge, and only time will tell if Microsoft has what it takes to overcome such a big data challenge.

 

 

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