Why is Microsoft buying LinkedIn? [Q&A]

Major tech companies rarely manage to surprise us, but Microsoft did it earlier this week when it announced the acquisition of LinkedIn. The software giant is spending an enormous sum -- $26.2 billion, to be exact -- to get its hands on the popular business-focused social network. The new Microsoft likes to take chances, and this high-profile purchase is certainly proof of that.

CEO Satya Nadella says that buying LinkedIn will allow Microsoft to "change the way the world works", but what is its motivation behind the purchase, how does it tie into its current strategy, and what do the two companies stand to gain from it?

I've chatted with Shyam Oza, senior product manager at Microsoft cloud solutions expert AvePoint, to get an answer to those questions as well as the perspective of someone closer to the enterprise field. So, without further ado, let's get to the Q&A.

BN: Does Microsoft need to own a social network?

SO: Absolutely. Microsoft needs to stay relevant in an enterprise that is about to be flooded with millennials. Focusing on enterprise scale, security, and features previously was what garnered it success. These things are a given in the mind of a modern worker.

Applications should never be slow, should never run out of storage and their data should always be accessible on any device. This is what Microsoft focused on over the last decade, and it's been planning for these eventualities which is apparent in Office 365 and Azure. Now it is planning for future requirements to stay relevant in tomorrow’s workplace.

BN: How will this acquisition impact LinkedIn users?

SO: I think Microsoft has worked hard on a new fresh and friendly image. Changing the experience for anyone in LinkedIn would be very counter to their current strategy of integration and openness. I think LinkedIn Premium will be bundled with Office 365 SKUs over time, but the default experience for LinkedIn-only users shouldn’t change. I think users will see content of a higher quality in their LinkedIn newsfeeds for sure.

BN: What does Microsoft stand to gain?

SO: Up front there is a treasure trove of data to be mined and integrated; this alone has significant value. In addition to that this is a defensive move against competitors like Slack, Jive and Box. Jive has a shared gap with Microsoft in that they have internal enterprise social, but nothing between enterprises or out to their consumers. [Editor's note: Jive has reached, informing us that it has Jive-x which actually does offer this kind of communication.]

Vendors like Slack and Box lack any real enterprise social features of their own, and would be bolstered by integration with a platform like LinkedIn as an alternative to building one internally, which would come at a very high cost and with great risk. This now puts Microsoft into direct access with LinkedIn’s platform as well as the ability to strategically limit access to competitors while monetizing on what they do decide to share via API.

BN: How will LinkedIn evolve under Microsoft?

SO: LinkedIn in its current state will remain the external/consumer facing brand. I believe this will take on a Skype for Business vs. Skype for consumer/desktop strategy. I think we will see new offerings built on top of the acquisition or integration with Yammer, Project, Delve/Graph, Exchange, and Skype before we see changes to the LinkedIn we know now.

BN: Will/should Microsoft incorporate LinkedIn into its products and vice-versa?

SO: It should be a major component of the purchase. Expect to see announcements on integration as early as Ignite.

BN: Financially speaking, how good of a deal is this for Microsoft?

SO: LinkedIn may have come in short of its expectations fiscally, but I think this is more of a platform investment than a desire to pick up LinkedIn’s existing business. Also, Microsoft won’t guarantee it will magically begin making its expected targets, but that would be overlooking the fact that its revenue grew 35 percent in 2015.

Microsoft won’t inherit an organization that’s bleeding. This is unlike Dell’s purchase of EMC, where both companies are facing an uphill battle to catch up to a world quickly being dominated by cloud services and counter to its entire business model.

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