image source: techcrunch

Today Microsoft announced it will buy LinkedIn for $26.2B, which is 48% over their current market capitalization. Jeff Weiner will remain as CEO, and report directly to Satya Nadella.

Overall this is a very strong and smart move by Microsoft. Not only do they acquire the world’s largest business network, but with Dynamics CRM growing at double digits globally, they can now pair it up with the best set of universal business data. This combined solution may be just what they need to challenge Salesforce.com for Enterprise CRM 2.0.

“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella said in a statement. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.”

Why Now?

In a post I wrote last year, I talked about how the Future of CRM Needs to Include Relationships, and how Salesforce.com and LinkedIn are set to battle for CRM 2.0, with Salesforce.com owning the most market share, but LinkedIn owning the best CRM data (business profiles).

Salesforce.com historically has been more about Customer “Record” Management, than Customer Relationship Management, and that is why they spent $392 million (some say almost 100x revenue) to buy RelateIQ, a startup focused on relationship intelligence. The reason is that they need to move beyond just better record keeping, and get into customer interactions.

LinkedIn has worked for several years to build out its marketing and sales cloud solutions. But they have struggled, because such a large part of their business involves selling access to their data asset (HR and recruiting), and also they lack the marketing and sales process infrastructure you typically have in a CRM system. Earlier this year they took a $50M write down of their acquisition of Bizo, because as Jeff Weiner said “it took more resources than anticipated to scale.”

With the combined solution, Microsoft finally now has the business users, their “connectedness”, and business data to tackle Salesforce.com at its core. It is going to get really interesting.

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