Kenexa Acquires Outstart: Getting Serious about the Corporate Learning Market

This week Kenexa, one of the largest and most successful HR and talent acquisition consulting companies, announced the acquisition of Outstart, a pioneering company in the market for e-learning tools, learning management, collaboration, and mobile learning solutions. This represents a major move for Kenexa, putting the company firmly into the market for training tools, systems, and solutions.  (Research members, watch for a detailed bulletin on this acquisition coming later this week.)


Kenexa is a publicly traded consulting and software company which focuses on six major business areas:  recruitment process outsourcing (RPO) and employment branding, assessment (Kenexa is one of the world leaders in assessment science and tools), employee engagement (validated engagement surveys, tools, and consulting), strategic HR consulting (HR strategy and talent segmentation), leadership development (the company recently acquired a leadership development company and now sells leadership programs and content development), and talent management software and services.

Over the years, Kenexa has grown both organically and through acquisition. The company just posted 2011 revenues of $291 Million and the company expects its 2012 revenues to increase to $350 Million or greater. This growth is coming through a combination of both organic growth (new business) and acquisition.

Kenexa and the Learning Market:

Kenexa offers a wide range of talent management products and services, including the company’s 2X end-to-end talent management software platform. In the talent management software market, Kenexa is a leader in recruiting products and often competes directly with Taleo.

Today, because of the growing maturity of the talent management software market, large buyers of these products (30-35% of buyers) are looking for a single vendor solution. This means that many of Kenexa’s current customers are either looking for a learning management system, or they are looking for a talent acquisition vendor who offers a learning management system. So for the last few years Kenexa has been trying to build or buy a competitive LMS.

Kenexa as an organization is filled with expert consultants who have backgrounds in IO Psychology and Organizational Development, so the company has a good understanding of the value of corporate learning. In addition, Kenexa’s recent investment in leadership development (acquisition of CHPD) has given the company a true learning and development services offering. But until now the company has been more or less vacant from the learning technology and learning platform marketplace (around a $1 billion market).

History of Outstart:

Outstart is a pioneering company founded by two ex-Sybase/Powersoft engineers around 1991. The company’s breakthrough products were its LCMS (Learning Content Management System) and development tools, which rapidly gained market visibility in the early 1990s (during the early days of e-learning).

During the last 20 years the company grew its business in learning tools and content management solutions, and later acquired its primary LCMS competitor EEDO. As the LCMS market evolved and never grew into a large market, Outstart expanded into the learning platform market, and acquired a small company with a collaboration solution called Participate. Participate is now offered as a platform solution for collaboration, knowledge management, and expert support. As part of this strategy Outstart also started building its own LMS, since many of its customers (often customer training teams) wanted an LMS to manage and administer the programs they were developing.

Later the company acquired HotLava, a well known leading toolset for the development of mobile learning applications. This was a natural extension of Outstart’s content development business, and is now considered one of the top tools for the development of mobile learning applications.

Today Outstart has around 300 customers and is a slow growing but profitable company (the tools market is very fragmented). The company’s LMS is relatively new and fits well for mid-market organizations or small training groups, but was not designed to be an enterprise-scale solution. Many of the original founders are still there, so the company continues to have a strong brain trust of learning technology experts.

What Outstart Brings to Kenexa:

Outstart brings three major benefits to Kenexa.

First, the Outstart LMS and Participate platform will be integrated into the Kenexa 2X talent management platform, giving Kenexa an end-to-end talent management solution. Today the Outstart LMS will not compete well in the enterprise LMS market, but Kenexa has the resources to increase that investment and build out the LMS into a scalable solution over the coming years. This enables Kenexa to compete directly with Taleo (Learn) and other LMS vendors for enterprise LMS opportunities.

Second, Outstart brings Kenexa a profitable business selling development tools to training organizations. Kenexa plans to keep almost all the Outstart employees in place, giving the company a new business unit which can go into existing and prospective Kenexa customers to sell content development tools, collaboration solutions, customer training portals, and mobile learning infrastructure. Today this is a $20-25M business, and Kenexa can grow this simply by putting more feet on the street.

Third, Outstart now brings Kenexa a brain trust of learning technologists who can develop new products. HotLava, for example, could be extended to provide more mobile solutions for content distribution and talent management. The Outstart team is a passionate and innovative development organization who can help Kenexa define and deliver its future learning products.

The Corporate Learning Market is in a Growth Phase

The $140 billion worldwide corporate L&D market is growing again (read the 2012 Corporate Learning Factbook® for details), and the gloves are off. PeopleFluent just announced the acquisition of Strategia, Saba’s business is growing, Taleo’s learning business has become a growth engine, and SumTotal just announced significant bookings growth. Now, for the first time ever, Kenexa can participate.

While Outstart does not provide Kenexa with an enterprise LMS yet, the company now has the potential to extend its strength in IO Psychology, talent management, engagement, and consulting into a range of new solutions for the needs of training organizations.