Kenexa Corporation

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Kenexa Corporation

IMPROMPTU PARTNERSHIP LEADS TO COMPANY FOUNDING

TECHNOLOGY: CENTRAL CORPORATE STRATEGY

KENEXA DEVELOPS GLOBAL MARKET STRATEGY

CONTINUING PRODUCT DEVELOPMENT

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

IMPROMPTU PARTNERSHIP LEADS TO COMPANY FOUNDING

Kenexa originated as Raymond Karsan Associates (RKA), an executive recruitment firm specializing in the insurance industry. The company name extended from the last names of founders Barry Raymond and Nooruddin “Rudy” Karsan. The two men met when Raymond, then an executive recruiter, interviewed Karsan, then an actuary for Mercantile & General Reinsurance Company of Toronto, for Raymond’s client in the insurance industry. Raymond and Karsan established a rapport immediately and found they had complementary business skills. Raymond suggested that he and Karsan form a partnership in the field of executive recruitment, and Karsan’s interest in entrepreneurship prompted him to accept the invitation.

At first, Raymond and Karsan simply pursued business opportunities in a fun, casual manner, without formal strategy or market research. Then, in 1991, as revenues neared the $1 million mark, they began to take a more conceptual approach to business growth. Their strategy involved providing a complete range of services complementary to the executive search and hiring process. By offering a variety of services, RKA sought to stun its clients with its ability to address any need. Moreover, Raymond and Karsan never said no to a customer, believing they could find a solution to any human resources management problem. Frequently, RKA acquired a company that already offered a service in order to assist a client. Karsan, who became chief executive officer in 1991, attributed the growth of the company to a willingness to say yes to any idea, as long as it involved a well-defined goal. Over time, RKA’s management consulting services came to include organizational change and planning, compensation structure, standards of competency and performance, and employee development, the latter involving methods of promoting employee satisfaction and directing career pathways.

During the early 1990s, demand for computer-based technologies led RKA to the development of information management systems which simplified human resource processes. Because the company had little capital to invest in technological development, Karsan proposed a merger with the firm that already handled RKA’s information technology. Then, in 1993, RKA introduced its first computerized talent management system, which transformed proprietary knowledge into software which assisted customers in recruiting, training, and retaining employees. In 1995, the company began to offer software for performance management and employee research. The introduction of software applications for outsourced employment processing began in 1996.

Thus, between the mergers and acquisitions and a general rise in new customers, RKA grew rapidly. By 1996, the company had grown from one full-time employee to 144 employees and from one office to 22 offices nationwide. With revenue nearly doubling every year, from $3.7 million in 1993 to $27.9 million in 1996, RKA attained a place on the Philadelphia 100, a list of the fastest-growing companies. Inc. magazine listed RKA on its list of the 500 fastest-growing companies nationwide for four years in a row, from 1995 through 1998.

TECHNOLOGY: CENTRAL CORPORATE STRATEGY

During the late 1990s, much of the company’s growth occurred through several mergers and acquisitions that broadened the company’s technology products and service capabilities. Prominent merger partners included Advanced Consulting Inc., an award-winning multimedia company specializing in custom, computer-based training and intranet training. The 1997 merger with Human Resources Technologies contributed a variety of customized services in executive search, recruitment, and development. Enhanced Communications Inc. provided RKA with unique training programs in a variety of management areas and in several media formats. Enhanced Communications offered unique training programs in the fields of financial services, information technology, and other professional services industries.

COMPANY PERSPECTIVES

Our Mission: Talent has no limits. We optimize human potential, increase happiness, and maximize the engagement of people by providing superior solutions for understanding, acquiring, developing, and retaining talent.

The greatest impact on growth occurred when RKA began to offer consulting and maintenance services for Oracle databases and applications. Toward that end, in 1998 RKA merged with Technology Partners Corporation, which offered Oracle products for several business management and information management applications, including online publishing. The January 1999 merger with Software Support Services further contributed to RKA’s capabilities in applying Oracle applications and technology to human resources management processes. Working exclusively in Oracle software, S3 brought substantial expertise to RKA. The focus on Oracle product implementation substantially expanded RKA’s client list of several Fortune 500 companies. By the end of 2000 Oracle services accounted for 85 percent of the company’s $60 million in revenues.

While revenues continued to increase, further growth required an infusion of outside capital to cover the cost of developing Internet products and services, as well as day-to-day operations. In December 1999, RKA obtained $22 million in venture capital funds, primarily from Parthenon Capital of Boston and secondarily from Shad Run Investments LP and TSG Co-Investors LLC. A credit facility through Fleet National provided an additional $10 million. The company sought to obtain further resources through an initial public offering of stock, as announced in June 2000, but delayed the offering after the investor interest in Internet companies waned significantly. In the meantime, Kenexa obtained $58 million venture capital funds from Wafra Partners, a group owned by the Public Institute for Social Security of Kuwait, and Parthenon Capital. An additional $6 million was received from Westbury Partners in April 2001.

RKA used $7 million to purchase Barry Raymond’s ownership. To reflect the change in ownership, the company changed its name to TalentPoint in May 2000. However, the use of the word “talent” made the name similar to other companies, including TalentPlus, which filed a lawsuit to stop the company from using TalentPoint. The company changed its name to Kenexa the following November.

The majority of investment capital was intended to develop proprietary Internet products, to be available on-demand through a paid subscription. Kenexa concentrated on the development of talent acquisition and performance management products branded and trademarked with the Kenexa name. In 2000, Kenexa introduced a web-based career development tool, called Kenexa CareerTracker. The system parlayed the company’s knowledge in this area into a user-friendly tool whereby employees set goals in conjunction with their employers’ framework of goals and performance standards. Performance, skill, aptitude, and personality measurements provided employees with a tool for realistic self-development on the career path. Managers used CareerTracker to organize information on people who hold potential for promotion. Moreover, the system allowed managers to interface with employee input in order to match individual ambitions and abilities with organizational goals and succession planning. Kenexa introduced upgraded versions of existing products, such as Enterprise Staffing Solutions and a specialized version, Healthcare Staffing Solutions. The latter facilitated the large scale recruiting for nursing and other healthcare professionals staffing through a unique process. An improved version of Prove It! offered a skills assessment for Microsoft Office software, such as Word, Excel, and Powerpoint.

As the company’s focus on Internet tools progressed, Kenexa streamlined its product offering to eliminate training and to emphasize talent acquisition and maximization as a holistic process. In 2004, Kenexa launched Kenexa CARE, a software application designed to manage employee recruitment for hospital staffing by capturing candidate data in a format that facilitated candidate tracking during the entire recruitment process. Recruiter Express provided applicant tracking for small businesses with less than 1,000 employees and fewer than three active recruiters. Kenexa’s StoreFront, introduced in November, offered applicant tracking designed for the needs of retail businesses in recruiting and hiring hourly employees. Through application online at remote sites or at an in-store kiosk, StoreFront streamlined the screening process and allowed for immediate or quick interview arrangements. With Interview Builder, Kenexa offered access to interview questions and links to interview resources on the web. Through job analysis, the system provided questions based on tasks and skills required of a position. The program scored candidate responses to interview questions for further analysis. By the end of 2004, subscription-based products accounted for 79 percent of revenues.

KEY DATES

1991:: Rudy Karsan becomes CEO of Raymond Karsan Associates (RKA), as company turns toward comprehensive service.
1993:: The company’s first human resource management computer software is launched.
1998:: For the fourth consecutive year, RKA ranks on the Inc. 500 list of fastest-growing companies.
1999:: Company realigns its growth strategy toward the development of Internet products.
2000:: Company is renamed Kenexa Corporation.
2004:: Subscription-based Internet products account for 79 percent of revenues.
2005:: Kenexa initiates public offering of stock.
2006:: Kenexa Research Institute is established.

A partnership with Swiftknowledge, Inc., in 2005 led to the development of Kenexa bStrategic, an in-depth and complex analysis tool. The system used data on recruitment, applicant tracking, and employee and performance information, as well as finance and accounting information, to align human resource functions with organizational goals.

By June 2005 the company was prepared to seek funds for additional acquisitions and further product development, as well as to initiate international expansion, through an initial public offering (IPO) of five million shares of stock, priced at $12 per share. The initial offering, plus a secondary offering of 750,000 shares, raised $61.7 million net, though reacquiring stock of private investors left the company with $21 million in capital for the planned acquisition of Web-hire, Inc.

KENEXA DEVELOPS GLOBAL MARKET STRATEGY

Kenexa continued its acquisition and expansion efforts by entering the global arena for employment process outsourcing services, particularly in Asia. Industry observers expected revenues in human capital management to reach $2 billion in Asia by 2008. The company planned to invest approximately $6 million to establish a presence in India. In April 2004, the company acquired Oramasters, a human resource solutions company based in Hyderabad, India, which specialized in Oracle products. Kenexa planned to expand operations at the center to accommodate customer support as well as augment continuing product development. In October 2006, Kenexa opened a new facility in Visakhapatnam, India, intended to serve India and Asia-Pacific operations. Kenexa opened offices in Hong Kong, Taiwan, and Malaysia as well. To serve these markets, the company launched its Enterprise Human Capital Management technology, a product designed for global employee performance management.

In August 2005 Kenexa augmented previously established offices in Canada when the company acquired the assets of Scottworks, a human resources consulting firm in Toronto. Scottworks specialized in employee and organizational feedback, sales and service improvement, team-building, and management development. In particular, Scottworks’ multirater feedback system provided Kenexa with a significant new tool in obtaining employee opinions throughout an organization.

In Europe Kenexa established offices in the Netherlands and Germany, and in November 2006, acquired Psychometric Services Limited (PSL), a candidate assessment solutions provider in London, England. PSL specialized in personality and ability tests used for screening and selections of prospective employees. Kenexa acquired the company for $7.6 million. In addition to its expertise in psychological assessment, PSL would contribute an impressive client list, in both business and government.

CONTINUING PRODUCT DEVELOPMENT

Kenexa continued to improve its product offerings in 2006. In January Kenexa completed its acquisition of recruitment and new hire software company Webhire for $34 million. Webhire provided Kenexa with a new product, onboarding software designed to facilitate a new employee’s first day on the job. This product provided Kenexa with an important link between the recruitment and employee retention process.

In order to provide broader and deeper knowledge about best practices in employee satisfaction, the company formed Kenexa Research Institute in October 2006. Toward that end, Kenexa acquired Gantz Wiley Research (GWR), whose assets included the WorkTrends database of employee survey results. Hence, the institute would include a library of more than 30 years of employee surveys on such topics as leadership, customer service, and employee engagement with organizational goals. Moreover, GWR principal Jack Wiley attained international prestige for his High Performance Model, which revealed the connections between employee opinions, customer loyalty, and business achievement. Wiley became executive director of the Kenexa Research Institute.

Kenexa improved its recruitment technology with the $115 million acquisition of BrassRing, a competitor in talent management technology. Based in Waltham, Massachusetts, BrassRing offered consulting, recruitment, and recruitment software. Observers noted that BrassRing carried better enterprise software which would benefit Kenexa. Indeed, Kenexa acquired the company in October and launched a new product in December. Kenexa Recruiter BrassRing Release 9, an applicant tracking system with more than 70 upgrades in functionality, derived its improvements from BrassRing’s technological capabilities. The new system served organizations of more than 10,000 employees and addressed the needs of global organizations with multiple language and customization options for application of the technology to local needs. Kenexa planned to repay debt related to the acquisition of BrassRing through an offering of stock in early 2007.

While Kenexa was already recognized as a leader in human capital management, by 2007 industry observers placed Kenexa among the top companies in its field. In 2005 HRO Today ranked Kenexa as number one among 13 full-service recruitment process providers, in terms of range and quality of services. In 2006 Workforce Management placed Kenexa as the third ranking provider of applicant tracking system software providers, with more than 400 active clients.

Mary Tradii