Microsoft buys LinkedIn database for treasure trove of CRM contacts

Recently, Microsoft bought LinkedIn for a record sum of $26.2 billion. As industry observers watched from the sidelines, the question soon became why Microsoft was willing to pay so much for data from the social networking database company. Microsoft has struggled with other acquisitions, including Yammer, for $1.2 billion, and Skype, for $8.5 billion, the jury is still out on whether Microsoft has integrated new collaboration tools like Skype into its existing portfolio.

At one level, Brent Leary, a CRM expert, says Microsoft paid a premium for the LinkedIn database of professional contacts because it features so many professional contacts and so much information about their current and past job history that can augment existing data in Microsoft Dynamics CRM, the customer relationship management platform.

"It's that ability to have updated information in real time on hundreds of millions of business people," Leary, principal at CRM Essentials, says. "That's very hard to get."

The LinkedIn purchase also represents an important shift in focus for sales efforts, from targeting companies for sales opportunities to instead targeting individuals, observers say. According to Leary, the idea is to have LinkedIn supplement Dynamics CRM data with real-time information. That career-focused information will supplement the customer account data that sales people already work with. According to Leary, that may smooth the way for salespeople to be more active in entering data into their CRM systems.

Lack of commitment to data entry has been a long-standing issue with sales reps, who are often resistant to spending time entering contacts into CRM systems because it's time-consuming. Leary says that the information in LinkedIn may ultimately help sales reps stay on top of their accounts. With more complete data in the CRM, sales departments can probably make better estimations about their forecasts and other sales metrics.

"They have more reason to use the system," Leary says.

For more on the importance of Microsoft's purchase of LinkedIn, check out the podcast above. Click here for part two, where we explore the future of the Microsoft-LinkedIn deal and the role of APIs.