July 29, 2004 7:00 AM PDT

IBM buys into app management

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IBM said Thursday it will acquire Cyanea, a 3-year-old company with close ties to Big Blue, to beef up its portfolio of application management tools.

Cyanea, an Oakland, Calif.-based firm with about 75 employees, makes software designed to spot and diagnose problems to reduce system downtime.

James Chong, Cyanea's president and CEO, will head an effort within IBM to consolidate different application management tools, IBM said. Financial terms were not disclosed.

Cyanea's software is used to monitor transactions running on mainframe systems--a market dominated by IBM--and Java server applications, notably those written to run on IBM's WebSphere Java infrastructure software.

Since 2002, IBM has resold Cyanea's software as part of its WebSphere brand. IBM was also an original investor in Cyanea, having taken a roughly 11 percent share of the company at its founding. With the acquisition, IBM will buy out the other venture capital firms that were original investors.

The planned Cyanea purchase fits a clear pattern at IBM's $14 billion software group. The company has acquired several smaller, specialized companies that are already IBM partners or have written software that complements IBM's own infrastructure software.

The purchase of Cyanea, which represents the 17th company that IBM's software group has bought since 2001, is consistent with IBM's plan to build out a broad set of tools for building, running and managing business applications, said John Swainson, IBM's vice president of worldwide software sales. Swainson recently took on the head software sales job after leading the WebSphere division.

"We are always making buy vs. build decisions about how we can extend our portfolio," said Swainson.

Swainson noted that application management--a market with several smaller, niche providers--is an area where IBM wants a full set of offerings that span older CICS and IMS mainframe-based transaction systems, along with WebSphere, which runs on Windows, Linux and Unix operating systems.

Earlier this year IBM acquired Candle, an 18-year-old company that also sells application management tools. Chong and the Cyanea team have been given the task of consolidating the Cyanea tools with those from Candle and the Tivoli monitoring tools, Swainson said.

In application and systems management, IBM competes directly with Computer Associates, Hewlett-Packard and BMC Software, which each sell a suite of applications for monitoring system performance. There are also several smaller application management companies that specialize in particular areas, such as Java application servers and databases.

 

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