August 22, 2006 4:00 AM PDT

Industry shift to services fuels IBM spree

IBM has become one the software industry's most generous sugar daddies, ever-ready to buy smaller companies with technology that it covets.

The computing giant announced plans in the past three weeks to acquire three software companies: FileNet, MRO Software and Webify. If they all go through, the bill will total more than $2.3 billion.

And that's just the announcements made in the last month. If all recent deals go through, IBM will have shelled out more than $9 billion (all in cash) since 2003 on acquisitions, with the bulk of the money going to 31 software companies.

Beyond the benefit of added revenue, the thing that has unleashed IBM's purse strings is the computing industry's shift to service-oriented architectures, said the company's IBM's top software strategist Kristof Kloeckner.

"Services-oriented architecture in this case is really not just a buzzword. In this context, it's an operational strategy," said Kloeckner, vice president of strategy and technology for the IBM Software group.

Acquisitions of software companies--coupled with internal development and aggressive partner programs--are giving IBM the broad product portfolio it needs for the move to services-oriented architectures, or SOAs, Kloeckner said.

"We provide the enabling infrastructure. This needs to be fairly comprehensive. What's included covers the technology shifts within the industry," he said.

Snapping up smaller software companies has been a standard play in the business software industry game book as IBM competes against Oracle, SAP, Microsoft and Sun Microsystems to be a one-stop shop for corporate customers .

Indeed, IBM could face a competing bid for FileNet, or an IBM competitor like Oracle could purchase another stand-alone content management company.

SOA is an approach to designing back-end systems in a modular way and, usually, around industry standards. If done well, a company can reuse software components, rather than duplicate existing work, and more easily share information among disparate systems.

Business software providers, including SAP and Oracle, are rearchitecting their own products to usher in growing use of SOA.

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To IBM and its massive consulting organization, the rebirth of the SOA concept during the past two years couldn't be better news, said Forrester Research analyst John Rymer.

"For IBM, SOA is the best thing that's ever happened. It's all about leveraging what you got. It can't be done strictly with products; it requires services. And the largest companies are the ones most aggressively adopting it," Rymer said. "The stars are in alignment."

Rymer noted that IBM's software acquisitions are increasingly being coordinated and funded with IBM's business consulting group.

For example, the purchase of privately held Webify was orchestrated by IBM software and IBM's services division. Webify sells a "framework" for building software applications, where much of the code is prewritten and designed for specific industries, such as insurance and financial services. Having reusable software improves margins for IBM's custom application development services business, Rymer noted.

The combination of software and services has become integral to IBM's strategy to growing its revenue and fleeing from low-price competition.

See more CNET content tagged:
SOA, custom application development, IBM Corp., FileNet Corp., custom application

6 comments

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Cool
As an SOA designer, I think this has to be good. There are so many "emerging technologies" that it's impossible to keep track & do justice to all of them.

Bringing them under the IBM umbrella should make them more accessible & provide far more choice in SOA solutions design.
Posted by (409 comments )
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As an SOA engineer...
...you're only hoping that IBM buys you out and makes you rich.
Posted by DavyBoyWonder (41 comments )
Link Flag
Since "Services-oriented architecture....
... in this case is really not just a buzzword. In this context, it's an operational strategy,"; so said "Kloeckner, vice president of strategy and technology for the IBM Software group."; will the implementation on an instant messaging and collaboration strategy be part of the recommemdation to the Kerik Group which is likely to bid competitively for a services offering to be offered by the Guyana Government:

"Kerik's services could be funded through competitive procurement - IDB
Tuesday, August 22nd 2006"

<a class="jive-link-external" href="http://www.stabroeknews.com/index.pl/article_general_news?id=56502053" target="_newWindow">http://www.stabroeknews.com/index.pl/article_general_news?id=56502053</a>

So, is "the IBM internal development; and/as well as, "its aggressive partner programs" ready for these dynamic emerging global business opportunities! Just how the (SOA) competitive landscape will emerge is left to be seen! ;-)
Posted by Captain_Spock (894 comments )
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"And IBM is not ceding that market to Oracle and SAP"...
... since it is known that IBM once lost out to SAP on a banking (J.P. MORGAN CHASE) deal in the past - just what will IBM do differently and strategically this time around not to cede "market to Oracle and SAP" as is now being stated!
Posted by Captain_Spock (894 comments )
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SAAS has security risks
As more companies move towards SAAS, I think we'll see a shift in online attacks towards this arena. I was just at a compliance and security lecture, where analysts pointed this out as the next big risk potential for stealing data and company information. We'll be able to soon add it to this list of incidents: <a class="jive-link-external" href="http://www.essentialsecurity.com/educationalfacts.htm" target="_newWindow">http://www.essentialsecurity.com/educationalfacts.htm</a>
Posted by nanarita (6 comments )
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SOA Meme Upturned Two Years Ago
SOA has been in an upturn for two years. Here's my explanation for why, as well as the memegraph.

<a class="jive-link-external" href="http://www.realmeme.com/roller/page/realmeme?entry=soa_j2ee_revisited_in_more" target="_newWindow">http://www.realmeme.com/roller/page/realmeme?entry=soa_j2ee_revisited_in_more</a>
Posted by Broward Horne (88 comments )
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