Big Blue leads the way on software purchases

IBM’s acquisition this month of US content management software maker FileNet for US$1.6 billion is the largest deal Big Blue has done in three years and the fourth largest in the company’s history.

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By  Dylan Bowman Published  August 20, 2006

IBM’s acquisition this month of US content management software maker FileNet for US$1.6 billion is the largest deal Big Blue has done in three years and the fourth largest in the company’s history. Combined with the purchase of two other US firms — asset management software provider MRO Software for US$740million and privately held services-oriented architecture (SOA) vendor Webify Solutions for an undisclosed amount — the industry heavyweight’s eight day August spending spree already overshadows the US$2 billion it laid out last year in sixteen acquisitions it made. The purchase of three software companies in such a short time is a sign of the importance IBM is placing on its software business and the rapid rate at which the sector is consolidating, analysts were quick to point out this month. This latest spending spre follows on from a busy July, with HP paying US$4.5 billion for a management software firm, Mercury Interactive, and storage giant EMC snapping up one of the biggest names in the security software sector, RSA Security, for US$1.2billion. The FileNet buy differs from both that of MRO and Webify in that it brings IBM key customers and market share rather than filling gaps in the vendor’s product portfolio. IBM had been languishing in third spot behind leader EMC and FileNet in the content management market; Big Blue has now leapfrogged EMC to become the number one vendor. According to research firm IDC, the combined company has around 18% of the market, while EMC now controls just over 11%. Analyst firm Gartner Group said that it now expects a head-to-head rivalry between IBM and EMC to control the high-end of the market. One of the other major players in the enterprise content management space, Open Text, has also strengthened its hand this month, with the US$489million capture of rival firm Hummingbird. IBM’s acquisition builds on its “Information on Demand” strategy — launched in February — that refers to a portfolio of products and services that help companies manage their data. “Freeing up information contained in content management systems is critical to unlocking the potential of information to improve business processes and performance,” said Ambuj Goyal, general manager of IBM Information Management. “The combination of IBM and FileNet will provide our customers and partners with industry-focused content management solutions that offer a new level of business value,” Goyal added. The MRO and Webify purchases also relate to data management, but give IBM access to products built using SOA as well. Both are examples of how important SOA is become to vendors and how it is changing the way they and their customers approach software and services. While Gartner said IBM’s vision in its software buys was “sound” it warned the firm faces “challenges” in executing on the acquisitions, such as the problem of product overlaps.

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