IBM adds to software stable with Ilog buy

IBM has agreed to buy French business management software maker Ilog for 215 million (170 million).

The takeover will add a range of products to IBM's growing enterprise software range, including Ilog's Business Rules Management Systems (BRMS), business process visualisation software and its extensive supply chain management software suite.

"This combination will allow us to dramatically extend our market reach and realise the full potential of all of our technologies while protecting investments of Ilog's customers now and into the future," Ilog chairman and chief executive Pierre Haren said in a statement.

The offer price represents a premium of about 56 per cent compared with Ilog's one-month average closing share price prior to 28 July, and a 37 per cent premium to the closing price last Friday.

Separately, Ilog on Monday said its net profit dropped to $500,000 (250,000) on turnover of $181 million (90.5 million) in the year to 30 June, compared to a profit of $4.9 million (2.45 million) on sales of $161.5 million (80.75 million) the previous year.

"In the fourth quarter, we faced a challenging economic environment, notably in the financial sector, which remains a key source of revenues for Ilog," the company said.

Neil Ward-Dutton, research director of IT advisory firm Macehiter Ward-Dutton, told IT PRO that the IBM deal was about the perception that it needed Ilog's rules engine technology to fill out its own business rules management capabilities, as service oriented architecture (SOA) and business service management (BSM) became more mainstream.

"IBM and Ilog have been partners for years, so I was surprised IBM hadn't done this sooner," he said.

"But the truth is, rules only makes up a third of Ilog's business and it's pretty high-end, niche stuff used to capture complex business policies away from the applications in a very disciplined way."

IBM has spent about $21 billion (10.5 billion) on 70 acquisitions since 2003, including $5 billion (2.5 billion) on business intelligence software maker Cognos, which IBM purchased in January of this year.