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July 29, 2008updated 19 Aug 2016 10:07am

IBM’s Ilog buy is a “non event” says rival

News that IBM is buying business rules, visualisation and supply chain player Ilog for $340m has been described by Ilog rival Lombardi Software as a “non event”.Announced on Monday, IBM said it hopes the acquisition of the French firm will improve

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News that IBM is buying business rules, visualisation and supply chain player Ilog for $340m has been described by Ilog rival Lombardi Software as a “non event”.

Announced on Monday, IBM said it hopes the acquisition of the French firm will improve its offering in the application lifecycle management market, as well as developing IBM’s BPM and SOA offerings… [click continue reading for more]

Gentilly, France-based Ilog targets several markets: business rules management and optimisation, visualisation and supply chain management. It is probably best known for its business rules software, which enables companies to streamline their business processes, and reduce companies’ reliance on hard-coded application logic. It is said to be able to put some power to change business processes in the hands of business users, too.

IBM does have business process capabilities, namely within WebSphere Process Server, but it has tended to partner with rules companies — including Ilog — for clients with anything other than straight-forward rules requirements. Rivals to Ilog in the business rules space include Pegasystems, Fair Isaac, Haley, Lombardi Software, CA, Oracle and more.

Lombardi for one dismissed the move, saying it makes IBM little more than a “bottom feeder”: “Clearly this was a bottom-feeder acquisition for IBM,” said a Lombardi spokesperson after CBR asked for comment on the deal. “This is a non-event, especially in the BPM market. Lombardi has hundreds of customers, and they have done 1,000’s of processes using [Lombardi] Teamworks. From these, we can count on one hand the number of deployments that used a rules engine as part of the solution.”

“The BRMS [business rules management system] space is a niche, and there is no growth,” said Lombardi. “They had $184m in revenue, only $7.6m net income. They were bought for barely 2x revenues. Very slow growth, very little profit, low valuation.”

Not everyone was quite so sceptical. OnStrategies Perspectives analyst Tony Baer said the deal will suit both parties: “Both companies know each other quite well, having been partners in one way or another for about a dozen odd years.” Baer added that, “Ilog’s business rules engine fills a key gap in the WebSphere Process server BPM line.”

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But Baer did note that Ilog had stalled somewhat recently: “The company happened to grow satisfactorily, showing profits for seven straight years, so that it never had to face the uncomfortable question of refocusing. Had it stayed independent, it might have had to do so; while revenues grew roughly $20m this year to $180m, profits sank from $4.9m last year to a paltry $500k this year.”

“The good news is that Ilog is a great fit for IBM,” Baer said. “Its rules engine adds a piece missing from WebSphere Process Server, and in fact has excellent synergy with a raft of IBM products that start with Business Events (apply sophisticated rules to piecing together subtle patterns emerging from torrents of data), FileNet content server, WebSphere Business Fabric (the old Webify acquisition, providing frameworks for building vertical industry SOA templates), and the list goes on.”

Allan B. Krans, senior analyst at Technology Business Research, said the deal is likely to see IBM encroach further into the, “Gray area between middleware and applications. Prior acquisitions such as Webify pushed IBM towards a componentised middleware strategy, which provides many of the same services as business applications, without requiring adoption of an entire platform. The acquisition of Ilog is an extension of this push, particularly with the company’s LogicTools Supply Chain Management Application Suite,” he said.

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