IBM Acquires Webify and MRO to Enhance Software, Services Offerings

August 7, 2006 Mary Lou Roberts

In two announcements in as many days last week, IBM bolstered both its WebSphere and Tivoli product lines along with its services oriented architecture software and middleware strategy. SOA is a technology that IBM, like so many software makers, seems to push at every turn these days. One of the acquisitions, at $740 million, represents one of the largest purchases IBM has made in years in the software arena.

On August 2, IBM announced that it has acquired Webify, an Austin, Texas-based provider of software and services for building SOA-style applications. The price was not disclosed. Webify is a privately held company that was formed in 2002. It has two primary locations, with approximately 70 employees in Austin and 50 at a development lab in Mumbai, India. All Webify employees, including its chairman and chief executive officer, Manoj Saxena, will join IBM.

Webify’s success has come through the development and delivery of the Webify Industry Fabric, an integrated environment for policy-driven sourcing, assembly, delivery, and governance of composite business services, along with two sets of industry-specific composite business services designed specifically for the insurance and healthcare industries. For the insurance industry, these services include new business, policy lifecycle, claims lifecycle, distribution management, and agency/partner services. For the healthcare industry, these services include provider collaboration, benefits and eligibility, claims attachments, CDH (customer driven healthcare) management, and rate and quote.

IBM said in a statement that the acquisition of Webify will strengthen IBM’s leadership in SOA by combining “IBM’s development and use of open industry standards with Webify’s experience in semantics” to enable solving common business problems in given vertical industries. “Together, IBM and Webify will help businesses run more efficiently by accelerating the integration of business processes and the sharing and reuse of proven applications and best practices.”

As might be expected, Webify’s software will be delivered as part of the WebSphere portfolio, and it was Robert LeBlanc, general manager of IBM’s WebSphere products, who led off Wednesday’s announcement teleconference. First, he explained that “[IBM] will take the Webify tools and frameworks and integrate that into the WebSphere product line that forms the foundation for all the SOA tools that we provide in the market today and that helps customers build very quickly the next generation applications that support their businesses.” He also noted that IBM will take the Webify industry-specific assets and will be able to go to market through IBM’s Global Services group. “It enhances our ability to help customers through our services and consulting capability,” he said. LeBlanc pointed out that Webify’s components and services support industry-specific requirements such as HIPAA in the healthcare industry and ACORD standards in the insurance industry.

Finally, LeBlanc predicted that “Webify will also help us bring focus in all of the industries that we service today. . . and we intend to bring the value of Webify and its reusable asset base to all industries that we service.” LeBlanc did not say this, but it seems likely that two of the next industries in line may be banking and telecommunications–two industries that were on the top of Webify’s list at the time of the acquisition, to the extent that they had space and emphasis on the Webify Web site.

Clearly another key to the acquisition is the extent to which Webify’s industry-specific SOA components will enhance the ability of IBM Global Services to build out its offering. Peggy Vaughan, IBM’s Global Consulting Services leader, followed LeBlanc on the agenda and explained: “We’ve taken our customers’ requests for industry-specific expertise with regard to the creation of SOAs and it’s real exciting news that this acquisition will enable IBM to continue to lead the SOA marketplace. Through the acquisition of Webify, we’ll be delivering greater vertical industry solutions.”

Vaughan used the example of Fireman’s Fund, which has undergone a complete transformation by “streamlining the insurer’s systems for administration and billing, many of which have functional overlap.” Through this effort, Vaughan said, “Fireman’s Fund estimates that it will consolidate as many as 70 percent of its applications. This will help reduce costs and make resources available for new IT projects that will generate new revenue. Upon completion, Fireman’s fund estimates that the project could save upwards of $200 million.”

Another benefit of the acquisition, according to Vaughan, is that Webify’s capabilities will complement the recently announced the IBM Global Business Solution Center, launched this past March in Mumbai, that is “dedicated to the development of industry business solutions that leverage SOA-based composite business services.” (It seems clear that Webify’s 50 employees in that city will become a part of that group.) “While Webify will immediately begin to integrate into the WebSphere portfolio, from a services perspective Webify’s industry content will add to our existing Global Services and SOA capabilities by extending our component business services portfolio.” Global Services will immediately offer the Webify composite business services and list them in the SOA catalog.

At the end of the teleconference, LeBlanc responded deftly to the question about what IBM was lacking in its product line that it is getting with this acquisition: “Webify brings in two things. One is in the area of the fabric that Webify has in the building of applications and some of the governance capabilities that they have. They have function that enhances the already-leading WebSphere product line, and we will integrate very quickly those capabilities into WebSphere. More importantly, they bring the industry-specific assets that add value to the industry as they start to build the next generation applications and they deal with the standards in those industries, such as HIPAA and ACORD. It brings value in that it gives us a richer portfolio from which we can draw to build the next generation of systems for our customers, and it also enhances the portfolio that we have.”

Will Webify keep it’s name within the WebSphere framework? LeBlanc offered a carefully crafted response: “We will work on branding over the next 30 to 60 days. Whether we keep the Webify name as a sub-brand has not yet been determined. The value of Webify comes in the technology and the people and the expertise and experiences that the team has, and for us, that’s the most important thing. Because Webify is a small company, their brand and their name is not as widely known as some of the other global brands that we have in IBM.” (In other words, “no.”)

Saxena, who says that he plans to stay with IBM as part of the SOA leadership, explained his reason for making the sale of his privately held company to IBM: “What we see now is formation of a large market in SOA over the next three to four years, and IBM provides a phenomenal global platform to be able to take our industry-leading product and technology and get that out to the world on a worldwide basis. For me personally, it means the opportunity to take some unique technologies and make a difference to thousands if not tens of thousands of customers over the next two years. We have been working and partnering with IBM for the past two and a half years, and IBM and Webify have very similar views of how the market is going to be transformed with SOA.”

Then, on Wednesday, IBM announced the acquisition of Bedford, Massachusetts-based MRO Software, a publicly traded company, for the hefty sum of $740 million. The sale, which is, of course, subject to MRO shareholder and regulatory review, is expected to close before the end of this year.

MRO, with 900 employees and approximately 300,000 end users, provides asset and service management consulting and software that is used to manage the purchase, maintenance, and retirement of assets including production equipment, facilities, transportation, and IT hardware and software.

This is a big market. IBM points out that industry research firm IDC estimated the combined 2006 worldwide revenue for enterprise asset management software to exceed $1.5 billion, and for system and network software to exceed $15 billion.

“IBM will leverage MRO’s software portfolio and management consultants to provide clients with a single approach to managing all industrial and IT assets,” IBM said in a statement announcing the acquisition. Since MRO’s offerings are built on a modern architecture, they can be easily integrated into IBM’s service oriented architecture-based capabilities, including business process management and IT service management.”

IBM further explained that “as management processes converge around all types of asset classes, enterprise assets are becoming more intelligent–connecting to IT networks via RFID, for example, and using IP addresses and embedded chips. With a consolidated asset management approach, companies can be more efficient and cut administrative overhead by managing all critical enterprise assets, including industrial equipment, in a single, automated environment . . . ”

IBM intends to establish MRO’s operations as a business unit within IBM’s Tivoli software unit, led by general manager Al Zollar (who previously ran IBM’s iSeries and Lotus units). The MRO technology will then be incorporated into the Tivoli software catalog and will be sold through IBM’s and MRO’s sales channels and by IBM business partners. IBM also plans to expand the scope and capabilities of IBM’s Global Services IT asset management consulting practice.

The acquisition of MRO, like that of Webify, is positioned as an enhancement to IBM’s SOA capabilities. “This is an important deal for us, as it underlines some of the strategic priorities of IBM–most importantly, our intent to build repeatable services solutions based on SOA,” said an IBM spokesperson.

MRO’s reasons for agreeing to the IBM acquisition sound much like those of Webify. “The IBM acquisition opens a world of opportunity for our clients and our employees,” said Chip Drapeau, MRO’s president and CEO. “By integrating our asset management capabilities with IBM. . . we can offer our customers a complete asset management solution on a global scale.”

Certainly, if one is ever going to do it, now is the time to be jumping onto IBM’s SOA bandwagon. With announcements about SOA acquisitions and standards groups and expanded product functionality coming from Big Blue at a lightening clip, it seems clear that IBM is placing a lot of its eggs in the SOA basket, with the intention of driving the market–a strategy designed to enhance both its WebSphere and Tivoli brands and its Global Services revenues. And isn’t that what it’s all about?

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