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Big Blue's Software Spending Spree 85

abb_road writes "IBM has gone on an aggressive acquisitions spree for document management packages in the past three weeks, spending more than $2 billion to pick up two companies. The companies, Webify and FileNet, are expected to become part of IBM's Information on Demand strategy. The acquisitions point to a larger industry trend: a focus on software for unified corporate data management. From the article: 'It's a crucial time to jockey for most-valuable-software-provider status, because companies want to buy more from fewer players, and they're tired of buying stand-alone pieces of software like customer-relationship management that don't fix real-world business problems. The new message to software vendors: Fix my call centers, don't just sell me a product. As a result, the lines are starting to blur between software companies that offer, say, Internet security, databases, and tools to manage nearly every part of the business. So, too, are the lines between service companies and software companies.'"
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Big Blue's Software Spending Spree

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  • Oh, sure... (Score:2, Funny)

    by Anonymous Coward
    When IBM goes on a software spending spree, it makes the news. But when normal people go down the aisles at Best Buy and throw everything into their cart, THEIR spending spree doesn't make the news at all! Oh, the injustice!
  • Worthless (Score:5, Interesting)

    by Anonymous Coward on Friday August 11, 2006 @12:17PM (#15889711)
    I can't believe the money keeps flowing into IT, no document management solution is worth $2 million, let alone $2 billion. How long would it takes a team of 20 average slashdotters to code a full featured document management system? Let's say 2 years at $1 million each salary per year. Who here earns anything like $1 million a year?

    Don't even think of telling me that IBM are buying customers or market share! It's painfully obvious that the market is overvalued.

    • I don't think this comment deserves "Troll." The poster has a point.
    • I agree with the parent, no mod points to untroll him unfortunately.

      Seriously. These firms make apparently only 1 software product, that is probably relatively complex, but no rocket science. How come that these two firms that I (as a general nerd, not someone working in the field) never ever heard of are worth a f**king 1 billion dollars each?!?!

      • Re:Worthless (Score:2, Interesting)

        by huangpo ( 741798 )
        Take this as constructive advice from someone who works in the field: what you don't know could fill a library (that's a building with books in it).

        You could try educating yourself first about Filenet [] before posting, but I forget; this is Slashdot. Filenet has a buttload of products []; they also provide lots of consulting to go along with those products. BTW, consulting is IBM's bread and butter, if you didn't know. Filenet made [] $422 million bucks last year. At that level of income, IBM will make its money ba
    • Re:Worthless (Score:1, Insightful)

      by Anonymous Coward
      The value of a document management system is not in the amount of work that it took to code the system. The value is in the processes the business would have to do if it didn't have a document management system. All the paper handling. Shuffling carts of paper from floor to floor, department to department. Trying to find a document again in some filing cabinet, among rows and rows of filing cabinet.

      Many businesses and government agencies would simply not be able to function without this type of system.
    • Re:Worthless (Score:3, Insightful)

      by Whelps ( 994742 )
      Dude, do you realize how stupid you sound? FileNet has its flaws, but it is a full-scale enterprise application that has an enormous client base and it would be near impossible for 20 average slashdotters could create a rival an application that even comes close to gaining market share on them in a year or two timeperiod. Regardless of the quality of the application itself, a company's worth comes from its revenue stream.
    • Value is not cost.

      You may install and use a piece of software which cost $5.50 to develop but which saves your organisation $500,000 per year. Someone sells that software to you for $450,000. You save $50,000 on the first year and $500,000 per year every year after that. The vendor makes $449,994.5 profit on the first implementation and $450,000 profit on each subsequent implementation.

      What's the value of that software? $5.50? Bollocks it is.

      Cost and value aren't directly related and the reason you aren't e
      • Nice point, but you are using an unrealistic cost model. Okay so the software costs $5.50 to write yourself. And we'll say the software saves you $500,000 a year, and has a price tag of $450,000. What you're missing is that blurring of the lines between software companies and service companies. You're CIO does the same math you do and he purchases the software plus a service package for installation, configuration and customization (generic software doesn't work the way your business works). Now initia
    • What is obvious is that you have no idea what you are talking about.

      A document management system comparable to Filenet's offerings would require more than 20 man years [] to develop. If you disagree, then please go for it; Filenet needs the competition. Otherwise, STFU.

      Filenet provides more than just document management software. They provide a whole slew of products, as well as consulting services and support. Their document management, content management and workflow management products are used by 70
    • This isn't Microsoft Sharepoint we're talking about here. This is a framework for managing unstructured content--that means forms, records management, business process management, content-centric workflow, email archiving and retention, regulatory compliance, web content management, imaging, search and discovery. FileNet spent 14 years building up their portfolio through acquisitions and development. IBM arguably invented document management in the 1960s and has been working on their Enterprise Content M
    • Re:Worthless (Score:3, Insightful)

      by putaro ( 235078 )
      20 "average" slahdotters? About a million years. As far as I can tell the average slashdotter is not a programmer. 20 "average" slashdot programmers? Well, you can get a basic application together in a year or two. Then, you will continue to refine, improve, reduce. The big features actually tend to take the least amount of time. It's all of the little nice features that make a really polished product that take the time.

      In any case, as others have pointed out, FileNet was a functioning, profitable co
  • If we are, then Mao is rolling over in his spartan, commie grave. If not, then I'd say this is just a software version of vertical integration, first seen thousands of years ago, in the 1920's.

  • by truthsearch ( 249536 ) on Friday August 11, 2006 @12:18PM (#15889721) Homepage Journal
    IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.
    • by bhmit1 ( 2270 ) on Friday August 11, 2006 @12:35PM (#15889816) Homepage
      IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.
      Yes and no. They do have the people, but most are off consulting or supporting the existing product set, not developing new products. IBM has been making all their advances by acquisition for many years now. And seeing what the products look like when IBM builds them in-house, we are probably better off that way. Hint: what do you think happens when someone says don't build something new if we already have it, and they have lots of different tools? Lots and lots of ugly glue and a poor tech that has to learn 15 products to do something other places do with a single simple interface.
      • And seeing what the products look like when IBM builds them in-house, we are probably better off that way.

        Oh [], really? []

        • Yes, really. You do have a good example with eclipse, but I can find more than enough counter examples. I work in the systems management side, so my examples will be Tivoli biased. But one bad example is patch management []. Yes, you're reading that right, 8 cd's to ssh to from one windows box to another and download patches from WSUS. And the product cannot be install on a system that has ever had any other IBM products installed before because of version conflicts.

          Another is the way IBM forced all th
        • by nostriluu ( 138310 ) on Friday August 11, 2006 @01:24PM (#15890115) Homepage
          IBM bought Cloudscape, which years later they released as Derby. Eclipse is a well designed product, but in effect they bought the developers who designed it (OTI, years ago admittedly, and they seem to work as a separate unit).

          In fact, IBM has bought most of their major products (Notes, etc) that I know of (I have no idea about the history of the mainframe stuff &c).

          This is all probably better than the "not invented here" syndrome, I would except that focused start ups are more keen to innovate, particularly on vertical apps, than workers in a giant company like IBM.
        • |Oh [], really? []

          Both Eclipse and Derby are the result of previous shopping sprees by IBM.

          Eclipse was developed by the IBM Ottawa Software Lab []. This lab started life as OTI, a company which developed Smalltalk technology, that IBM bought in 1996 [].

          Derby is the open-source version of the Cloudscape DB. Cloudscape was a Java DB company which was acquired by Informix in 1999 [], which was in turn acquired by IBM in 2005 [].

          • Almost--Cloudscape was acquired in 2001 via the Informix buyout, not the 2005 Ascential deal. There were 27 people focused on Cloudscape and within a week of IBM ownership, that number was whittled down to 9, then shuttled over to the DB2 Everyplace team. It took IBM a long time to realize the value of some of those Informix assets (and they still haven't figured out what to do with Red Brick), but they realized that Informix Dynamic Server is still a better-performing OLTP system than DB2 UDB and that Cl
          • The traditional IBM approach seems to be to buy a software product, not improve it, and ride it into the ground, relying on people to keep buying it on name alone. I'm really hoping the open source stuff does not follow this path.
    • by gstoddart ( 321705 ) on Friday August 11, 2006 @01:09PM (#15890017) Homepage
      IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.

      Well, companies have market share and customers. If you build from scratch, you have to go in and compete from the ground up. If you buy an established company, you then get to control the direction of that software, as well as instantly getting yourself customers.

      And, when fortune 500 buyers are looking at stuff, those reports from the Gartner Group go a long way. Basically, if your software isn't in the magic quadrant which makes it best of breed, you're probably not considered at purchase time. It goes a long way.

      Buying FileNet, they undoubtedly get a huge installed base, as well as the opportunity to further sell into that organization. (Never underestimate the value of credibly getting your foot in the door to sell all of your other products.)

      And, really, time to market and maturation of the software means that if you have the pockets, you can buy it sooner and possibly cheaper than you could build it. But, buying it means you get a salesforce, support infrastructure, and people who already know the software. As well as market recognition and whatever goodwill that has earned them from customers.

      I've been watching some heavy-duty consolidation in the markets for a few years. A lot of companies prefer to acquire than try to develop from scratch. So, you're partly right - it is about buying them before someone else does. But it's partly about being in a new market segment next month, instead of in three years with a rev 1.0 product. That's too long of a time when you're competing against people already established in the market. Because they will have moved ahead a lot in that time, so you'll always be playing catch up.

    • IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.

      In the last quarter's earnings conference call, an analyst specifically asked the IBM CFO what form of acquisition IBM makes. Loughridge described the great majority as "accretive" almost immediately. There is little overlap with existing offerings, so the acquisition's continued growth does n

    • IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.

      Software is only one asset of a company like FileNet. How about: brand, customer loyalty, domain expertise, market share, talent. Even considering just the software: it isn't really helpful to pay a half a billion dollars to duplicate someone else's product if you will end up being two years be

  • Dealing with the IBM rep is bad enough but now we will have to deal with them pushing their new products when I just want answers about the product I just bought from them. The only thing worse than this is when they "synergize" their sales force. I recently had a Symantec sales rep come in to discuss their Symantec Security Information Manager product and they sent a sales rep from Veritas. The only thing he could tell me was Veritas would make a great backup system. I had to tell him we already use Tivol
    • by FooAtWFU ( 699187 ) on Friday August 11, 2006 @12:51PM (#15889917) Homepage
      Dealing with the IBM rep is bad enough but now we will have to deal with them pushing their new products when I just want answers about the product I just bought from them.
      I don't work for IBM (anymore! haha, byebye internship) but from what I've seen, IBM's focus is not on providing people spiffy software so much as...
      The new message to software vendors: Fix my call centers, don't just sell me a product.
      This is very much the direction they are trying to make things head - not a hardware company, not a software company, not even as "software as a service" company so much as a business company - they want to be "all sorts of IT and business services, including software and such to help keep things moving". They will gladly come in and show you all sorts of ways to change (ideally, to streamline) the way you're doing business. (If you pay them to. And I can't speak to their results one way or another. But would you like some links to spiffy promotional literature?)

      Hmm. Was the summary written by an IBMer by any chance? I don't see the words "on demand" or "business transformation" or anything like that, but...

  • by eclipz ( 630890 ) <skyspirit@g m a i l . com> on Friday August 11, 2006 @12:27PM (#15889775)
    The big question is, how is this all going to integrate? IBM already has it's own document management system that competes against FileNet in a lot of areas. So, is one going to go away? Or perhaps they'll continue to sell both and basically bring their credibility down for both. Not only that, but with FileNet phasing out one of their products and forcing their user base to upgrade, will FileNet lose a lot of their base because they don't trust that it will be around much longer? There are a lot of questions without much of an answer. Sure one hell of an impulse buy.
  • Interesting point (Score:5, Interesting)

    by Jerry Coffin ( 824726 ) on Friday August 11, 2006 @12:45PM (#15889887)
    Reading this got me to thinking about a slightly different point -- one that's been niggling at the back of my mind for a while, but I haven't seen discussed much. Maybe that's just because to everybody else it's just to obvious to mention though...

    It seems to me that computers are progressively becoming less and less about computing, and more and more about simply storing and communicating data. A long time ago, IBM bought out Lotus software. Lotus became famous based on 1-2-3. It was the "killer app" that sold tons of DOS machines -- and oriented heavily toward doing computation. I'm not sure if IBM even still sells 1-2-3 or anything derived from it -- the big Lotus-derived products are Notes and Domino (I.e. storing and communicating data, not doing actual computing). In fact, you hardly hear about spreadsheets any more. Excel works, and a lot of people use it, but it doesn't seem to be a "killer app" for much of anybody anymore -- I'm pretty sure I haven't heard of anybody buying a machine to run it (or any other spreadsheet) in years.

    Now acquisitions (and new development) seem to be oriented almost entirely toward storing and communicating data, not toward doing any actual computing. The same seems to be happening in software development as well. Languages for doing real computation, like FORTRAN and Matlab are almost universally seen as boring and passe. Even languages like C++ oriented kind of halfway toward computation seem to be viewed as a whole less less than exciting, anyway. What's hot are things like Ruby on Rails. Of course, you can write computational code in Ruby if you want to, but I'm pretty sure nearly nobody uses Ruby to do things like matrix multiplication -- they use it for Rails, to set up web sites that talk to databases (storing and communicating data).

    In fairness, I suppose I should add that there are still a few "big things" oriented heavily toward real computation -- Folding@home and Seti@home for a couple of obvious ones -- and BOINC has a number of less obvious/well-known ones as well. Clearly computation isn't entirely dead and gone or anything like that.

    I'm a little uncertain what this emphasis on simply storing and communicating data really means though. Was most computing that involved real computation really just a fad, and people were doing it primarily because it was new and different? Is the current emphasis on data storage and communication really just a fad, and people will care a lot less about it in a few years? Is it a matter of the "computing" parts of things mostly being cured problems, so they're less apparent, even though they're really as important as ever?

    I suppose for this to be a proper comment, I should have a strong opinion to express about it, but I really don't -- at least for me it's almost entirely an open question.

    • by AutopsyReport ( 856852 ) on Friday August 11, 2006 @01:00PM (#15889960)
      Is the current emphasis on data storage and communication really just a fad?

      No, not at all. The current emphasis on storage/communication/collaboration is the due to the business world recognizing the capabilities of what computing can do for them. Most businesses are not interested in the computational power of computing as much as they are the expenditure-reducing, labour-reducing and capability-increasing power of computing. The present computations revolve around business logic. Typically the business world holds a much different perspective on how a computer is useful to them.

      Excel works, and a lot of people use it, but it doesn't seem to be a "killer app" for much of anybody anymore

      Excel was and still is a very powerful too. There really isn't a subtitute for it. Personal, business, and government all use it. Microsoft Office isn't popular by coincidence -- the Excel, Access, Word, etc., suite is very powerful for all categories of work.
      • Also: Excel is used as much for communication and data storage as it is for computation. It isn't as if an Excel spreadsheet is a stateless computer program. It's a container for data that can be easily transmitted and manipulated if necessary.
      • Not only is your description accurate about business uses for computers, this has been the case since the mainframes in the 60's and probably b4.
    • FileNet is an imaging and workflow system. You are correct that it is not doing the processing. It is designed to integrate with your existing processing systems that actually do the work. The workflow piece pretty much tracks the process of how far along a work process is, even if it is a manual step.

      The imaging piece is made to store images of documents, especially in the case of businesses that are required by law to keep certain documents for a number of years.

      The thing is that many businesses
    • by mcrbids ( 148650 )
      As technologies mature, they become infrastructure for other technologies, and slowly disappear from view.

      I remember a time, not so very long ago, when the very idea of a cellular phone was just electrifying. I watched the James Bond shows where he had a phone in his car with envy!

      Now, I have a cheap, reliable cell phone at my hip (pretty much) 24x7, and it's casual. I'm annoyed more often than not getting calls when I'm trying to get something done.

      The current emphasis on computing as a communications and
    • I think the problem lies in the fact that computing software and hardware has basically solved the processing needs of most businesses from a computational perspective. Spreadsheets, word processing, and encrypting information are all most businesses really want that are computational problems rather than information storage and retrieval. The tougher problems like business process scheduling, supply line management, financial planning, etc. have yet to be truly automated because these are *gosh* very tough
    • Congratulations, you've noticed that there are a billion times more trivial problems than there are hard ones.
    • To speculate wildly, I suggest this is due to the changing nature of computer use - in the business world, where I earn my living, management is still learning lessons in computer use that researchers figured out a long time ago.

      Most business computer use *is* just about storing and organizing very dull data. Most accounting software STILL sucks (non-intuitive, complex UI; complete lack of interoperability; data lock-in; resource hogs...), fileservers are nothing but big file cabinets (and about as well org
  • IBM paid just over 700mm for MRO Software last week. It's the best-of-breed maintenance management sytem in the market. I am very curious to see IBM buying up all these companies but their consulting wing does do a fair amount of work deploying Maximo and Filenet, so I see some synergy (to use a horrific cliche' from the 90s). ANyhoo, I'm hoping IBM increases the marketing exposure for MRO Software and their Maximo product. More sales means more value for my consulting services.
    • I'm an Maximo (MRO's main product) end user, kind of interested to see how this pans out. I see they're lumping it into Tivoli, which includes Websphere and DB2.

      For those unfamiliar, Maximo (from at least version 5 onwards) runs on an application server that is either IBM's Websphere or BEA's Weblogic, I don't have figures but I'd guess the majority of installations use the latter. This might be a worrisome development for companies that went with BEA instead of IBM. Also, the database normally runs o
      • There is a DB2 version already. The application is quite server agnostic, so I don't fear IBM pushing Weblogic out of the picture anymore than I would expect them to cease supporting the app on windows infrastructure. As far as why it's in the Tivoli group: the Tivoli group supports IT asset management, something that is an emerging market for Maximo. My only fear is that MRO loses focus on their bread and butter, which is serious maintenance management from asset intensive verticals, like utilities and fa

      • I'm an Maximo (MRO's main product) end user, kind of interested to see how this pans out. I see they're lumping it into Tivoli, which includes Websphere and DB2.

        Neither DB2 nor WebSphere (the brand or the Applicaton Server) are a part of Tivoli.
        • The Tivoli division at IBM, not the product...

          If they aren't part of that division, then someone needs to update the Wikipedia entry on Tivoli [].
          • From said article:

            Tivoli Software is the systems management brand of the IBM Software Group. IBM purchased Austin, Texas-based Tivoli Systems, Inc. in 1996[2] and allowed it to operate as a wholly-owned subsidiary for a few years before forming the Software Group. In addition to Tivoli this IBM division includes WebSphere, DB2, Lotus Software and Rational Software.

            I believe "this IBM division" refers to Software Group, not Tivoli.

            Indeed, if you look here [], you'll see the five IBM software brands are In

  • by xdxfp ( 992259 )
    This has been the case for years. IBM has always specialized on "Enterprise Solutions" for businesses. Indeed, this is where IBM makes most of their money (not their consumer products).
  • Wait, isnt this just what Xerox was doing in the '90s?
  • Software - Service (Score:3, Interesting)

    by Mr. Jaggers ( 167308 ) <jaggerz@g[ ] ['mai' in gap]> on Friday August 11, 2006 @03:48PM (#15891055)
    "As a result, the lines are starting to blur... between service companies and software companies."

    It seems to me that the F/OSS phenomenon is largely responsible for this shift. Think back to Cygnus, ISC, and other companies like them. For that matter, the early Red Hat years seem to fit that description, as well. Value-added service on top of a GPL'd stack is far from uncommon, these days, and often makes for a rather reasonable business strategy.

    Couple that with IBM's grand (and expensive) ongoing experiment with gnu/linux, and this sort of observation is hardly surprising. It will be interesting to see what tech from these recent acquisitions make their way out into the F/OSS community at large.
  • IBM used to invest in it's employees as much as it did technology. Now, however, it's been paying for it's recent acquisitions by offshoring thousands. While I have no real problem with offshoring (it looks fine on paper), in practice it results in companies sacrificing real talent for less expensive labor. At some point, the pendulum needs to start swinging back the other way.
  • IBM SWG's chief business issue is that they are hyper-concentrated at the top end - several hundred of their customers account for 90%+ of their revenue. They tell us that this available market is growing circa 2% a year, so the only way to increase market share in that segment is by acquiring other company's technology and customer bases... or by switching to more service orientated business (Business Process Outsourcing or Redesign is growing 100% a year at the moment). Or both.

    Same thing is happening for

"The number of Unix installations has grown to 10, with more expected." -- The Unix Programmer's Manual, 2nd Edition, June, 1972