Intelligent Enterprise

IBM today announced that it plans to acquire ILog, an unquestionable leader in the business rules engine marketplace. The acquisition comes at a time when ILog seemed to be faltering, with declining profitability and reliance on a troubled financial sector, but there's no doubting the tremendous value to IBM and customers.

IBM is not new to business rules engines (BRE). WebSphere has a rules component, and IBM has experience with various other rules integration models (e.g. PegaSystems, Haley etc.) as well as with in-house experimentation. Yet, IBM has always lagged in its BRE capabilities. In contrast, ILog is a known market leader with formidable capabilities and established market presence – Forrester ranks ILOG and Fair Isaac as the top two BRE vendors. Pegasystems and Corticon are the next largest competitors, while Haley was recently acquired by Australian company RuleBurst.

IBM's acquisition strategy is truly impressive: Ascential, Cognos, FileNet, ILog – all deals that indicate a selective approach to acquiring vendors that have demonstrated leadership in terms of both technology and market presence… and a willingness to pay a price that's worthy of that leadership.

It remains to be seen, however, whether this strategy (of creating a strong, all-encompassing range of solution capabilities from IBM) is good for customers in the long run or whether it will hurt customers by wiping away competition as soon as it reaches a meaningful size. IBM, of course, is not alone in its acquisition strategy: Microsoft, SAP and Oracle are all energetically pursuing much the same strategy.

In business rules capabilities, Microsoft has BizTalk, Oracle has Oracle Business Rules, and SAP has the Yasu acquisition, but none of these can go head-to-head with ILog. Next step: shall we say, Oracle acquires Fair Isaac (currently valued at around $1.1 billion)?