IBM Reaffirms Acquisition Strategy with Lombardi

IBM announced its intention to acquire yet another software provider, Austin, Texas-based Lombardi, in a bid to bump-up its business process management capabilities and solidify its leadership in the middleware market. Like ILOG, which it acquired last year, IBM intends to fold Lombardi’s department-level BPM under the WebSphere umbrella, competitively positioning Big Blue and its VARs to expand their federal and cloud computing businesses.

Acquiring Lombardi is just the latest demonstration of Big Blue’s strategy to expand its BPM capabilities through both acquisitive and organic growth. IBM’s purchases of ILOG, InfoDyne and AptSoft, all completed last year,  show the behemoth is focused on growing margins, owning a customer account end-to-end, and, continually positioning itself to take advantage of emerging trends in the tech marketplace.

"The acquisition of Lombardi continues a long line of software acquisitions that IBM has made to differentiate itself and accelerate new opportunities in key areas such as business analytics, process and information management,” said Craig Hayman, general manager, IBM Application and Integration Middleware.

The company has acquired more than 90 companies since 2003. Lombardi is number 8 on the list of Big Blue’s business integration acquisitions.

Lombardi brings an impressive list of large enterprise and government customers like Wells Fargo, ING Direct, the Department of Homeland Security, and Pfizer that broaden IBM’s reach into the enterprise and provides additional potential incremental revenue opportunity for the company. The Lombardi suite is focused on department-level business processes, and supports WebSphere. According to IBM, the two companies share multiple joint customers that use the products together.

Lombardi’s addition to the IBM product portfolio will refine Big Blue’s focus on Smarter Planet and cloud computing even further—two key areas where IBM anticipates exponential growth.

“It [the acquisition] provides yet another anchor to support IBM’s Smarter Planet initiatives that are automating and improving virtually every aspect of business and society — from transportation, electrical grids and government to financial services, insurance and retailing," said Hayman.

First, Lombardi’s hold on the State and Local market as well as its entrenchment in large federal agencies, provides IBM with more industry-proven BPM to support its substantive government business and expand its growing list of Smarter Planet deployments.

Second, Lombardi’s enterprise customer list and BPM capabilities give Big Blue an edge when trying to move enterprise customers to the cloud. Lombardi’s department-level deployments provide an optimal target for moving to the cloud. IBM invested loads of cash in the cloud and anticipates hearty returns from its enterprise customer base buying into the craze.

So far, IBM’s “eat ’em up, buy ’em up” software acquisition strategy seems to be paying off. Even in the economic downturn, the company repeatedly grew its software business. In the third quarter, software revenue grew 20 percent and Big Blue says it is on target to reap $8 billion in software revenue this year alone—up from $7.1 billion in 2008.

As always, the acquisition is subject to regulatory approvals, but is expected to close in early 2010. As for when product integration will occur, an IBM spokesperson said the existing relationship between the two companies will lessen time to market. He said, the “‘hard integration work is already done based on the long-standing relationship our two companies have had.”