IBM Elevates Its Cloud Offerings with Purchase of Cast Iron Systems

IBM Senior Vice President and Group Executive for IBM Software Group Steve Mills announced the acquisition of cloud integration specialist Cast Iron Systems at the IBM Impact 2010 conference in Las Vegas on May 3. The privately held Cast Iron is based in Mountain View, California and delivers cloud integration software, appliances and services, thus the acquisition broadens the delivery of cloud computing services for IMB’s clients. IBM’s business process and integration software portfolio grew over 20 percent during the first quarter and the company sees this deal as a way to expand it further. The financial terms of the acquisition were not disclosed although Cast Iron Systems’ 75 employees will be integrated into IBM.

According to IBM officials, Big Blue anticipated the worldwide cloud computing market to grow at a compounded annual rate of 28 percent from $47 billion in 2008 to a projected $126 billion by 2012. The acquisition of Cast Iron Systems reflects IBM’s expansion of its software business around higher value capabilities that help clients run companies more effectively.

IBM has transformed its business model to focus on higher value, high-margin capabilities through organic and acquisitive growth in the past ten years–and the company’s software business has been a key catalyst in this shift. IBM’s software revenue grew at 11 percent year-to-year during the first quarter and the company generated $8 billion in software group profits in 2008 (up from $2.8 billion in 2000).

Since 2003, the IBM Software Group has acquired over 55 companies, and the acquisition of Cast Iron Systems is part of that. Cast Iron Systems’ clients include Allianz, Peet’s Coffee & Tea, NEC, Dow Jones, Schumacher Group, ShoreTel, Time Warner, Westmont University and Sports Authority and the cloud integration specialist has completed thousands of cloud integrations around the globe for retail organizations, financial institutions and media and entertainment companies.

IBM’s acquisition comes at a time when one of the major challenges facing businesses when adopting cloud delivery models is integrating the disparate systems running in their data centers with new cloud-based applications–which used to be time-consuming work which drained resources. IBM gains the ability to help businesses rapidly integrate their cloud-based applications and on-pemises systems, with the acquisition of Cast Iron Systems. Additionally, the acquisition advances IBM’s capabilities for a hybrid cloud model–which allows enterprises to blend data from on-premises applications with public and private cloud systems.

IBM, which is know for offering application integration capabilities for on-premises and business-to-business applications, will now be able to offer clients a complete platform to integrate cloud applications from providers like Amazon, Salesforce.com, NewSuite and ADP with on-premises applications like SAP and JD Edwards. Relationships between IBM and Amazon and Salesforce.com will essentially become friendlier due to this acquisition.

IBM said that it can use Cast Iron Systems’ hundreds of prebuilt templates and services expertise to eliminate expensive coding, thus allowing cloud integrations to be completed in mere days (rather than weeks, or even longer). These results can be achieved through using a physical appliance, a virtual appliance or a cloud service.

Craig Hayman, general manager for IBM WebSphere said in a statement, “The integration challenges Cast Iron Systems is tackling are crucial to clients who are looking to adopt alternative delivery models to manage their businesses. The combination of IBM and Cast Iron Systems will make it easy for clients to integrate business applications, no matter where those applications reside. This will give clients greater agility and, as a result, better business outcomes.”

IMB cited Cast Iron Systems helping pharmaceutical distributor Amerisource Bergen Specialty Group connecting Saleforce CRM with its on-premise corporate data warehouse as an example. The company has since been able to give its customer service associates access to the accurate, real-time information they need to deliver a positive customer experience while realizing $250,000 in annual cost savings.

Cast Irons Systems additionally aided a division of global corporate insurance leader Allianz integrate Salesforce CRM with its on-premises underwriting applications to offer real-time visibility into contract renewals for its sales team and key performance indicators for sales management. IBM said that Allianz beat its own 30-day integration project deadline by replacing labor-intensive custom code with Cast Iron Systems’ integration solution.

President and chief executive officer of Cast Iron Systems Ken Comee said, “Through IBM, we can bring Cast Iron Systems’ capabilities as the world’s leading provider of cloud integration software and services to  global customer set. Companies around the world will now gain access to our technologies through IBM’s global reach and its vast network of partners. As part of IBM, we will be able to offer clients a broader set of software, services and hardware to support their cloud and other IT initiatives.”

IBM will remain consistent with its software strategy by supporting and enhancing Cast Iron Systems’ technologies and clients while simultaneously allowing them to utilize the broader IBM portfolio. For more information, visit Nubifer.com.

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  1. Interesting. IBM is making a power play on this one…

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