Big Blue Just Turned 100; Who Will They Buy Next?

The celebration of IBM’s 100th birthday this month has focused the spotlight squarely on Big blue. In an industry where companies fail all the time, IBM’s ability to stay relevant is impressive. So how does a company like IBM manage to stick around for so long?

As the ERP market analyst at Software Advice, I typically write about trends related to manufacturing software. But IBM is such a fascinating company and so pervasive in enterprise technology that I just had to dig deeper into what’s keeping Big Blue on top of their market.

It’s hard to put a finger on it, but one aspect is definitely their willingness to purchase hot tech companies that mesh well with their portfoilio. IBM is never far from a conversation about tech M&A; and for good reason – they completed over 100 acquisitions in the last decade alone. Their purchases range all over the map of enterprise technology, from professional services to data management to application performance management.

With much of the media focus squarely on IBM’s history this month, I thought it’d be fun to try and divine their future. I honed in on their M&A strategy and decided to dig deeper. The first order of business was pulling together the last ten years of purchases. Putting this into a spreadsheet doesn’t do much to help visualize their history so I decided to make an infographic instead. You can find my infographic here.

To nobody’s surprise, IBM has bought a lot of professional services (14 to be exact) in the last ten years. Another obvious area of focus is in business analytics, which includes the $5 billion purchase of Cognos.

After laying it all out, it’s pretty obvious that they like to purchase fairly deep in the technology stack. I looked out at the landscape of companies working in the vast infrastructure market and started to come up with potential targets.

Here are a few of the markets I can see IBM shopping in:

• Network & Service Assurance
• Virtualization
• Data Warehousing

Network & Service Assurance

This is one area that hasn’t been a huge focus for IBM but it makes sense given their presence in the data center. In face, it’s one of the few areas that they don’t manufacture their own products in. Their purchase of Blade Networks in 2010 could be a sign that they are going to change that.

In this market I see two targets that IBM could go for, Juniper and Broade. I think IBM goes for Juniper if they are looking to compete with Cisco and HP (who just bought 3Par). If they want to get in the market but don’t want to taint their existing relationship with Cisco, Brocade is a reasonable play that would send fewer shockwaves through networking.

Virtualization

IBM has stood by while their competitor EMC has dominated this market. Of course IBM has supported EMC’s virtualization competition, but it hasn’t had much of an impact. Instead VMware has only grown more dominant.

I think Citrix is a viable target for IBM if they want to step up their game in virtualization. Citrix is no stranger to M&A themselves and could bring a lot of technology beyond virtualization it IBM’s portfoilio. On the other hand, IBM may just make an offer to EMC to own VMware. This is a little bit out there because it would be such a costly move, but IBM is one of the few that can make this deal happen.

Data Warehousing

Analytics is such a focus for IBM that it’s hard to imagine that don’t continue in this space. The future is in big data – we’re drowning in data today and it’s just waiting to be mined. Who better to hammer down this market than Big Blue?

Informatica is an attractive target for IBM. They excel at data warehousing and have integration features that fit well into IBM’s middleware portfolio. At a market cap of $5.7 billion it wouldn’t be cheap, but it would be worth it. A little less likely but even more valuable would be SAS. Jim Goodnight is getting to retirement age these days. If he’s going to let go of SAS there aren’t any other big tech companies that I can see him selling to.

Of course, this isn’t the only area a company of IBM’s scale . I’ve included some more possible targets on my blog at: IBM Mergers & Acquisitions: Who’s Next? We’re hosting a poll over there so please stop by and make your voice heard. If you have a better idea than what I’ve listed, feel free to suggest it in the comments section. In a couple of weeks, we’ll be publishing the results.

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