Supply chain technology acquisitions have been in the news of late.  On July 28 there was a surprise announcement that IBM intends to acquire French software provider ILOG, and today JDA Software announced that it was acquiring supply chain planning technology vendor i2 Technologies, a fairly well known player in the industry.  In this Part One post, I will share my thoughts and observations regarding the ILOG acquisition, and in part two, the i2 acquisition.

IBM intends to acquire ILOG for an aggregate purchase price of approximately $340 million, subject to a series of approvals from both organizations. ILOG is essentially a software tools and custom applications provider. Over 500 software OEM’s embed ILOG business rules, optimization, and visualization technologies within their applications.  When speaking to my clients about ILOG’s role in software, I often use the 1800’s California gold rush analogy.  Who benefited more by the rush to discover gold, the individual miners panning for gold, or the makers of the picks, pans and shovels?  In software, ILOG serves as the optimization or business rules engine for many software vendor and internally developed applications, including supply chain planning and analytics.  ILOG serves as the “picks and shovels” for sophisticated software needs.

According to documents filed with the U.S. Securities and Exchange Commission (SEC), IBM’s WebSphere software group intends to assimilate ILOG into their Business Process Management and SOA Suite of offerings.  ILOG joined the IBM SOA Specialty Program in October of 2006, and the two vendors have been jointly collaborating on customer implementations, as well as internal scheduling and other planning applications to support IBM’s internal manufacturing and supply chain processes. IBM’s Websphere group has been quick to recognize the growing importance of both business rules components and visualization as key components of a client’s overall SOA strategy.

Of added note is that in February of 2007, ILOG acquired supply chain network design and inventory optimization vendor Logic-Tools, and assimilated that company into a newly formed supply chain applications business consisting of ILOG’s custom production planning and Logic-Tools applications.  This particular group grew 35% in year-over-year revenues, thus far in 2008.

After reviewing current SEC and other briefing documents, I found no specific mention of plans related to the supply chain applications group.  I find that interesting since the LogicNet Plus 6.0 XE supply chain network design application has been positioned as a carbon footprint analysis tool to support green supply chain initiatives, and has been garnering a lot of attention of late. IBM has also been on the forefront of garnering attention to its green and sustainability initiatives. IBM currently offers its own inventory optimization application, and also partners with SmartOps, a competitor to ILOG in the inventory optimization area.

The acquisition transaction is not expected to close until mid to late September.  More specifics should hopefully emerge relative to plans related to plans for the supply chain business applications division of ILOG.  If your company is a user of Logic-Tools applications, I would encourage you to seek more specifics regarding longer term product support and development plans. IBM has often been a customer-responsive vendor and I would expect no less in the consolidation of ILOG’s supply chain applications business.

In the meantime, you can provide your comments, desires, and/or concerns relative to this acquisition in the comments section below this post. Call or email if you require specific assistance.

 Bob Ferrari