IBM has closed a $182 million deal on Tuesday to buy Corio, which delivers software online, and plans to pick up the pace of acquisitions to fuel growth in its mainstay services business, an executive in charge of the strategy said. International Business Machines Corp, the world's largest computer company, aims to strengthen its lead in existing markets for computer services as well as enter new areas, said Todd Gordon, vice president, portfolio management, for the company's services business.
IBM, which has made 40 acquisitions since 1995, many of them in software, is now looking for ways to stoke growth in its services business, the $46 billion engine that generates nearly half its revenues.
"It's a two-pronged attack." Gordon said in a phone interview late on Tuesday of the acquisition strategy.
IBM is eyeing acquisitions in areas such as Web services, security, small business services and vertical market acquisitions that would increase expertise in a specific industry, Gordon said.
IBM on Monday said it would pay $1.1 billion to acquire Ascential Software Corp, a maker of software used to mesh together retail computer systems, which grew 46 percent last year.
In Web services, Corio allows small- and medium-sized businesses to behave like big companies by providing hosted services and software tools as a service rather than requiring the companies to invest in their own central machines.
"It really is the first of what will probably be a series of strategic plays in building out our capabilities," Gordon said of the drive for smaller customers that Corio will aid.
Armonk, New York-based IBM wants to extend to small businesses its strategy of partnering with allies like Siebel or SAP, or even rivals like Oracle and its PeopleSoft unit, to deliver their software as a hosted service. It has some 60 partners for which it acts as a sales distribution pipeline. IBM is looking to expand beyond a historic reliance on big customers and long-term contracts into faster turnaround services deals that tend to be more profitable than multi-year projects.
IBM services leader John Joyce sees this as potentially representing at least a $500 million new market for services - and one that promises to help IBM reach its goal of returning to double-digit revenue growth in coming years.
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