IBM Poised to Advance PLM with Bid for ILOG

4 Aug, 2008 By: Kenneth Wong

Big Blue could strengthen ties between lifecycle management and business process management.

Pierre Haren, chairman and CEO of France- and California-based ILOG, likes to think his company makes the world "hum rather than hiccup." Last week, Heran began humming to the tune of €215 million, or $340 million — the price IBM is offering for ILOG.

ILOG's domain, business process management (BPM), is a distant cousin of the product lifecycle management (PLM) industry. IBM is entrenched in both areas as a systems integrator. So when the two I's — IBM and ILOG — become one, Big Blue will be in a position to reshape the PLM industry by injecting a fresh set of business rules.

ILOG's Footprint in Manufacturing
According to ILOG, its business process management tools allow companies to "model, automate, monitor, and redesign business processes, such as opening a bank account, documenting a medical record, or customizing an insurance policy."

Among ILOG's estimated 3,000 customers worldwide are instantly recognizable manufacturing titans like Airbus, Anheuser Busch, Procter & Gamble, and Volkswagen. Airbus marketing teams use ILOG CPLEX, an algorithm-based decision-making and resource-allocation tool, to support Airbus's airline development and marketing campaigns. Another customer, Volkswagen Group of Spain, uses ILOG Optimization, ILOG CPLEX, and ILOG Solver to plan and offer customizable vehicles.

Beyond Websphere
IBM and ILOG are no strangers to each other. In 2005, when IBM Websphere Process Server v6.0 was released, ILOG quickly issued a connector to link its ILOG JRules, a component of the ILOG BPM system, to IBM Websphere.

"Because of its SOA [service-oriented architecture] support, ILOG software already ties into many of IBM's software offerings, including Tivoli, Information Management, and Websphere," said Robert Norton, IBM's program director for extended PLM solutions. "These offerings can derive powerful benefits through the life of a product, such as increased production and reduced inventory carrying costs."

ILOG's technology is also embedded in products of SAP and Oracle, IBM rivals in certain computing sectors. For instance, ILOG Dispatcher is a part of SAP Advanced Planner and Optimizer, a set of applications for production planning, pricing, scheduling, and shipping, and ILOG JRules is a component of Oracle BPEL Process Manager. For now, IBM is tight lipped about how it plans to handle ILOG's partnership with its competitors.

Forbes pointed out the purchase price IBM is offering is "a 56% premium on [ILOG's] one-month average closing price — a full valuation," but "the rewards could be worth it" (see "IBM Goes All Out For ILOG," July 28, 2008). Part of the reward might be the competitive advantage over Oracle and SAP.

Business Rules and Product Lifecycles
In early 2006, IBM's longtime partner Dassault Systemes, a PLM vendor, began offering what it called business process content (BPC). Simply put, Dassault believed it could sell industry best practices, culled from its experience working with leading manufacturers over the years, as ready-to-implement methodologies and support documents. At the time, IBM was supposed to be the systems integrator to plug these BPCs into the buyers' IT framework. (For more Read, "Industry Best Practices for Sale," PLM Strategies, April 2006.)

Dassault is no longer offering BPCs as stand-alone products. According to Dassault's press office, "Their content is core to Dassault Systemes' industry solutions ... [Dassault is] applying them to solve problems specific to industries."

IBM continues to actively sell Dassault's PLM products. In addition, IBM also has agreements to mix and match its own software and services with products from PTC and Siemens PLM, Dassault's rivals. With ILOG's business-rules management portfolio in its pocket, IBM can add value to potential PLM buyers, no matter which vendor's products they're buying.

"IBM has been marrying PLM with the discipline of business process management for many years," said IBM's Norton. "We have nearly 10,000 business process management consultants as part of IBM Global Services and many of them work on PLM projects across all industries worldwide."

That makes Big Blue an ideal PLM peddler, poised to rewrite the rules of the market.