IBM Buys Cast Iron Systems to Bolster Its Cloud Offerings

IBM announced that it has acquired cloud integration specialist Cast Iron Systems to broaden the delivery of cloud computing services for clients.

LAS VEGAS-IBM announced that it has acquired cloud integration specialist Cast Iron Systems to broaden the delivery of cloud computing services for clients.

IBM Senior Vice President and Group Executive for IBM Software Group Steve Mills announced the acquisition at the IBM Impact 2010 conference here on May 3. Cast Iron, a privately held company based in Mountain View, Calif., delivers cloud integration software, appliances and services. Financial terms of the deal were not disclosed. The acquisition expands IBM's business process and integration software portfolio, which grew more than 20 percent in the first quarter of 2010, the company said.

IBM officials said Big Blue expects the global cloud computing market to grow at a compounded annual rate of 28 percent from $47 billion in 2008 to $126 billion by 2012. Thus, this acquisition demonstrates how IBM is expanding its software business around higher value capabilities that help clients run their businesses more effectively. IBM's business process and integration software portfolio grew more than 20 percent in the first quarter of 2010.

In the past decade, IBM has undergone a significant shift in its business model to focus on higher value, high-margin capabilities through both organic and acquisitive growth. IBM's software business is a key driver in this shift. With its software revenue growing at 11 percent year-to-year in the first quarter, IBM generated $8 billion in software group profits in 2008, up from $2.8 billion in 2000. The IBM Software Group has acquired more than 55 companies since 2003.

And IBM is hoping the acquisition of Cast Iron will play into that. Cast Iron Systems has completed thousands of cloud integrations around the world for financial institutions, media and entertainment companies, and retail organizations. The company's clients are Allianz, NEC, Peet's Coffee & Tea, Dow Jones, Schumacher Group, ShoreTel, Sports Authority, Time Warner, Westmont University and many others, IBM said.

Moreover, a key challenge businesses face in successfully adopting cloud delivery models is integrating the disparate systems running in their data centers with new cloud-based applications. In the past, this involved time-consuming and resource-draining coding work. Through Cast Iron Systems, IBM is gaining the ability to help businesses rapidly integrate their cloud-based applications and on-premises systems, IBM officials maintain. The acquisition also advances IBM's capabilities for a hybrid cloud model, which is attractive to enterprises because it allows them to blend data from on-premises applications with public and private cloud systems, IBM said.

IBM is already known for the application integration capabilities it offers for both on-premises and business-to-business applications. With the addition of Cast Iron Systems to its portfolio, IBM will be able to offer clients a complete platform to integrate cloud applications from providers including, Amazon, NetSuite and ADP with on-premises applications, such as SAP and JD Edwards. In short, IBM will become much more friendly with business partners such as and Amazon because of this deal.

Using Cast Iron Systems' hundreds of prebuilt templates and services expertise, expensive custom coding can be eliminated, allowing cloud integrations to be completed in the space of days, rather than weeks or longer. And these results can be achieved using a physical appliance, a virtual appliance or a cloud service, IBM said.

"The integration challenges Cast Iron Systems is tackling are crucial to clients who are looking to adopt alternative delivery models to manage their businesses," said Craig Hayman, general manager for IBM WebSphere, in a statement. "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."

For example, Cast Iron Systems helped pharmaceutical distributor Amerisource Bergen Specialty Group connect Salesforce CRM with its on-premises corporate data warehouse, IBM said. In doing so, the company has been able to give its customer service associates access to the accurate, real-time information they need to deliver the best possible customer experience while realizing annual cost savings of $250,000.

In addition, Cast Iron Systems helped a division of Allianz, a global leader in corporate insurance, integrate Salesforce CRM with its on-premises underwriting applications to provide real-time visibility into contract renewals for its sales team and into key performance indicators for sales management, IBM said. Allianz replaced labor-intensive custom code with Cast Iron Systems' integration solution, beating its own 30-day integration project deadline, the company said.

"Through IBM, we can bring Cast Iron Systems' capabilities as the world's leading provider of cloud integration software and services to a global customer set," said Ken Com??«e, president and chief executive officer of Cast Iron Systems. "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."

Consistent with IBM's software strategy, IBM will continue to support and enhance Cast Iron Systems' technologies and clients while allowing them to take advantage of the broader IBM portfolio. And Cast Iron Systems' 75 employees will be integrated into IBM.