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First thoughts on the IBM/ILOG announcement


I got a chance to speak with ILOG today and do some thinking so it’s time to write more about the IBM and ILOG announcement. As it is an acquisition of one publicly traded company by another neither company can legally say very much. As a result I, like everyone else, have a bunch of questions that will just have to wait – probably to the end of the year when they hope to have the acquisition done. So, given the little we know, what can we say?

Overall I am cautiously optimistic about the future of ILOG’s products and the markets and customers they serve. IBM has long shown an interest in both business rules and optimization and their willingness to put real money behind these two decision-making technologies is very encouraging. IBM is also a distributed multi-national company with developers in lots of countries so they should be able to integrate the critical development know-how without too much pain. I don’t expect to see ILOG’s Rules products or its CPLEX optimization technology suffer any lack of investment or support from their new owners once they become part of the IBM family nor do I see much reason to worry that developers, product managers, consultants or architects will feel a sudden urge to be working elsewhere. All of this bodes well for existing and future customers.

Part of the challenge for IBM will be deciding how to integrate ILOG’s products into the IBM organization. While the WebSphere BPM/SOA offerings clearly need to be tightly integrated with business rules, so does FileNet (currently in the Information Management group) and so should the data mining and analytics aspects of the Information Management group. Business rules are, for instance, a perfect way to deliver “information on demand”, one of IBM’s core strategies. IBM also has a long standing optimization specialty group and, while their extensive use of ILOG’s CPLEX will clearly continue, the potential for that group moving into rules-based delivery of optimization is potentially very interesting. Business rules has always been challenged by the very breadth of potential uses and IBM will need to organize the new acquisition to make sure that business rules can be fully leveraged across the company’s product lines.

Indeed, several of the comments from the press release hints at this potentially very broad use of the ILOG rules products. Like this one:

…strengthen IBM’s BPM and SOA position by providing customers a full set of rule management tools for complete information and application lifecycle management across a comprehensive platform including IBM’s leading WebSphere application development and management platform

and this one:

ILOG technology has the potential to add significant capability across IBM’s entire software platform and bolster its existing rules management offerings. This includes improved rules and business optimization capabilities for Information Management offerings, better visualization for Lotus products, enhanced optimization within Tivoli solutions, and efficient supply chain management assets for planning and scheduling.

One of the questions this acquisition does leave hanging is what impact it has on both the rules and optimization markets. The optimization market was always a little odd, given the hugely dominant position CPLEX had. Dash Optimization, a distant second and now part of Fair Isaac, never really challenged its hegemony and IBM taking ownership of it will not change that. So no change there.

The business rules market is more complex. There has been a lot of discussion recently as to whether there even is such a thing as a business rules market. Business rules can be used for so many things – from decision management to process management, data quality to customer treatment – that defining it as a market is difficult. Personally I think this acquisition means the end of the discussion – there is not going to be a long term business rules software market. With major platform vendors like SAP (Yasu) and now IBM (ILOG) buying rules products to bolster their platforms it seems only a matter of time before Oracle and Microsoft do likewise. With business rules in the platform we will see two potential independent markets where business rules plays a significant part – Business Process Management and Decision Management – but no real independent business rules market.

The Business Process Management market, to the extent it remains independent from the platform business, will continue to come under pressure to do a better job of managing business rules. The power of business rules to make process management easier, more agile and more business-friendly means that the technology will continue to play a key role. Either companies will build their own (as Pegasystems has done), buy a smaller rule vendor or use the rules in the platform(s) on which it runs. It is possible an OEM business for business rules engines will continue, just not a real business rules management system market. The event processing market seems likely to move in a similar direction.

The emerging enterprise decision management market will also need robust business rules. This market does not need all the features of a traditional business rules management system but it does need deep analytic integration and real decision-centric performance management as well as adaptive control and adaptive analytics. I believe this market has a potential for independence because business decisions cut across systems, platforms and channels. Business rules vendors who don’t wish to become part of a platform should take this route and do so quickly.

To wrap up I thought I would pose some questions:

  • To Business Process vendors like EMC or Software AG relying on ILOG’s rules product – do you want to rely on IBM for this component of your offering? If not, what are you going to do?
  • To platform vendors like Oracle, Microsoft, Salesforce.com – what’s YOUR rules strategy? If IBM and SAP have one, you probably should also.
  • To Business Rules vendors like InRule, Corticon and Fair Isaac – do you want to be part of someone’s platform (if so, who) or do you want to be a decision management product? Decide quickly…
  • To vendors building on IBM’s platform but not using ILOG’s rules – do you think WebSphere customers will expect to have all their rules in the ILOG product once it is integrated? I do.
  • To customers using anyone’s rules product – are you clear on the difference between business rules in business process management, business rules in an SOA platform and business rules as the basis for true decision management? If you aren’t, maybe you should call me….

May you live in interesting times…


Comments on this entry are closed.

  • Mike Gualtieri July 28, 2008, 6:17 pm

    Nice post James. Do you see any scenario in which IBM’s acquistion of ILOG would be bad for business rules in general?

    • James Taylor July 28, 2008, 9:29 pm

      Well I think they could damage the market by delaying or under-investing in ILOG releases but I think that’s unlikely. I think it is bad for the idea that there is an independent business rules market per se but I don’t see how it can be bad for business rules as a technology/approach.

  • sm July 29, 2008, 3:43 am

    I do indeed think websphere customers will expect to be able to store all their rules once the ILOG products are integrated. However as I have experienced, customers expect the rule engine to do everything apart from making the tea, and now that it’s all part of websphere they will expect even more.

  • Zubin Wadia July 29, 2008, 1:03 pm

    Thanks for the analysis… I have some thoughts on your pontification:
    To Business Process vendors like EMC or Software AG relying on ILOG’s rules product – do you want to rely on IBM for this component of your offering? If not, what are you going to do?
    here: http://zwadia.com/

  • Laurent Pacalin July 29, 2008, 6:32 pm

    Mike:    Clearly,  IBM’s intent to purchase ILOG is another confirmation of the vision that Fair Isaac has been executing on for several years. Indeed, our customers have told us time and time again that Decision Management was critical to them in order to achieve sustainable competitive advantage and increased agility.   We’ve responded to their request by delivering a best-of-breed Decision Management platform incorporating   business rules and optimization engines as well as analytics. Fair Isaac’s Decision Management platform is in turn used to deliver high-end Decision Management applications for fraud, debt and claims management.

    Laurent Pacalin
    Chief Marketing Officer
    Fair Isaac

  • Jeff Hatfield July 30, 2008, 9:03 am

    From the perspective of the Mortgage industry this announcement by IBM makes a lot of sense.   IBM has been building their  Lender Business Process Services (LBPS)  subsidiary to  offer a vertically integrated mortgage origination outsource solution for the past year or so.  

    They are integrating the technologies of recent acquisitions Palisades Technology Partners and FileNet to develop an end-to-end mortgage origination, fulfillment, and servicing solution.   The acquisition of ILOG fills a major gap by providing the decisioning capabilities for pricing, underwriting, and fraud detection, etc.   Given the turmoil in the mortgage industry and IBM’s recent investments  they may stake a dominant position in this vertical.   The last key piece remaining will be to integrate their solution with electronic signatures to achieve the full  vision of e-Mortgage.   Can that be far behind?  

    Jeff Hatfield
    Home Loans Data Management

  • Hitesh August 13, 2008, 1:37 pm

    Interesting thoughts James. You do not talk about LogicTools products that ILOG had acquired and what future holds for them in the hands of IBM?

  • Mel November 10, 2008, 6:50 pm

    When i learned that IBM was going to acquire ILOG, I was so glad we chose ILOG over the others: Fair Isaac, InRule and Corticon. As a .NET architect and soon to be a SOA and business rules architect, I wished Microsoft acquired ILOG. But it seems that IBM still maintain some .NET product they acquired and IBM in their PR really presents BRMS as a strategic component in an SOA which is even truer with the increase of regulations we will have to cope in   the next future.