IBM: $1.3 billion ISS buy will create ‘world leader in security services’

Bolstering its presence in the security marketplace, computing giant IBM has agreed to acquire network intrusion and managed services provider Internet Security Systems (ISS) for about $1.3 billion, the two companies announced today.

The acquisition will further IBM's business plan to better address IT management services for its customers as security becomes "one of the most complex challenges companies are facing, regardless of size, location or industry," according to a joint statement issued by both firms.

Atlanta-based ISS, founded in 1994 and counting 11,000 customers, provides automated intrusion prevention solutions and managed security services that seek to protect enterprises from the latest vulnerabilities and exploits. The company - which becomes the fourth swallowed by Big Blue in a month - will join IBM as a business unit within its Global Services' Security organization, rather than in its software arm, Tivoli.

IBM wants to further its position in the growing managed services sector, and "this acquisition provides (customers) with a partner they can trust to take on this critical role," Val Rahmani, general manager of IBM's infrastructure management services, said today during a news conference call.

"We've always taken security very seriously for ourselves and our clients, and we know it's a critical business challenge for our clients," Rahmani said. "This acquisition will create the world leader in internet security services. It will provide clients with a complete solution."

Tom Noonan, ISS president and CEO, said integrated ISS solutions now can benefit IBM's global reach of customers as more organizations choose to outsource their security management in light of rising costs.

"The complexity of managing multiple solutions and point products and providing (compliance) reporting has become a massive drain on IT budgets," he said during the call.

Paul Stamp, a Forrester researcher, said the acquisition is less about a bolstered managed security services division - IBM already has a strong practice - and more about providing the opportunity for IBM to "plug gaps in their security portfolio."

Some analysts said ISS had been struggling to expand its IPS market share against notable players such as Tipping Point and McAfee, but the IBM acquisition could help.

"This will give them a new and very large channel to help them expand their market presence," Stamp said. "I do think there's going to be a few customers who are going to be irked by losing their independent service provider."

Richard Stiennon, founder and chief research analyst at advisory firm ITHarvest, said he views IBM's further entrance into the security space as a natural progression.

"Security is maturing and getting closer and closer to the operational side of doing IT," he said. "And you can't do that without having a security company, and the bigger shops are noticing that."

Following the acquisition, expected to close in the fourth quarter of this year, IBM will:

      · Integrate ISS' software technology with Tivoli's IT security management portfolio.

      · Sell ISS' Managed Security Services and portfolio of products through IBM's and ISS' global channel and business partners.

      · Expand the scope of its business and IT asset management consulting practices by delivering services for ISS solutions.

This marks IBM's fourth acquisition this month following Big Blue's purchases of Webify Solutions, MRO Software and FileNet.

Asked why IBM appears to be on a buying spree, Rahmani said the 118-year-old company wants to "continue to drive growth in areas we see opportunity."

No ISS employees are expected to lose their jobs as a result of the purchase, and the company plans to remain open in Atlanta, Noonan said.

Click here to email reporter Dan Kaplan.

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