The drive toward greater consolidation and a more integrated IT branch has changed IBM Corp. (NYSE: IBM) from a supplier of commodity hardware to the world’s leading supplier of integrated solutions for business. Today, the company spent $1.4 billion to purchase Sterling Commerce in a buyout from AT&T (NYSE: T). Sterling makes B2B software that IBM plans to incorporate into its offerings in retail, manufacturing, communications, health care and banking.
IBM may have been first major hardware company to move into the solutions business, but it has not put a lock on the space. Hewlett-Packard Company (NYSE: HPQ) and Oracle Corp. (NASDAQ: ORCL) have acquired companies that put them squarely into competition with IBM. H-P bought its way into the space with its purchase of EDS in 2008, and expanded it more recently with its buyouts of 3Com and Palm, Inc. (NASDAQ: PALM). Oracle’s recent purchase of Sun Microsystems gives the company a hardware base to go along with its earlier purchases of BEA Systems, Siebel Systems, and PeopleSoft.
Related: SAP Attacks Oracle with Sybase (SAP, SY, ORCL)
Today’s announcement from IBM is the latest in a string of small-company acquisitions, all in software. Earlier this month, IBM bought cloud computing company Cast Iron Systems for an undisclosed amount. In its announcement of that purchase, IBM said it expects cloud computing to expand at an annual growth rate of 28%, from $47 billion in 2008 to $126 billion in 2012.
The Cast Iron software provides an integration platform for cloud-based solutions that must work cooperatively with on-site systems. Sterling Commerce’s business integration software provides the link between software-as-a-service offerings and the cloud computing platform.
The growth of cloud computing depends most of all on the ability of vendors to convince customers that the cloud is secure as well as cheap. No business wants its confidential data floating around in the ether unless it can be absolutely sure that it is protected from prying eyes. That day is approaching, but it’s not here yet.
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