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IBM buys MRO Software

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Comment IBM has announced that it has reached a definitive agreement to acquire MRO Software Inc.

The all-cash deal will see IBM pay $25.80 per share, valuing the acquisition at approximately $740m. As is ever the case in such circumstances, the acquisition is subject to the usual raft of shareholder and regulatory approval and closing conditions. The deal is expected to close in Q4 2006.

As a company, MRO was founded in 1968 and currently employs around 900 staff worldwide. MRO's products focus on the areas of Enterprise Asset Management, Service Desk, and Service Catalogue. These are currently marketed under the Maximo brand and the company has attracted over 10,000 customers around the globe.

MRO brings with it both a direct sales force and a wide range of partners with considerable experience of implementing asset and service management solutions.

Following the completion of the acquisition, IBM intends to establish MRO Software Operations as a business unit within the IBM Tivoli software unit and to market and sell MRO software products and services through IBM's and MRO's sales organisations along with the business partners of both organisations.

It is expected that over time MRO's software technology will be integrated into Tivoli software solutions and that IBM Global Services will expand its range of asset management consulting practices and services. The integration of the technology will be aided by the fact that MRO has rebuilt and re-architected its entire software solution portfolio using J2EE and SOA principles.

There is today no doubt at all that enterprise asset management is important. Indeed, in a recent survey of CEOs, around 40 per cent of those responding highlighted "asset utilization" as an area of major focus.

With IT now a cornerstone in almost every business transaction, the optimisation of IT asset usage has never been more important, nor more visible. As we have said before, effective IT management can only be built on a solid foundation of asset and service knowledge.

Asset Management and Service Catalogue are the foundations on which IT operations run and by which the costs associated with service delivery optimised. The addition of the MRO offerings adds real depth to the IBM management suite and complements the existing portfolio of tools well.

It is worthwhile noting the complementary fit with other IBM acquisitions of the last eighteen months, especially Isogon, the mainframe software asset management solution, and CIMS Lab with its charge back and financial reconciliation tools.

While much of the initial focus of the acquisition of MRO is likely to centre on the Asset Management and Service Catalogue capabilities, it should not be forgotten that MRO also brings with it a well established Service Desk solution.

Although in many markets "Service Desk", or "Help Desk", is now considered to be well established, and therefore very difficult to swap out, IBM believes that it has considerable opportunities to win Service Desk deals in the rapidly growing emerging markets of the world. In fact, IBM has stated bluntly that it sees potential to grow its revenues in all of the areas in which MRO's solutions fit.

The acquisition sits well with the IT Service Management strategy solutions that IBM is building. However, IBM will need to take its entire management portfolio to market far more aggressively than it has in the past if the company is to penetrate the markets as effectively as it could.

While recognition of the value of IT management is rising, organisations know they need help and many do not know where to start. IBM must get potential customers to recognise it as having IT service management solutions that fit their needs. The technology is good; now Tivoli needs to show excellent marketing, selling, and solution delivery.

Copyright © 2006, The Sageza Group

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