IBM claims it's not in the applications business. True--at least as far as conventional packaged apps like ERP and CRM go. But the company's pending acquisition of content and business process management software vendor FileNet, along with earlier acquisitions such as Webify Solutions and Bowstreet, is evidence that IBM is prepping for a future when applications will look very different than they do today.

IBM is paying $1.6 billion in cash for FileNet, a developer of enterprise content management software, a market that's growing 19% per year and will reach $3.9 billion by 2008, Forrester Research estimates. IBM expects to complete the acquisition in the fourth quarter.

At first glance, there's significant overlap between the two companies' products. FileNet's P8 content management backbone competes with IBM's DB2 Content Manager system, but IBM execs say they'll continue to develop both platforms. FileNet's main applications include Content Manager, which lets users store and manage digital content; Email Manager, designed to help businesses deal with ever-increasing volumes of electronic messages; and Records Manager, which helps companies comply with document retention regulations.

FileNet fills some gaps in IBM's product line, particularly because it integrates business process management with document management. While IBM provides system-to-system integration through products such as its WebSphere Process Server, FileNet's document management tools support what Forrester analyst Connie Moore calls "human BPM"--tasks that involve document processing such as loan approvals, contract management, and insurance claim processing.

	Acquisition Binge IBM's purchases in the last eight months
	FileNet Content and business process management
	MRO Software Asset management
	Webify SOA development tools
	BuildForge Software development automation
	Micromuse Network performance management
	CIMS Lab IT resource virtualization management
	Bowstreet Composite application development

Although FileNet is a document management vendor, its crown jewel is BPM, Moore says. "IBM had only the barest capabilities in this area," she says, noting that by adding collaboration capabilities in its Lotus Workplace software, IBM "will provide something no one else has."

Such capabilities will be key in future software deployments that consist of Web services and composite applications based on service-oriented architecture, in contrast to today's monolithic ERP and CRM apps. "Enterprise customers need a more flexible way to tie together business processes to adjust to rapidly changing market conditions," says Murray Beach, president of Boston Corporate Finance, a tech-focused investment bank. "Packaged apps don't provide that."

How The Pieces Fit Together

Many of IBM's acquisitions in recent years have a place in this SOA blueprint. Earlier this month, it bought Webify and its tools for developing and deploying SOA-based applications. Last December, it acquired Bowstreet, a supplier of software for building composite apps. Two years ago, IBM acquired Venetica, whose software lets users access information in IBM and FileNet content management repositories. IBM is now hiring tens of thousands of people in India to build SOA-based software systems that consultants can resell to customers in various industries.

The FileNet acquisition also fits with IBM's strategy to deliver information from disparate sources as a service to users. Key to this information-on-demand effort was last year's $1.1 billion purchase of Ascential Software, a data integration products vendor.

To make all this work will require close cooperation between IBM's Information Management unit, of which FileNet will become a part, and IBM's WebSphere and Lotus operations. This coordination may not be easy. IBM has had difficulty in the past getting those parts of its Software Group to work together, Moore says. And with so many software products from so many acquisitions, IBM's sales force will be challenged with educating confused customers.