Big Blue Buys Think Dynamics

Advancing its on-demand computing strategy, IBM Corp. (NYSE: IBM) today said that it has acquired Canadian software startup Think Dynamics (see IBM Acquires Think Dynamics).

IBM didn't disclose the financial details of the deal, but the company probably paid a lot less than the amount it dished out for its last software acquisition. In February, IBM purchased Rational Software for a whopping $2.1 billion. Think Dynamics, with just under $8 million in total funding -- mainly from Canadian venture capital firm Brightspark -- surely reeled in less than that.

In any case, the Toronto startup's software should fit in nicely with the on-demand computing initiative IBM launched about six months ago. Analysts say that this is a good move for IBM, and that it's another validation of the drive toward utility computing. "This adds credibility to the notion of full system automation from the host on down," says IDC analyst Bill North.

Think Dynamics' software helps automate the process of reallocating resources to systems as peaks and demands shift within networks. This so-called autonomic technology (in IBM's terminology) enables computers to automatically initiate and manage necessary changes. Resources supporting lower-priority work can, for instance, quickly be reallocated to meet higher-priority needs as they arise. On the storage side, this would mean, among other things, more resilient and dependable backup and restore capabilities, IBM claims.

"The IT structure can adapt to what's going on in the business," Robert LeBlanc, general manager of IBM Tivoli Software, said on a conference call discussing the news.This "orchestrated provisioning" is key in allowing customers to respond quickly to changing business requirements, IBM says, pointing out that automating repetitive manual tasks also enables companies to free up IT staff to focus on core business needs.

IBM says it will continue to sell Think Dynamics' software as a standalone product, but that it will quickly integrate it into its existing software and server products, as well as provide it via its outsourcing services. "This really affects all of the IBM units," LeBlanc says, insisting that the modular nature of the software will enable both swift and simple integration with IBM's products.

IBM isn't the only company snapping up startups to advance in the utility computing space. Last week, Veritas Software Corp. (Nasdaq: VRTS) announced that it will soon be launching its own products in this space, based on its recent acquisitions of Precise Software Solutions and Jareva Technologies. And last November, Sun Microsystems Inc. (Nasdaq: SUNW) bought Terraspring, which had developed server-provisioning software (see Veritas Moves up the Stack and Sun Bounces on Terraspring).

"All the major players are rallying around this, although they might call it different things," says The Clipper Group Inc. analyst Michael Fisch. "I think IBM has the most credibility and mindshare around the concept."

But while a bunch of companies are busy boasting of the virtues of utility computing, IDC's North cautions that there are still a few bumps on the road to the fully automated data center. While the automation tools themselves may work impeccably, he says, they still depend on the business policies of the customer."There just aren't enough people with high enough understanding to establish the policies in the first place," he says. "Even if you can automate, you might automate the wrong stuff... If your policies are wrong in the first place, you're just facilitating errors."

IBM says that all 36 of Think Dynamics' employees -- about 50 percent of whom are engineers -- will join IBM and that most of them will go to its large Toronto lab. Some employees who have been working at the startup's operations in Atlanta, Boston, Chicago, and New York may move to other offices, according to an IBM spokesman. Including the Think Dynamics employees, IBM expects to add an additional 100 people to its Toronto workforce in connection with its growing on-demand initiative.

Think Dynamics CEO Alan McMillan said on today's call that he is the only company employee that won't be staying with IBM long-term. However, he said, "I'll be supporting the transition for the next couple of months."

IBM's stock price dipped in afternoon trading today, falling 1.3 percent, to $88.80 a share.

Eugénie Larson, Reporter, Byte and Switch