IBM to Buy Sterling Commerce

IBM plans to acquire Sterling Commerce from AT&T for $1.4 billion in cash — a deal that Big Blue is betting will augment its capabilities in software integration and other key areas.

“The addition of Sterling to IBM will substantially advance our ability to help clients to create more agile business networks,” Craig Hayman, general manager of IBM’s Software Group’s WebSphere business, said during a call with reporters. “What this mean is: improve the way they connect and communicate with their partners, customers and suppliers.”

Sterling Commerce develops business-to-business integration software and has over 18,000 customers. Pending the close of the deal, the plan is for Sterling Commerce to be folded into IBM’s (NYSE:IBM) WebSphere division, where it will build out an end-to-end commerce enablement and business insight platform.

IBM expects that the purchase will close in the second half of 2010, pending regulatory approvals.

Hayman added that with the combination of Sterling and IBM, users will be able to manage their business partner networks using on-premises software or through a Cloud-delivery model. Sterling Commerce had originally been acquired by AT&T’s predecessor SBC back in 2000 for $3.9 billion in cash.

From IBM’s perspective, a key part of the deal is also the expected synergies between Sterling and other elements of IBM’s software business. In particular, Hayman noted how recent IBM acquisitions could all potentially work in conjunction with the Sterling offering.

“A substantial benefit to customers will be the ability to combine Sterling commerce technology with the wide range of capabilities in our portfolio,” he said. “We recently acquired a company called iLog, which was the No. 1 company in rules management and supply chain optimization, and we’ll be able to bring this together for an even better outcome for our customers.”

IBM acquired iLog in 2008 for $340 million. Hayman also highlighted how it could leverage IBM’s Cognos division, which provides business analytics, to offer new insight into optimizing business partner relationships with Sterling technology.

Sterling Commerce, meanwhile, said its being a part of IBM and the integration that will provide is a good thing for its customers. “Our business integration suite is a perfect complement to IBM’s integration offerings,” Sterling Commerce President and CEO Bob Irwin said during the call. “The Sterling selling and fulfillment suite will work well with IBM’s WebSphere product line for meeting customers, e-commerce, selling and fulfillment needs.”

Precisely how the Sterling Commerce products will be integrated with IBM is work that the IBM still has to do, pending the close of the acquisition. At this stage, at least, IBM is is committing to growing the Sterling Commerce business. “We will invest here to further innovate in the Sterling portfolio and the IBM portfolio,” Hayman said. He also added that IBM will bring together analytics, business rules and event processing capabilities in a way that supports what both companies’ customers want to do.

“Our approach with acquisitions is to support customers and partners of the acquired company and to seek out their feedback on what they are looking for, and then effect that change,” Hayman said. “Today, we’re at the point of announcement and there is some transition planning that occurs, but when this deal has been approved and we’re closed, that’s when we’ll begin the true work around deep integration.”

Sean Michael Kerner is a senior editor at, the news service of, the network for technology professionals.