IBM Buys CrossWorlds for EAI Apps

The recently announced acquisition of enterprise application integration (EAI) provider CrossWorlds Software by IBM (Armonk, NY) may signify the beginning of the rapid adoption of EAI software by not only insurance and financial services companies, but all potential technology user clients.

"With the prominence of large mergers in insurance and with all companies trying to get a handle on customer information and CRM, the market for EAI software is accelerating rapidly," says Craig Kaster, vice president for business and product development, financial services sector, CrossWorlds Software (Burlingame, CA). "With a strong economy, and minus September 11, this would be an even stronger growth area. But even with those factors, EAI will be a large business opportunity," he says.

According to Framingham, MA-based research firm IDC, software supporting the unique business-process integration requirements of specific industries, such as CrossWorlds' products, represents the fastest growing sub-segment of e-business infrastructure software, with an annual growth of 25 percent. IDC estimates the opportunity for this sub-segment will be $4 billion in sales by 2005.

Middleware Hot, As Well

Steven Etzler, senior manager at New York-based KPMG Consulting, says the EAI market will be strong, especially in insurance. "Middleware and EAI are hot," he says. "We'll see a lot of middleware and integration tools used in 2002. Insurers are looking to cut costs and improve service to customers. Middleware is going to enable a lot of application integration in the enterprise."

CrossWorlds, a software integration provider, will fit into IBM's Software Group, according to Kaster. "We are filling a distinct product need for IBM," he says about the functionality of CrossWorlds' software. "IBM was competing with us, at times, with MQSI," an application development and integration product that works with IBM's popular WebSphere suite of Internet tools. "CrossWorlds was founded on business process integration and is very strong with BPM business process management. We fit well with IBM," Kaster adds. IBM has agreed to acquire CrossWorlds Software in a cash transaction valued at approximately $129 million.

Focus on CRM

"CrossWorlds will be part of IBM's overall suite of integration software," Kaster adds. "The offering will be very robust. Clients need to focus on business process integration, for things like wealth management and CRM applications. Integration software is important for consolidating customer views or for clients that are involved in integrating multiple legacy systems."

KPMG's Etzler also sees a focus on CRM in insurance. "Certain things need to be done at insurance carriers if they want to get one view of the customer," he says. "The enterprise has to link all of the products' systems together for CRM."

As part of IBM's Software Group, CrossWorlds' development labs will be maintained and will most likely become IBM's worldwide center for business process management, Kaster says. The deal will also give CrossWorlds the opportunity to enter the Asia-Pacific market. "They are planning to have IBM's Asia-Pacific sales force distribute CrossWorlds' products," Kaster says. "We have been planning to enter Asia for a while, but this deal jump starts the whole process and gives us the ability to pursue the strategy."

Not out of the Blue

CrossWorlds and IBM have been working together for the past four years, according to Kaster, through a partnership agreement. CrossWorlds' software has been integrated with IBM's WebSphere middleware products and CrossWorlds has an OEM agreement with IBM for MQSeries and has added WebSphere Application Server software connectivity to its products.

IBM also plans to keep the CrossWorlds organizational structure relatively intact, Kaster says. "IBM is not just buying technology, they are aggressively working to have CrossWorlds' development team be part of the IBM development team," he says. "As of now, IBM is working to retain the senior management team," including Fred Amoroso, president and chief executive officer, and former head of IBM's Worldwide Insurance Business Unit. Kaster also was part of IBM's insurance practice prior to joining CrossWorlds.