IBM has bought the US and Europe disaster recovery business of oil-industry specialist Schlumberger for an estimated $200 million (£110m).
Big Blue left the Asia-Pacific arm due to duplication with its existing business, but the US and European operations will shore up its global services division in Europe and help IBM aid companies to comply with new data protection regulations.
The Schlumberger business continuity unit competes with SunGard and HP and has long-term contracts with over 750 clients and more than over 40 recovery sites worldwide, many with government bodies and global companies. In a statement, IBM said the business will supplement its own recovery services unit, which has 120 business continuity locations around the world.
The unit was left over after Sclumberger decided to concentrate on the oil business and sold most of its IT business in September 2003 for £850 million. However, it is profitable and bolsters weak points in IBM's business. It has particular strength in Europe, and along with IBM's own services division, will help companies comply with the Basel II and Sarbanes-Oxley regulations for data protection, the company said.
Basel II is an international set of banking accords on risk assessment and operational procedures that are anticipated to necessitate a round of new IT buying to meet certain standards. IBM has already rolled out a "Basel-II ready" bundle of software and services to tap into the potential spending spree. Likewise, the company has been expanding its customized hardware, software and services to create bundles to help companies with specific compliance problems under US Sarbanes-Oxley regulations.
"This buy will strengthen our overall portfolio, especially in helping companies comply with new regulations all over the globe," said Pat Corcoran, director of marketing and business development for the business continuity and recovery units. The emergence of new regulations has created a whole new audience for IBM's services, Corcoran said, because they have grabbed the attention of business leaders in addition to technology executives. The Schlumberger unit will also provide IBM with specific skills in trading floor and workplace disaster recovery, Corcoran said, as well as more in-depth knowledge of the European market.
IBM has continued to put weight behind its services division, perhaps most notably with its 2002 buy of PwC Consulting, the consulting division of PricewaterhouseCoopers LLP. The strategy seems to be paying off as the company reported an eight percent rise in revenue from its Global Services group in the fourth quarter of 2003.
"IBM is anticipating greater demand for business continuity services as a result of new regulatory compliance," said Andrew Efstathiou, program manager with the The Yankee Group. Both Basel II and Sarbanes-Oxley also particularly affect IBM's core of financial services clients, he said, making the offerings a good fit.
While Efstathiou didn't see any holes left to fill in IBM's continuity services, he said that the company still needs to "coordinate across independent silos" within IBM and could make further acquisitions to knit together different geographies.
Corcoran didn't rule out further acquisitions to round out the company's offerings either. "Like any company we are looking at how we can strengthen our portfolio to meet our clients' business needs," he said.