IT has made 59 acquisitions since 1995, with 41 of these coming after 2000, but tech giant IBM's software group certainly isn't stopping there, according to a senior company executive.

In an interview with BizIT last week, Neil Isford, vice-president of IBM's software business for its Asia-Pacific operations, said that the company intends to continue an aggressive strategy that calls for acquisitions to account for some '2 to 3 per cent of our revenues'.

'We make acquisitions to fill in the gaps or to get a headstart,' said Mr Isford, adding: 'We are different from Oracle in that we don't buy overlaps.'

Last year, IBM's software group accounted for US$18.2 billion of Big Blue's total revenues of US$91.4 billion. IBM spent almost US$5 billion on 13 acquisitions last year, one of which was content management firm FileNet for US$1.6 billion.

'It's not a dramatic shift in strategy,' acknowledged Mr Isford, explaining that the business model has worked for the company 'for a couple of years'. He revealed that the plan called for it to grow its middleware revenue 8 to 11 per cent. Last year, its middleware business met this target by growing grew 10.7 per cent.

Middleware is software that connects software applications together. IBM's five major middleware brands - Lotus, Websphere, Tivoli, Information Management and Rational - accounted for US$9.4 billion in revenue last year.

The company also wanted to grow profitability of the software segment by 10 to 12 per cent, and last year's performance exceeded this target with a 14.9 per cent increase in pre-tax profit.

The senior executive also noted that software trends in the region echoed that of worldwide trends, and last year, IBM's regional software business registered 'high double-digit growth' in India and Asean. Of the worldwide software market, estimated at US$222 billion, a huge part of it - about 40 per cent - is estimated to be middleware, said Mr Isford. 'What's driving middleware is the need to integrate systems, which could account for about 40 per cent of IT budgets, according to IDC. Another factor driving middleware is the increase in mergers and acquisitions (M&As). This drives the need for a flexible infrastructure,' he said.

However, the challenge the company currently faces in growing its business is the ability to find enough talent to scale the business. Thus, the company is investing more money into training, educating partners, as well as trying to get projects which are repeatable, or those that can leverage off previous projects.

Part of the group's plans is also to introduce more solutions targeted at specific vertical industries, such as for financial services institutions, government, telcos and the mid-market, which it defines as companies with less than 1,000 employees.

'The mid-market currently constitutes about 10 to 20 per cent of our revenue, and we certainly expect to grow that,' said Mr Isford.

This article first appeared in BT on March 22, 2007