Acquisition Helps Position IBM for Further Growth in Insurance

Back in April of this year, I wrote about an announced under-the-radar acquisition by SAP—TechniData AG, a provider of product safety and environmental, health and safety (EHS) solutions.  While the insurance community probably paid scant attention to the news, TechniData provides systems integration, managed EHS (environmental, health and safety) services, regulatory content and software to help companies comply with regulatory challenges in these areas.  The magic word here for insurers was “comply.”

Now, IBM has announced a definitive agreement to acquire OpenPages, a privately-held company based in Waltham, MA. OpenPages provides software that helps companies more easily identify and manage risk and compliance activities across the enterprise through a single management system. Financial terms were not disclosed.

Why are acquisitions like these so important?  As IBM points out in its announcement, “with growing volumes of data, disconnected systems, constantly changing regulatory compliance challenges and a dynamic business climate, gaining a complete view of an organization's risk exposure is increasing in complexity.”

The announcement added that an IBM study of 1900 global CFOs and senior finance leaders revealed that risk management has risen in priority by 93% since 2005. The survey also noted that two out of three companies had encountered material risk events within the past three years. 

So why am I focusing on these events?  I believe they illustrate a growing trend among our major industry vendors.  Software and platform providers are no longer content to compete on their products alone.  Instead, these vendors are working hard to stay ahead of trends in the insurance industry and to then provide thought leadership that expresses itself not only in further product development, but also in extending the company’s capabilities to the areas that are most meaningful for future growth.

Indeed, as the IBM announcement points out, “managing risk is a top priority for businesses in all industries including finance, insurance, retail, healthcare and energy and utilities.”  Of course, risk management has always been important to insurers, but in the current economic malaise and tight market conditions, the role and importance of managing risk have been magnified to a level we could not have foreseen before 2008.

This kind of aggressive looking-ahead and planning is, of course, a risk in itself.  Yet given current conditions, it seems like a well-thought-out gamble.  For my money, it is the aggressive vendors and insurers who stand the best chance of profiting from current troubles.  Even if huge short-term gains are not realized, those who take risks based on solid trends like the need for better risk management will, in my opinion, emerge head and shoulders above those who do relatively little as they wait out the economic storm. 

The acquisition is subject to applicable regulatory clearances and other customary closing conditions. Following the close of the acquisition, IBM says intends to integrate OpenPages within IBM's Business Analytics software portfolio.

Meanwhile, the move strengthens IBM’s already-considerable foothold in our industry.  It should be interesting to see how this all plays out. 

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