IBM snaps up Algorithmics for risk-management tools

IBM has bought Algorithmics, which makes risk-analysis software for the financial industry, to help customers meet regulators' data oversight demands.

On Thursday, IBM said it has agreed to acquire the Toronto-based software company for $387m (£239m). Under the deal, all of Algorithmics's 900 employees at its 23 worldwide locations will join IBM's Software Group, which is also international.

"What Algorithmics brings is risk-analytic capabilities for credit risk, market risk and liquidity risk that is incredibly timely," Laurence Trigwell, an executive in IBM's European business analytics unit, told ZDNet UK. "Regulators are asking for more frequent analysis and more frequent exposure... also the regulators are doing a lot more analytics of those disclosures."

IBM plans to integrate software from Algorithmics with risk and compliance management technology gained in its purchase of OpenPages in October 2010. Over the past five years, IBM has invested $14bn in snapping up 26 analytics technology providers, and on Wednesday, it bought Cambridge-based i2, which specialises in analytics for crime and fraud.

The Algorithmics analytics tools, already used by HSBC and Societe Generale among others, help businesses automate much of their financial risk management.

"There are levels of integration and automation that just don't happen [in financial companies] because the complexity prevents them from happening in an efficient way," Trigwell said. "What this [acquisition] is all about is providing a level of robust automation."

IBM approaches technology development from two directions, Trigwell said. On one side, it focuses on a handful of large-scale 'thought leadership' schemes, such as the Deep Blue chess computer or the Watson syntax and semantic analysis software. On the other, it works on smaller projects that deal with specific problems for specific customers. The Algorithmics acquisition falls into the latter category, he said.