IBM has agreed to buy French software company Ilog for around US$340 million. IBM plans to combine Ilog's business rules management systems with its own business process management and business optimization tools, it said Monday.

Ilog's business rules management systems (BRMS) could be used to improve and add capabilities to a whole range of IBM product lines, including Tivoli and Lotus, the companies said.

Business process automation systems can replicate the paper-shuffling aspect of a company's systems, but do less well with decisions that rely on human judgment, such as which customers deserve priority treatment, or whether an expense claim conforms to company policy. Business rules management systems seek to handle that dimension.

Last October, IBM competitor SAP bought an Indian BRMS vendor, Yasu Technologies, to improve the capabilities of its NetWeaver enterprise software platform.

IBM's offer for Ilog represents a premium of around 37 percent over Ilog's closing share price on Friday. Ilog's board has approved the deal, and holders of around 10 percent of Ilog's shares have already accepted the offer, IBM said. The deal requires regulatory approval in the U.S. and France, and acceptance from holders of two-thirds of the shares, to go ahead.

Also Monday, Ilog reported revenue of US$46.1 million in the quarter ending June 30, and net income of $100,000, compared to revenue of $46.3 million and net income of $1.9 million a year earlier.

BRMS was the weakest product sector, with license and maintenance revenue down 13 percent year on year, while business optimization revenue grew 13 percent, Ilog said.

The runaway success for Ilog, though, was its supply chain applications business, where revenue grew 35 percent, led by Europe and Asia.