I.B.M. Expected to Buy Start-Up to Advance Open-Source Strategy

I.B.M. is increasingly betting that it can build a big business around open-source software. The latest step in that strategy is the purchase of Gluecode Software, an open-source start-up.

The Gluecode acquisition, which I.B.M. plans to announce today, is small in size but significant in the evolution of the company's plans in open-source software, according to industry analysts.

The two companies did not disclose the price of the deal, but analysts estimated it at less than $100 million.

I.B.M. has long supported open-source software like the Linux operating system and the Apache Web server. And it has made money indirectly, mostly by selling computers that run open-source software or selling I.B.M. proprietary software that works with Linux or Apache.

But Gluecode is a stand-alone open-source business, and the purchase will give I.B.M. a stake in the lower-end market for server software for running business applications.

Gluecode, based in El Segundo, Calif., sells support and service for an open-source server, called Geronimo, that is used by companies for applications including customer service, electronic commerce Web sites and work-sharing Web sites.

I.B.M. offers its own proprietary server, WebSphere, for business applications. It does not see Gluecode and Geronimo as potential competition in that area, but rather as a way to enter new markets.

WebSphere, I.B.M. executives say, is built to handle advanced computing tasks like stock trading and banking, and its transaction-processing engine borrows from the company's mainframe technology.

But WebSphere may be too big and too costly for some customers, I.B.M. says, like departments of large companies or small and medium-size companies with fewer than 1,000 employees.

"This widens our market," said Steven Mills, the senior vice president for software. "Some customers may later move up to WebSphere if they choose to go in that direction. But if they don't, they don't. This is its own business."

I.B.M. executives say they are not worried. Yet open-source projects, in which programmers collaborate to improve the code, often grow and the software becomes more powerful and reliable.

"It's inevitable that there will be overlap with WebSphere," said Amy Wohl, an independent technology analyst in Narberth, Pa., "but that will probably not be for a while."

The Gluecode acquisition can also be seen as a defensive tactic for I.B.M, which ran the risk of ceding the lower end of the business application server market to others, like JBoss, another open-source start-up, which has grown rapidly recently.

Gluecode was founded in 2003 and, in March 2004 received $5 million from two venture capital firms, Palomar Ventures and Rustic Canyon Partners.

"We're very complementary to the strategy that WebSphere has now," said Chet Kapoor, chief executive of Gluecode. "They sell software at the high end, and we have a support and subscription business model for small and medium-sized businesses and departmental projects in big companies."