IBM announced this week plans to buy French supply chain software provider ILOG.

The deal, valued at approximately $340 million dollars, appears to position IBM more firmly in the software applications business.

Throughout the 1990s and early 2000s, ILOG was primarily a software tools vendors, providing the well known CPLEX optimization engine, which application software vendors in such areas as supply chain planning and transportation management used to build optimization tools. Companies that did their own operations research and built supply chain applications in-house also used the tools.

ILOG later began to migrate from the tools area to full-blown supply chain applications through both internal development and acquisition. In 2007, for example, it acquired LogicTools, which offered network and inventory optimization tools. ILOG also developed a shop floor planning and scheduling solution.

IBM has positioned the deal as helping to enhance its WebSphere business process management platform, especially in integrating ILOG’s “rules engine” product into its existing software. For example, the rules engine could help an ecommerce application understand that no more than 20 customers are eligible for an on-line promotion, as well as powering more complex rules-based scenarios.

There were rumors that SAP and Oracle were also interested in ILOG’s rules engine technology, perhaps spurring IBM to act now before a competitor made the move.

But the company also now has ILOG’s other supply chain applications. A few years ago, IBM acquired a global shipping application from ocean shipping giant Maersk as part of an IT outsourcing arrangement. Late last year, IBM acquired business intelligence software vendor Cognos, one of some 300 total software acquisitions the company has made over the past few years.

The prediction here: IBM continues to expand its supply chain software portfolio, but cautiously.