Terms of the deal were not disclosed, but Monday's announcement underscores International Business Machines Corp's continued effort to expand in software and services while retreating from sales of commoditized hardware.
IBM said the deal will help customers integrate various cloud applications from providers like Salesforce.com Inc, Amazon.com Inc, NetSuite Inc and SAP.
IBM said it expects global cloud computing market, including software as a service, to grow to $126 billion by 2012 from $47 billion in 2008.
Analysts said they expect deals in cloud computing by IBM and such other technology vendors such as Hewlett-Packard Co, Cisco Systems Inc and EMC Corp.
Targets could include similar small companies specializing in cloud computing, like Boomi, Hubspan and informatica, they said.
I think software as a service will continue to undergo a shakeout, absolutely, said Forrester Research analyst Liz Herbert. There are lots of these small providers in spaces like integration and billing and provisioning ... We are seeing and we expect to see more acquisitions activity from major providers.
IBM does not always announce terms of individual deals but has said it spent a gross $1 billion on acquisitions in the first quarter. For all of 2009, it spent $1.5 billion, including $1.2 billion cash to buy business analytics company SPSS Inc.
Cast Iron, whose approximately 75 employees will join IBM, said the deal will help it gain broader customer reach. Its current clients include Time Warner Inc and ShoreTel Inc.
(Reporting by Ritsuko Ando; Editing by Tim Dobbyn and Steve Orlofsky)