The deal values ISS at $28 a share, almost an 8 percent premium over its $26 closing price Tuesday on the Nasdaq Stock Market.
If the acquisition is approved by shareholders, the companies expect it to close in the fourth quarter.
Armonk, N.Y.-based International Business Machines Corp. has now picked up three public companies this month. Two weeks ago, it sealed a $1.6 billion pact for document-management software provider FileNet Corp. On Aug. 3 IBM agreed to spend $740 million for Bedford-based MRO Software Inc., which helps industrial companies track physical assets.
Those deals were part of a long-running effort to use acquisitions to fill holes in IBM's software portfolio, easily the company's most profitable segment.
ISS is a bit different because of its potential impact on the company's flagging services division. ISS helps guard against data theft and other network problems with automated monitoring products and with technical consultants.
Based in Atlanta, ISS says its 11,000 customers include 17 of the world's largest banks. Its 1,300 employees are expected to remain with IBM.