ILOG Opens Subsidiary in China

New Shanghai Location to Manage Expanding Business Operations

SHANGHAI and PARIS – Sept. 26, 2006 – ILOG® (NASDAQ: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced it has established a subsidiary in China to support its expanding business operations in China, recruit and manage its partnerships there and create an increased demand for ILOG’s products in the country. Based in Shanghai, ILOG Software Technology (Shanghai) Co. Ltd. is a Wholly-Owned Foreign Enterprise, which will be led by Bounthara Ing, ILOG’s Deputy CEO and executive vice president in charge of Asia Pacific operations. The company previously had a Beijing representative office in China.

By establishing the subsidiary, ILOG hopes to benefit from the rapid growth anticipated in the Chinese IT market and the drive for Chinese companies to create a local software industry. IT spending in China is expected to grow at 14 percent this year, outpacing the 5.8 percent growth expected in the U.S., according to research firm IDC. The company also hopes to leverage the need for process automation and business agility, as well as planning and scheduling solutions to help Chinese companies better respond to the hyper-growth they are experiencing as a result of their booming economy.

Located in the Pudong Software Park, the new subsidiary will provide sales, service and training for ILOG’s growing Chinese customer base. The Company is also planning to tap local technical talent through the creation of a competency center, which will work closely with its local partners to deliver services and software solutions that will benefit ILOG customers worldwide.

Consistent with China’s “Eleventh Five-year Plan,” which has specifically identified as a goal the development of an “innovation-oriented country,” Chinese Premier Wen Jiabao recently said the central government will increase spending on science and technology by nearly 20 percent this year.

“To materialize its goals on the IT front, Chinese companies will need software to help create their own unique innovations they can export to the rest of the world,” said ILOG Chairman and CEO, Pierre Haren. ”By establishing this subsidiary, we hope to capitalize on the demand for home-grown innovation by providing software tools and solutions to help China realize its goal. Relocating some of our top management talent demonstrates our significant commitment to the region.”

“As a leading provider of software products that have been used to create strategic software applications for the world’s largest software companies, along with many of the Global 2000, we are an ideal partner for Chinese companies that want their business operations to become more scalable and agile,” said Ing. “We already have some of the biggest companies on the mainland as customers, and we look forward to working with our local partners to increase the penetration of our products in China.”

ILOG has had a presence in the Chinese market since 1999 when it began partnering with several leading Chinese universities, including Tsinghua, Fudan, Shanghai Jiaotong, Xian Jiaotong, Tongii, NanKai and Jilin universities, among others, to provide software and training services. ILOG’s customer base in China includes leading financial institutions such as China Construction Bank, Everbright Bank and Taiping Life Insurance, as well as major telecom equipment providers like Huawei and leading manufacturers like Baosteel. ILOG also has partnerships with many regional systems integrators such as Shanghai First Tech, Primeton, AsiaInfo and BOCO. Due to the explosive growth of the telecom sector in China and an increasingly competitive environment, many large mobile operators such as Zhejiang Mobile, Shanghai Mobile, Guangdong Mobile, Shanghai Telecom are using ILOG’s BRMS for channel management, settlement and loyalty program management, among other applications, as key parts of their customer acquisition and retention strategies. It opened its Beijing office in 2002.

About ILOG
ILOG delivers software and services that empower customers to make better decisions faster and manage change and complexity. Over 2,500 corporations and more than 465 leading software vendors rely on ILOG's market-leading business rule management system (BRMS), optimization and visualization software components, to achieve dramatic returns on investment, create market-defining products and services, and sharpen their competitive edge. ILOG was founded in 1987 and employs more than 730 people worldwide. For more information, please visit http://www.ilog.com.

Forward-looking Information
All of the statements included in this release, as well as oral statements that may be made by us or by officers, directors or employees acting on our behalf, that are not statements of historical fact, constitute or are based upon "forward-looking statements" within the meaning of the United States Securities laws that involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause our actual results to differ materially are those risks identified in “Item 3. Key Information—Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects” of the Company’s most recent Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the “SEC”) and its other filings and submissions with the SEC, including, without limitation, quarterly fluctuations in our operating results; competition in our industry; the extended length of our sales cycle which impacts our ability to forecast product lines; our dependence on certain major independent software vendors; our investments in vertical markets; the increasing number of fixed price consulting agreements; decreased investment in our sales and marketing forces; changing market requirements; our ability to provide professional services activities that satisfy customer expectations; errors in our software products; the loss of key personnel; logistical difficulties, cultural differences, product localization costs, import and tariff restrictions, adverse foreign tax consequences and fluctuations in currencies resulting from our global operations; changes in tax laws or an adverse tax audit; our significant dependence on our proprietary technology; the impact of intellectual property infringement disputes; the impact of dilutive share issuances or the incurrence of debt and contingent liabilities and write-offs resulting from acquisitions; changes in accounting principles; and other matters not yet known to us or not currently considered material by us. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, the Company undertakes no obligation to revise these forward-looking statements to reflect new information or events, circumstances, changes in expectations or otherwise that arise after the date hereof.