IBM Acquires Advanced’s Application Modernization Assets

IBM Acquires Advanced’s Application Modernization Assets

The Six Five team discusses IBM acquires Advanced’s application modernization assets.

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Patrick Moorhead: IBM makes an acquisition.

Daniel Newman: Yeah, so there we go. I think it was maybe late last week, IBM made its first acquisition of 2024. Made 35 last year. So that’s interesting is we always focus on the mega acquisitions, but IBM is one of the companies that historically makes dozens of tuck-ins that help them with important parts of their business. Last year, observability was a big focus. This year, the company’s starting off with app and mainframe modernization. And the company’s been very successful continuously with its Z cycles, the Z mainframe, and the mainframe still run large swaths of the most important industries on the planet, healthcare and financial services, government agencies depend on. Of course, there are some limiting factors to mainframes and companies have had to think about how do they build and modernize to be able to run critical workloads securely on a mainframe, but maybe have hybrid integration and modernization to cloud to be able to take advantage of new AI technologies, or to have the ability to keep up with technology capabilities.

And so with CEOs prioritizing modernization, IBM knows that it needs to be able to handle the continuum. It’ll continue to sell Z and it’s a very successful, very high margin, super profitable part of the company, but it also has to be able to use and support through its consulting business, mainframe and modernizing mainframe. And so basically, they’re acquiring a business called advanced, not a household name by any means. And the idea is to support mainframe modernization journeys. And so this will be a business that will run in the consulting business unit and it will be very focused on basically, not forcing companies to choose the either/or. It’s not about whether to use mainframe or cloud, it’s about mainframe and cloud. And that’s all about what IBM has been. It’s AI or it’s hybrid cloud, plus AI. Well, being able to use the mainframe for certain needs, and then being able to use hybrid cloud capabilities for certain needs is very important to IBM’s strategy. That’s what they’re doing here with this advanced acquisition.

The other thing that’s important to note is it’s going to be very complimentary to the company’s IBM watsonx Code Assistant for Z. And so this was basically a set of tools that have been developed to give mainframe modernization a more simplified, streamlined set of options to standardize… And this is a lot of words, but standardize the modernization across three things. It’s across hardware, software, and services. And so putting together what they’ve built with the watsonX Code Assistant for Z is to basically end-to-end developer life cycles, application discovery analysis, refactoring and converting code. So these things are all going to work better. And so now basically, you’re adding more consulting and capabilities.

An interesting thing is some of this capability with stuff that I think Kyndryl did. And so it’s kind of interesting to see as things spin off, and then things start to come back in. I’m sure it’s a leaner, meaner organization, very focused, much smaller. Short story here, there were no details on financials. The deal is probably not big enough to warrant that. They expect it to close with some certain conditions being met, I think next quarter. So IBM, I believe, is going to deliver earnings this week. So we’ll hear from the company how it’s doing, how watsonx is performing. We’re entering another earnings cycle, Pat, which means another wave of earning conversations on The Six Five. I know we’re going to keep doing those in ’24. I know we’ll see. I know people want to hear about that from us. But yeah, pretty straightforward. Important topic, Pat. You and I cover this area a lot because a lot of businesses transformation still runs on a mainframe with the cloud, with AI, with containers, and, and, and IBM is addressing that here.

Patrick Moorhead: Yeah. So most people who think they know the mainframe, don’t actually know the mainframe. I know for the first five years of more insights and strategy, I pretty much wrote off the mainframe, but that’s because I was naive and kind of sucked into the world of X86. Now, I did spend five years in and around the IBM mainframe world when I was at NCR working in financial systems, but to IBM’s credit, it keeps chugging. And in fact, there’s more workloads being done on the mainframe every year, not by number, but in terms of NIPS and computing each year. And it’s up into the right.

And when you get into the super cycle of the mainframe replacement and you see the financials that hits IBM, and then a couple quarters later, you see the impact on services, you get a much better appreciation for what they can do. And mainframe modernization is not always a code for getting the application off the mainframe. It can be refactoring an application and putting and containerizing it. Dan, I know you had brought up Red Hat. It can be modernizing the code where the person who wrote the application maybe in COBOL is not alive anymore, has been retired for 25 years. And you want to move that to let’s say, a more modern language or even a higher level language that you can work with an IDE. Yeah, it is interesting. Kyndryl versus IBM Mainframe Consulting on here, I kind of view Kyndryl as kind of a vertical play and I look at this IBM Consulting as kind of a horizontal play. But I could be wrong, but I’m probably not.

Author Information

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.


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