The News: Rocket Software has completed its $2.275 billion acquisition of OpenText’s Application Modernization and Connectivity (AMC) division, now offering one of the most extensive portfolios in the market that empowers businesses to enhance their existing systems while embracing cloud innovations. Read the full press release here.

Rocket Acquires OpenText AMC: A New Era in Mainframe Modernization

Analyst Take: In today’s technology landscape, the pressure on enterprises to modernize their mainframe applications is more intense than ever. Often described as the workhorses behind critical business operations, mainframes handle significant volumes of transaction data. However, as technological innovation accelerates, organizations find that these systems, while robust and reliable, often lack the flexibility required to integrate with modern, cloud-based technologies.

Modernizing mainframe applications typically involves two key strategies: modernizing in situ (updating and optimizing applications on existing mainframe infrastructure) and providing pathways for these applications to migrate or re-platform to the public cloud. This dual approach allows businesses to enhance their legacy systems’ efficiency and capability while leveraging the scalability and innovation offered by cloud environments.

The rationale for these strategies is clear. Modernizing in situ allows for retaining the mainframe’s reliability and security, which is crucial for industries such as finance and healthcare that process large volumes of sensitive data. Meanwhile, migration to the cloud offers flexibility, better integration with new technologies, and potentially significant cost savings in terms of infrastructure and operational expenses.

OpenText’s Strategic Divestiture

Rocket Software has announced the acquisition of the AMC business from OpenText in a significant development in the mainframe modernization market. This move comes as OpenText seeks to realign its strategic focus toward artificial intelligence (AI) and cloud services following its substantial acquisition of Micro Focus.

OpenText’s decision to divest the AMC assets is a calculated move to manage its financial posture, specifically aiming to reduce the debt incurred from the Micro Focus deal. By selling off this division, OpenText alleviates financial pressure and sharpens its focus on areas expected to drive substantial growth in the coming years, such as AI and cloud-based solutions. This strategic pivot reflects a broader industry trend where companies divest non-core assets to double down on technological innovations that promise higher returns and market relevance.

The AMC business, previously part of Micro Focus and known for its robust mainframe connectivity and modernization solutions suite, represents a significant acquisition for Rocket Software. With this purchase, Rocket Software expands its portfolio and significantly enhances its capabilities in the mainframe modernization space. This acquisition is particularly noteworthy as it includes technologies that enable businesses to operate COBOL and PL/I applications on distributed or cloud servers, facilitating easier transitions from traditional mainframe architectures to more modern, cloud-based frameworks.

Rocket Software’s expanded offering now encompasses a comprehensive range of modernization solutions, from enhancing existing mainframe operations to facilitating full-scale migrations to the cloud. This acquisition strategically positions Rocket Software to meet the growing demand for flexible, scalable, and secure modernization solutions, enabling it to offer a holistic suite of services that address both in situ modernization and cloud migration needs.

Looking Ahead

The acquisition of OpenText’s AMC business is more than a mere expansion of Rocket Software’s capabilities—it is a transformative realignment that significantly enhances its market position. By integrating AMC’s products and expertise, Rocket Software expands its service offerings and customer base and anticipates approximately $1.3 billion in combined revenue in 2024.

This expansion is not just about adding new products; it is about setting a new standard in the mainframe modernization sector. Rocket Software now stands as one of the largest providers in this niche, equipped with more diverse solutions that cater to a wider range of modernization needs. This breadth and depth of offerings make Rocket a more formidable player in the industry, poised to capture a larger market share.

Moreover, Rocket Software’s increase in size and capabilities means it can engage a broader market segment, including larger enterprises requiring comprehensive, end-to-end modernization solutions. This positions Rocket Software well to leverage the increasing global demand for modernization services as businesses seek to innovate and drive efficiencies in their legacy systems.

In summary, this acquisition enhances Rocket Software’s ability to provide cutting-edge solutions and significantly strengthens its position as a leader in the mainframe modernization space. As Rocket Software continues to integrate and develop AMC’s products, the company is well-placed to drive innovation and leadership in a market that is increasingly critical for businesses aiming to bridge the gap between traditional systems and future technological landscapes.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.