Rocket Software Talks About Strategic Reasons Behind AMC Deal Announcement – Futurum Tech Webcast

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Transcript:

Steven Dickens: Hello and welcome to another episode of the Futurum Tech Webcast. I’m your host, Steven Dickens. Looking forward to this episode. I’m joined by Phil Buckellew from Rocket Software. Hey, Phil, welcome to the show.

Phil Buckellew: Hey, Steve, great to be with you again.

Steven Dickens: So, we’ve spoken a lot in the last few days. I’m really looking forward to this conversation. I think it’s going to help position some big news, but before we go there, maybe just tell the listeners and viewers a little bit about your role and what you do for Rocket.

Phil Buckellew: Sure, Steve. I lead the infrastructure modernization team here at Rocket Software. I’ve been here for going on a couple of years now, and it’s a great place, bunch of good folks, and really excited to be with you today.

Steven Dickens: So as I say, there’s been some big news. You guys have been busy. I think I’ve spoken to you more times in the last sort of three or four days than I have in the last three or four months, but it’s all been good. There’s all been positive conversations. So, we’re recording early on a Monday morning. Let’s dive straight in. Let’s break some of the news and provide some of the context. I think you broke some news late last week. Let’s give some context. Tell us what you guys have been up to.

Phil Buckellew: Well, thanks, Steve. So this past week, Rocket Software signed a definitive agreement to acquire OpenText’s AMC business, that’s their application modernization and connectivity business that’s formally part of Micro Focus. Obviously, the transaction, like all big transactions like this, is subject to customary closing conditions and regulatory approvals. We expect all that to be completed in the first half of 2024. The deal includes many of AMC’s leading solutions that I’m sure you and your listeners know. Things like Visual COBOL, Enterprise suite, which supports a lot of hybrid cloud use cases, app dev products like ChangeMan for development tooling, some host connectivity assets, and even a CORBA solution that mostly targets telecommunications providers. The acquisition’s going to dramatically expand Rocket’s portfolio of lots of offerings now that will help customers, we believe, to leverage their decades of investment and the core applications that run their business, while also helping them to take full advantage of new innovations and technologies that exist really across the hybrid cloud landscape. We’re super excited, we think there’s a fantastic set of really strong people and products that we know are going to help us address even more of our clients’ challenges.

Steven Dickens: So as you know, Phil, I’ve been tracking this space for a while. This is one of those seminal moments where you get to see a shift. There’s a big shift. I see this on a couple of different levels for the Rocket team and for the space in general. This is going to change both the scale and some of the size and some of the portfolio. You talked about the breadth of portfolio there. Maybe without me giving too much of my opinion, you can give us the Rocket rationale behind this strategic move for you guys.

Phil Buckellew: Sure, Steve. So at our core, Rocket’s always been a company focused on modernization. We’re constantly working to help our clients take advantage of the latest and greatest innovation, while still benefiting from their existing investments. And we’ve always had a strategy of trying to meet clients where they are in that journey. Our slogan you might have heard before, modernization without disruption. That’s really-

Steven Dickens: I love that, by the way, Phil. I love that slogan because I think it encapsulates all the conversations that we’ve been having. It encapsulates your portfolio and I think it gives… Kudos to Barbara and the team for coming up with that. I think it really sort of encapsulates you and the organization. So, it’s one of those few marketing things that I kind of actually subscribe to and like, so I just thought I’d jump in.

Phil Buckellew: It seems to really resonate with folks and it kind of goes to its core. Right now what the market wants is hybrid cloud solutions. Our customers see the benefits of the new technologies, like all the real-time analytics, there’s tons of AI and ML capabilities that are out there that are helping them improve their business, but yet at the same time, they also need to leverage their decades of investment in the existing applications and IT platforms like the mainframe, and they don’t want the process of taking advantage of that new innovation really to disrupt their business with high risk, expensive time-consuming efforts. So, this is going to really make us a much stronger player in that hybrid cloud ecosystem, and we really think we’ll even have more ways to help clients address their modernization challenges.

Steven Dickens: So, in the conversations that we’ve had in the last few days, one thing that came out for me that maybe I wasn’t aware of with the press release and some of the formal communications and probably passed by the casual reader was that this acquisition kind of on the surface, you’d think, “Oh, it’s buying the AMC business from Micro Focus,” but there’s more to it than that. There’s some assets that are coming across that were never part of that Micro Focus business. Can you maybe just position those and provide some context there for the listeners?

Phil Buckellew: That’s true, Steve. So, the acquisition will effectively carve out the AMC portion of Micro Focus from OpenText, as well as a small number of products that OpenText acquired that were focused on connectivity. OpenText we understand was motivated really to divest the entirety of their mainframe modernization and connectivity software business, and so that’s where some of those assets made more sense to divest. They’re really focused on their strategy of cloud and AI opportunities within the information management space, and we believe that the full set of assets from OpenText and Micro Focus will benefit from being across our portfolio.

Steven Dickens: So, obviously so far we’ve talked about some of the technology, we’ve talked about the assets that are coming across. I think this is going to be transformational. There’s obviously a human component to this. Maybe let’s use this platform to maybe speak to some of those Micro Focus team members that are coming across. I’ve known Rocket for over a decade now, know a lot of the team and I’ve always come away from those conversations personally admiring your culture, but maybe let’s use this platform to maybe talk about the human aspect of this and maybe speak to some of that Micro Focus team, who are going to be hopefully joining you guys in a few months time when this closes.

Phil Buckellew: We think Rocket’s going to be an excellent home for the Micro Focus team. If you look at it, our team’s work is very aligned with what they do. Our R&D teams in particular, they’ll be… In Rocket, the AMC teams will be surrounded by peers that value the same type of work and passion for similar technologies. They also have a culture where they’re deeply focused on making clients successful, and that’s always been something we prided ourselves on is the support teams and the way that we assist our clients no matter what their problems are, and that’s something that we think is common between the two groups. We value our client’s past investments, but we also believe that there’s a good opportunity to help them to modernize and innovate and ultimately we think Rocket values will really resonate with the teams that are going to be joining us soon, ideally.

Steven Dickens: I subscribe to that view. As I say, I’ve been really impressed over the years that I’ve known the Rocket team and the culture, and I think certainly knowing Barbara at the CMO level, and Milan, and yourself, and some of the rest of the leadership team, you guys embody that on a daily basis. So, let’s pivot back to the acquisition. I think I saw this break last week. I think it’s one that I mentioned it in the introduction. It’s one of those seminal moments in the industry. You can sort of track back to these points in time and go, “The industry’s trajectory changed.” So, my opinion of you I think is going to change on a couple of vectors. This is huge from just purely the numbers point of view and the scale that it brings, but you touched on it a little bit in one of your answers to one of my prior questions around this hybrid cloud perspective. I see that as providing your clients ultimately with optionality and flexibility to sort of go either particular ways. Is that kind of scale and optionality the right way for me to be thinking about the transaction?

Phil Buckellew: Absolutely, obviously with this transaction, we’ll have scale. We’ll have a more diverse, what we believe will be, an industry-leading modernization portfolio that really hits clients wherever they are, and that’s where that optionality comes in. We want to be a key software partner for clients that are modernizing their traditional IT environments, like the mainframe. And because of the expanded breadth of products and what would be over 2,000 engineers that are steeped in really deep across those legacy environments and how to help access and adapt them to cloud and newer innovations, we think we’re going to be a really important partner to our clients, but not only to our clients, also to the systems integrators, the managed service providers, and the cloud service providers that are all focused on helping what are really the most important businesses in the world to modernize. These are the businesses that are keeping the planes in the air, the trains on time, the goods, services, and financial transactions of the world all flowing, and really as these businesses are able to benefit from all that innovation and modernization, that’s going to ultimately have a positive impact on the world.

Steven Dickens: I agree with you there, Phil. The way I look at this, this isn’t just one software company buying another. Obviously, it’s that on the press release, it’s that on the first blush, but I see this as a wider ecosystem play. You mentioned the system integrators, you mentioned the managed service providers, open source community as well. I think around some of the cobalt stuff that’ll come through with the Open Mainframe Project. Then, you look at the clients that are impacted. We’re talking about some of the most mission-critical workloads, the things that make the trains run on time, the financial transactions happen. So, I think the sort of impact of this is going to be going to be… And we’re going to look back and see this is a seminal moment for the mainframe space, but broader than that, the hybrid cloud space. So, as we start to think about this and start to wrap up, how would you summarize this, the implications for Rocket, and more widely the implications for the mainframe modernization space?

Phil Buckellew: Sure, so we think there’s a lot of ways that you can go with modernization and we want to help our clients wherever they are in that journey, no matter the approach they’ve taken. So, we’ve got a lot of clients that are planning to modernize in place. In fact, a good chunk of the Rocket portfolio today is oriented to declines In that situation. They value the reliability, availability, and security that they get from their mainframe and their existing IT investments, but they want to work with it in more modern ways. They want to be using more DevOps tooling, they want more modern tools like VS Code, they want infrastructure monitors with more AI in them, so that it’s easier to address their skills challenges. And we’ve also got a lot of clients that are focused on keeping their core business transactions safe and sound on the mainframe, but they also want to leverage some of the services that are available in places like public cloud and other distributed environments like those real-time analytics. These are clients that really are embracing hybrid and they want that best of both worlds where you’ve got both sides and they’re all bringing benefits, and we did a survey not so long ago and almost 100%, 93% of respondents-

Steven Dickens: I’ll give you credit that 93 is almost 100, Phil.

Phil Buckellew: Almost all of them agreed that they want their organization to embrace a hybrid infrastructure model that spans from mainframe to cloud, and so that’s really important, and this makes us a really strong player in that environment. And finally, we see clients that want to re-platform their applications and move pieces of them to distributed or public cloud servers. And this is an area where Micro Focus and their partnership with the cloud providers has really built a very strong set of offerings. Ultimately, we believe that all of these approaches and strategies are relevant and they are valuable depending upon the client situations. Ultimately, it’s listening to our clients, embracing their strategies, and working on ways to help them modernize and innovate. That’s our North Star.

Steven Dickens: I think for me, the key piece of this is it gets you and Rocket, once this closes, an improved ability to meet those customers where they are, where they’re thinking is, whether that’s modernizing on the mainframe, whether that’s moving parts of those applications to a public cloud platform, whether it’s deploying a hybrid landscape for these mission-critical applications. I think it gives both optionality, choice, and allows Rocket to meet the customers where they are. So as we start to wrap up, we’ve covered a lot of ground in a short period of time here, Phil, how would you recap this for the listeners and the viewers so that they can sort of take the key takeaways?

Phil Buckellew: So, I think there’s really probably three areas that are really important for folks to know. First of all, it’s important for our clients to value their past investments, and that’s something that we obviously support with this approach. At the same time, clients need to get more modernization and leverage more innovation, and that’s what hybrid cloud really entails. Now, we believe you need that modernization without disruption, and that’s something that we are consistently a supporter of. And then finally, in closing, we think this acquisition is great for all the teams involved. We think it’s really great for the Rocketeers, those are our Rocket employees because they’ll have more peers that are really savvy and knowledgeable about these important spaces, and we also think it’s going to be really great for the AMC teams that are joining us in that we have such a shared commitment to similar technologies and a passion for innovation, while also standing on our foundation of really solid values. So, we couldn’t be more excited. We think it’s going to be a great acquisition and we’re really looking forward to the close.

Steven Dickens: Well, Phil, thank you so much. It’s been quick to get you on this show. I appreciate the collaboration on that, fantastic to get the insight around what I think is going to be a seminal moment for the hybrid cloud landscape and for mainframe modernization and kind of beyond the customers and the ecosystem, so thank you for joining us.

Phil Buckellew: Great. Thanks, Steve. It’s great to be here.

Steven Dickens: So, you’ve been watching the Futurum Tech Webcast. Please click and subscribe to check out some of our other episodes and we’ll speak to you next time. Thank you very much for watching.