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Rocket Software’s $2.275B Acquisition Boosts Modernization Suite, Unleashes Cloud Innovation – Infrastructure Matters

Rocket Software’s $2.275B Acquisition

On this episode of Infrastructure Matters, host Steven Dickens is joined by Rocket Software’s Milan Shetti, President and CEO, for a conversation on how Rocket Software’s monumental acquisition of AMC is set to revolutionize the company’s market stance by significantly enhancing its modernization suite and unlocking new avenues for cloud innovation.

Our discussion covers:

  • The strategic significance of acquiring AMC and its impact on Rocket Software’s position in the market.
  • The imperative of modernization in today’s digital landscape and the necessity for companies to prioritize this transition.
  • The unique qualities that set Rocket Software apart in the competitive field of cloud solutions and infrastructure modernization.

For more information visit Rocket Software’s modernization page.

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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 webcast. The author does not hold any equity positions with any company mentioned in this webcast.

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.

Transcript:

Steven Dickens: Hello and welcome to another episode of Infrastructure Matters, I’m your host, Steven Dickens, and I’m joined by Milan from Rocket. Hey Milan, welcome to the show.

Milan Shetti: Thanks for having me here, it’s so great to see you again.

Steven Dickens: So you’re the CEO of Rocket, we’re filming a day after some big news for the organization. You’ve got your leadership team here, there’s some broadcast stuff that you’re doing. Tell us why it’s such a big day for Rocket.

Milan Shetti: Oh, it’s fantastic, Rocket had announced several months ago that we were looking to acquire AMC, Application Modernization Connectivity business from OpenText, a business which we had been tracking for multiple years. And we absolutely believed that Rocket plus AMC is exactly what the customers, partners, and the industry needed. And we closed the acquisition yesterday, May 1st was day one, and so good to be making AMC and Rocket part of one family.

Steven Dickens: Well, congratulations.

Milan Shetti: Thank you.

Steven Dickens: Huge moment for the company. I track you guys pretty closely, this is not a small tuck-in, this is not a tiny little acquisition, this is pretty transformational. So tell us a little bit more about those AMC assets coming from… Was it OpenText, Micro Focus? A lot of people will maybe know it from the Micro Focus days. Tell us a little bit about the numbers you’ve been public on those, and then tell us about the portfolio that you’ve brought in.

Milan Shetti: Absolutely, it’s such a complementary portfolio. And so when we set out Rocket and Rocket in the next era, we said, “Modernization without disruption is what Rocket would want to stand for.” And we will meet customers wherever they are in their modernization journey. And Rocket plus AMC together, we are now a 1.3 billion dollar enterprise software company. We give scale to a lot of our customers on buying products on the Rocket portfolio, as well as the AMC portfolio. We have products such as CORBA, COBOL, Enterprise Suite, and these host connectivity. And these businesses are complementary businesses, and we actually fill a wide range of portfolio for our customers, and that’s just fantastic. We’re going to be over 3000 Rocketeers all over worldwide, great reach, great partner reach. So it’s just truly complementary.

Steven Dickens: I think some of those numbers are interesting for me. You mentioned 1.3 billion of revenue there, I think the acquisitions… What is it? Just over 2.2 billion in total. I think a lot of people maybe have seen Rocket in this space, they’ve seen them as one of the major software vendors in the mainframe ecosystem, but I don’t think people have given you credit for the size, you mentioned 3000 Rocketeers there. Maybe just give us a view of where you think that puts you in the overall market and the overall landscape.

Milan Shetti: Yeah, so we’re a privately owned company, and if we were… In terms of our EBITDA and the earnings before income tax, and if we were listed, we would be a Fortune 2000 company.

Steven Dickens: Is that something you maybe want to preview? No comment, right? No comment.

Milan Shetti: Exactly. But it’s exciting, I think it’s exciting not only for the scale which AMC brings us, both from a product portfolio standpoint and also the customer reach standpoint, but it’s also exciting for the industry. And meeting customers wherever they are in the modernization journey is very important. And with this breadth the customers mainframes are here to stay for a very long time, connecting the mainframe cloud workloads to mainframe is very exciting. And the suite of products we have, it’s true to the promise which we’ve been envisioning for a long time.

Steven Dickens: So I’ll take you back to something you’ve said, you’ve said it a couple of times now, and I think it’s crucial for the way that people should be thinking about this, and it’s certainly the way I look at where the portfolio is now, meeting people where they are on their journey. We hear a lot of various comments around the mainframe, people modernizing to get off the platform, people modernizing on the platform, people connecting the mainframe to other services and applications. What’s the Rocket perspective on modernizing where people are in their journey?

Milan Shetti: Yeah. So we see from a use case standpoint there are primarily… We see three use cases. And people who follow the mainframe industry such as you, would know that mainframe is actually quite modern from an application development standpoint and everything. And this is a remark coming from someone, so I joined Rocket in 2020, and I actually do not come from the mainframe industry, I had come from the open systems industry. And when the opportunity of joining Rocket Software came in, I was just studying about what’s happening in mainframe, what’s happening in the MIBs in the mainframe. The MIBs are actually growing on mainframe, IBM z16 was a fantastic launch.

Steven Dickens: And they’re posting great numbers still. We were talking about it off camera, this last quarter, still posting growth late into the cycle on that.

Milan Shetti: Absolutely, absolutely. So the one use case is around modernizing in place, and that’s where much of Rocket’s portfolio, traditional portfolio, has been. And also some of AMC’s portfolio has been the second use case, is hybrid. Where connecting, whether it’s on ZOS or zLinux, workloads coming and connecting into where the system of record is sitting.

Steven Dickens: And we see more and more of that. I think as hybrid becomes the new model for the default, a lot of these enterprises are saying, “How can I connect this system of record to these systems of engagement?”

Milan Shetti: Exactly, and there is no way for a mobile application to get to the system of record on your online banking without touching the mainframe. And that’s a great use case for hybrid. And so we’re very excited about the platforms such as the COBOL, Rocket didn’t have a big presence in COBOL, now with AMC Rocket has.

Steven Dickens: And that’s not going away.

Milan Shetti: That is not going.

Steven Dickens: The business, people look at it and they say, “Oh, maybe it’s a legacy language.” I think that’s a constrained way of thinking about it, it’s the business logic that’s coded into those platforms. Not so much just the language itself, but the business logic.

Milan Shetti: Absolutely. And when I look at COBOL as a language, and I’m not familiar with COBOL before joining Rocket and personally getting involved in it. But I actually think that of all the programming languages out there, COBOL is perhaps the most closest to English as in language. It’s only one place where the language, the spoken language and the computer language are so similar. So I actually see the joint portfolio, and I actually see whether it’s code assist and such. It actually is going to make the COBOL language much more stickier. The chances of COBOL… There are products, and people have tried COBOL to Java and everything, and I do come from the Java world. What I can tell you is that this Java stack is very heavy, and if you’re thinking about the business logic, which you mentioned and everything, I don’t see it performing the same way.

Steven Dickens: Well, you end up with JOBOL, and that’s the worst… I love this phrase, it’s the worst of both worlds. It’s neither Java nor it’s COBOL.

Milan Shetti: Yeah. And I actually think… And this is a forward-looking prediction, that I actually think as the AI space is getting out there, code assist is going on and it’s leveraged, I actually think we’ll get more COBOL developed with AI code assist.

Steven Dickens: Because it’s easier for those developers to get onboarded, right?

Milan Shetti: Exactly. And I actually think one of the things which is happening in the mainframe industry is around the talent and such, AI and COBOL is actually going to help the talent challenges which had existed previously in this industry, which is fantastic. And so that’s why I think Rocket plus AMC brings Rocket into the programming space. And us getting… We actually are in much better place than we ever were as an industry to solving and resolving the talent challenges.

Steven Dickens: So Milan, fascinating perspective here, it’s always great when you get to chat to people who are sort of onboarding a big acquisition. You’ve talked about some of the assets that have come in, we’ve got Enterprise Suite, the connectivity piece, that’s not going to maybe get as much press, but I think it’s still vital. Where do you see the portfolio going? I think we’re obviously… What is this, day one, day two today? What’s that strategic vision? Obviously there’s some good technology assets as they sit today, there’s a strong revenue profile of the business. Wind the clock forward two, three years for me, if you would, what’s your strategic vision?

Milan Shetti: Yeah, so I think the way we laid out this strategy around modernization without disruption, meet customers wherever they are in their journey, it gives customers confidence on the platforms they have invested in and the platforms they want to expand on. And the choice is actually going to help customers feel safe about expanding. I actually think a combined business will grow, will grow and it’ll be an industry-changing moment. I believe a forward-looking statement, which I’m very confident about bringing both the technology, and the people, and the culture together is the entire industry of…

I don’t look at this as a mainframe industry or a cloud industry, where I’m looking this is from a customer perspective. Their mission-critical environment, what do they want to do with it? Is there a partner they can partner with to connect what they have invested in, what they are looking to invest further? And can there be a seamless partner who can solve that end-to-end mission-critical environment modernization journey? And that’s now Rocket. And this where the Rocket plus AMC coming together, I do believe it’s going to create and lift to the industry, including the mainframe industry, to see that they can do modernization on-platform, connect to hybrid cloud, and at their own pace. Which is very important, because this is an industry.

The primary reason why the message resonates, is this industry cannot take risks, cannot take unnecessary risks, cannot do rip and replace. And they just cannot afford to do that, because it it runs with the economy. And now they can think of modernization at their own pace, we are the partner of choice.

Steven Dickens: It’s modernization without the disruption. You mentioned there the message has been resonating, what’s been the reaction? Obviously you made the announcement, “We’re closing now.” What’s been that customer reaction as you speak to clients?

Milan Shetti: Every single customer I’ve spoken with are super happy and glad that Rocket and AMC is coming together. They have seen Rocket and Rocket’s core values of empathy, humanity, trust, and love come through with the product portfolio which Rocket had developed, sold directly to customers, and also sold through IBM. That is something which they had known. They had also known AMC, and AMC also carried similar values and value propositions to customers coming together. They’re relieved, they’re actually relieved, and they’re actually confident that we can bring the AMC and Rocket portfolio together in a meaningful way for them.

So that’s been the reaction of customer. The partner reaction has been outstanding. The managed service providers have been super, and then the channel partners, the partners in the mainframe ecosystems, and also in the cloud ecosystems are super excited, the fact that these companies are coming together. And the investors are also pretty excited. And this is why I think AMC as a business unit now… AMC and Micro Focus, and AMC and OpenText, was they didn’t belong together.

Steven Dickens: It’s a great home within Rocket.

Milan Shetti: Exactly.

Steven Dickens: Let’s put it that way.

Milan Shetti: It’s funny you say that, because our message to the employees, and the customers, and the partners is, “Welcome home.” And when we say, “Welcome home.” It just quickly resonates with them, is because the portfolio are complementary. And so partner community, customer community, investor community, as well as the employees, I have not had a single conversation, not even a single comment, and I’ve had hundreds and thousands of conversations literally in the last six months or so since our definitive agreement, not a single comment where the comment was, “Why?” All the comments have been more complementary.

Steven Dickens: So if you were to wrap this up for me in three quick takeaways, as people watch this video, what should they be thinking about as they sort of process AMC joining the Rocket family?

Milan Shetti: Modernization is everything, people would always want to modernize their environment, whether it’s mainframe, whether it’s x86, whether it’s distributor, whether it’s databases, Rocket is the partner of choice. We want Rocket to be the partner of choice if they’re not already our customer, and if they are already our customer, either on the Rocket side, or the AMC side, or both, we guarantee modernization without disruption. We will meet them wherever they are in their modernization journey, and we’re very proud to partner with them. And this is a perfect fit from a portfolio standpoint on what their needs are for modernization.

Steven Dickens: Well, you’ve summed it up perfectly, Milan, thank you for joining me today, really enjoyed the conversation.

Milan Shetti: Thank you so much.

Steven Dickens: Thank you for watching. My name’s Steven Dickens, you’ve been joining us here on another Infrastructure Matters, where I’ve been joined by Milan Shetti, the President and CEO of Rocket Software. Please click, and subscribe, and check out those other episodes to grow our show, and we’ll see you next time. Thank you very much for watching.

Author Information

Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.

Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.

Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.

Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.

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