IBM, a global leader in technology and consulting, has recently made a strategic move that is set to further solidify its position in the world of mainframe application and data modernization. The company has announced its acquisition of application modernization assets from Advanced, a major player in this field, headquartered in Birmingham, UK. 

Acquisition details

Objective of the acquisition

At the core of IBM’s decision to acquire application modernization assets from Advanced lies a clear and strategic objective – to elevate its capabilities in the domain of mainframe application and data modernization within the purview of its consulting business. In a rapidly evolving technological landscape, businesses increasingly recognize the importance of modernizing their legacy systems, especially those reliant on mainframes. IBM’s acquisition of Advanced’s assets is a testament to its commitment to assisting organizations in this transformational journey.

Advanced’s role and expertise

Advanced, headquartered in Birmingham, UK, is renowned for its prowess in mainframe modernization and migration services, with a particular focus on OpenVMS and VME. Over the years, they have established themselves as experts in this niche, garnering recognition for their ability to navigate complex modernization processes seamlessly. This expertise is a valuable addition to IBM’s portfolio, as it complements the existing strengths of IBM Consulting.

Impact on IBM’s services

Enhancement of IBM WatsonX code assistant for Z

One of the notable impacts of this acquisition is expected to be the enhancement of IBM WatsonX Code Assistant for Z. This generative AI-assisted product, introduced by IBM in August of the previous year, was designed to aid IBM Z systems customers in modernizing their applications efficiently. With the incorporation of Advanced’s assets and expertise, IBM can further bolster the capabilities of this product, making it an even more powerful tool for clients seeking to navigate the complexities of modernization.

Employee expertise

Beyond the technology and assets, the team from Advanced that will be joining IBM Consulting brings a wealth of experience to the table. With over 30 years of collective experience in a range of mainframe application modernization services, including assessment, design, transformation, integration, and full deployment, they are well-equipped to address the diverse needs of clients across various sectors. Their expertise spans industries such as financial services, insurance, automotive, travel, transportation, government, utilities, and media. This breadth of experience is a valuable asset that IBM can leverage to provide tailored solutions to clients with distinct requirements.

Industry implications

Relevance of mainframes

Mainframes continue to play a central role in IBM’s strategic vision. It’s noteworthy that 45 of the world’s top 50 banks rely on IBM zSystems, and an impressive 71% of Fortune 500 companies utilize mainframes in their operations. These robust machines are responsible for handling 68% of the world’s production IT workloads and processing a staggering 90% of all credit card transactions. Given these statistics, it’s evident that mainframes are far from becoming obsolete; instead, they remain a cornerstone of critical business operations.

Market for mainframe application modernization (MAM)

The market for Mainframe Application Modernization (MAM) is far from stagnant; it is thriving. Enterprises continue to place a high value on mainframes due to their unparalleled security, resiliency, and transaction throughput. Recognizing the immense potential in this market, IBM’s investment in enhancing its capabilities in mainframe modernization through the acquisition of Advanced’s assets is a strategic move. It aligns perfectly with the strong demand for modernization solutions in this segment and positions IBM to be a frontrunner in meeting these needs.

IBM’s acquisition strategy under CEO Arvind Krishna

Recent acquisitions

This acquisition of application modernization assets from Advanced is just one piece of the puzzle in IBM’s broader strategy under the leadership of CEO Arvind Krishna. Since taking the reins in April 2020, Krishna has steered IBM toward a path of growth and innovation through a series of strategic acquisitions. With a keen focus on strengthening the company’s consulting, hybrid cloud, and AI capabilities, IBM has notched up over 35 acquisitions in a relatively short span.

Notable acquisitions

Among the notable acquisitions made by IBM in recent times are:

  • Equine Global: An Indonesia-based ERP specialist, who added valuable expertise in enterprise resource planning to IBM’s portfolio.
  • Manta software: A data lineage platform provider, enhancing IBM’s data management capabilities.
  • Apptio: A software provider acquired for a substantial $4.6 billion, solidifying IBM’s position in the software space.
  • Ahana: A SaaS-based provider specializing in PrestoDB, a popular open-source query engine. This acquisition strengthens IBM’s offerings in the world of data analytics and database management.

These acquisitions demonstrate IBM’s commitment to staying at the forefront of technological advancements and expanding its repertoire to better serve its clients across diverse industries.

Financial terms and closing timeline

While the financial specifics of the deal have not been disclosed to the public, it’s worth noting that the transaction is expected to be finalized in the second quarter of 2024. This timeline underscores the meticulous planning and execution behind the acquisition, emphasizing IBM’s dedication to enhancing its mainframe modernization services and expanding its consulting capabilities.

Final thoughts

IBM’s acquisition of application modernization assets from Advanced is a strategic move that aligns with the company’s vision under the leadership of CEO Arvind Krishna. Bolstering its mainframe application and data modernization services helped IBM to position itself as a leader in a dynamic and thriving market. 

The addition of Advanced’s expertise and assets, along with the continued relevance of mainframes in today’s tech space, ensures that this acquisition holds immense potential for both IBM and its clients. As the second quarter of 2024 approaches, the industry will be watching closely to see how this acquisition reshapes the landscape of mainframe modernization and consulting services.

Tim Boesen

January 29, 2024

5 Min read