We look at why this is such a hot topic and we zoom out to explore the bigger M&A picture.
Global hybrid cloud managed services provider Ensono has joined the M&A frenzy of 2022, snapping up a mainframe modernization specialist.
On Tuesday, the Illinois-based company said it has acquired New York-headquartered ExperSolve. ExperSolve focuses just on mainframe modernization — a need that, by many accounts, is soaring. For example, a recent survey from vendor LzLabs indicates that 98% of IT leaders would consider getting away from mainframes – those unwieldy but high-performance computers – completely. Of those, 82% would opt for public or hybrid clouds as a replacement. Even Amazon Web Services, a purely cloud-centric vendor, now offers mainframe modernization. So does Microsoft Azure, among other cloud providers.
Why is mainframe modernization such a hot topic? For starters, the technology is old. IBM, arguably the biggest name in mainframes, has produced the computers since 1952. As such, fewer people now know how to run the machines and their applications. The interfaces and programming languages have grown outdated. Plus, on the whole, operating mainframes is complex. To ease that load, many organizations need to migrate their mainframe applications to the cloud; this, or update the applications themselves on the mainframe. ExperSolve handles both use cases.
Ensono, for its part, has offered mainframe modernization and optimization services for years, similar to ExperSolve. In fact, “about half of our revenue comes from the mainframe side of the business,” Chad Mead, vice president of mainframe consulting and security at Ensono, told Channel Futures. Adding ExperSolve to Ensono beefs up the latter’s overall capabilities — and staff.
“Despite the increase in popularity of cloud-native applications, the reality is that most organizations currently operate a hybrid environment and prefer a partner who has deep expertise in both the cloud and mainframe,” Mead said. “We’ve seen providers like Microsoft Azure and Amazon Web Services improve their mainframe modernization offerings to meet these needs in recent years, showcasing that legacy systems are not going away anytime soon — just changing. With the acquisition of ExperSolve, we’re able to meet the moment.”
‘Digital Preparedness and Long-Term Success’
Noah Ross, founder and president of ExperSolve who now serves as managing principal at Ensono, agreed.
“A key focus for Ensono is its clients’ digital preparedness and long-term success, which is why ExperSolve aligns well with Ensono,” Ross said. “Both companies are dedicated to innovation that will help our clients meet their business outcomes and stay relevant in today’s enterprise.”
Such an approach is key to success, Liam Eagle, research director at 451 Research, wrote in a recent report.
“Application modernization remains a bigger-picture and longer-term IT objective at many organizations, motivated by the promise of modern architectures and technologies to deliver performance, cost and efficiency benefits,” Eagle said. “These efforts are driving cloud adoption and migration across enterprises as organizations see cloud platforms and their component services as a means of modernizing legacy applications.”
To that end, Ensono is keeping all of ExperSolve’s employees, including executives. ExperSolve joins Ensono’s advisory and consulting practice, part of the mainframe and security consulting division. Ensono did not disclose financial terms of the acquisition. Martinwolf acted as advisor to ExperSolve.
Now for the Bigger Picture
The Ensono-ExperSolve union joins what looks like a record number of M&A deals.
Just 11 days into 2022, more than a dozen channel – and channel-friendly – companies have made purchases and undergone private equity transactions. MSPs make up a sizable portion of this activity. Ensono’s Deal said that’s because of “increased demand for their services across organizations. This could also be attributed to organizations reevaluating their business needs as they go through pandemic recovery and lay out their plans for the future, as the modern workplace looks very different than it did less than two years ago.”
Zooming out even farther, financial experts say deal-making will remain a big story throughout this year. The reasons boil down to the need to stay competitive, especially to get their hands on talent amid the Great Resignation; having access to tons of cash; and bowing to investor pressure to raise valuations, according to a recent survey by global consultancy KPMG.
“Based on the volume of new pitches in November and December – transactions that would come to market in Q1 and Q2 of 2022 – there are no signs of a slowing deal market,” Philip J. Isom, global head of M&A at KPMG, said in the company’s report, “2021 Was a Blowout Year for Global M&A.”
In the year ahead, KPMG’s survey shows that executives are eyeing M&A to diversify portfolios and gain access to products, services and technologies they otherwise would not.
Meanwhile, some important trends will influence the market. For one, private equity players have a lot of money at their disposal and want to invest it. For another, the Fed is expected to raise rates to combat inflation. Buyers that rely on debt financing will move quickly to avoid those higher interest rates, KPMG noted. Finally, the continued acceleration of digital transformation is driving deals, KPMG said, as is the worldwide ESG push.