Consequenses of the Micro Focus HPE reverse takeover

September 12, 2017
Asysco blog, Micro Focus, HPE, reverse takeover, merger, acquisition, Micro Focus acquisition, Micro Focus HPE, Micro Focus HP enterprise takeover

 

 

 

 

 

Author: Herman Eggink, CCO Asysco

Let’s say you’ve chosen your “flavor” of Micro Focus COBOL and you’re currently enjoying the enhanced capabilities of COBOL programming, plus a reduction in cost compared to your previous mainframe licenses. Your plan was to stay in Micro Focus COBOL for at least a decade and that is your long-term strategy.
Now, nearly one year after Micro Focus and HP announced the reverse takeover of HP’s non-core software, the deal finally concluded on Friday, Sep 1st, 2017. According to the Financial Times, Micro Focus has made a virtue of buying legacy computer brands and wringing them for profitability by cutting costs. But the $8.8bn reverse takeover of Hewlett Packard Enterprise’s software assets is likely to prove more complicated.

In a recent interview, chairman of the board, Kevin Loosemore made it clear that the operating margin needs to improve from 21% to 45% in 3 years, as happened with all previous acquisitions (e.g. Attachmate). Loosemore said: “There are a lot of companies in this space that are trying to grow when they shouldn’t, as a result, they were running their businesses at half the margin that we run the businesses at. These old companies are often trying to invent the next big thing — but they don’t really know what that is.”

Whilst he may have a point regarding the growth and operating margin, isn’t this ultimately about creating customer value and ensuring you get paid fairly for the value you create? Doubling margin in 3 years for a company the size of HP is only possible through massive internal efficiencies where little optimization synergy exists pre-merger (the reverse takeover): less money is spent on R&D (longer-term issue) and less service and support will be available for existing customers (short term issue).
This will no doubt impact the smaller product lines such as … Micro Focus COBOL, a product that quite a number of their customers still rely on for the core of their organization.

Hardly any R&D is spent on legacy to begin with (less than 1% of the top IT company’s R&D budgets is used for innovating mainframes, COBOL and such, it all goes to x86 and ARM/mobile). In that sense, this reverse takeover is very likely to end up being a reverse value creator for their customers.

According to the Financial Times, one top-10 shareholder describes Chairman Kevin Loosemore as “more a private equity-type than a businessman”.

Do you really want to depend on a company that’s only about margin and is driven by a hunger for expansion?

“Our funding ability has increased now that we are bigger,” Kevin Loosemore said in an interview. “There is no practical cap in terms of the size of future deals.”

Sources:

ZDNet.com

Financial Times

Bloomberg.com

 

The best of both worlds

August 4, 2017

Cobol has been declared dead numerous times over the last decade but is still alive and kicking. Something that cannot be said about the Cobol workforce. Every day, about 10.000 baby boomers are retiring including quite some Cobol programmers. A recent survey conducted on behalf of IBM shows that retirement is the biggest worry in the mainframe world. It is estimated that nearly 20 percent of the programmers are expected to retire within 5 years from now.

Companies still depending on mainframe or legacy systems are concerned about their business continuity and are seeking for ways to outsource their mainframe maintenance. Technology outsourcing firms like Ensono have started to recruit graduate students and outsource them to their mainframe customers after a couple of months of Cobol training.

Question is, can these young programmers replace the wealth of knowledge that the ‘seasoned’ Cobol workforce has? Are they able to correctly interpret the often undocumented treasure of business logic that is built in these legacy systems?

Will they be ‘up and running’ fast enough to fill the hole that the retirement wave leaves? Outsourcing companies benefit of Cobol resource scarcity. Rates and salaries for mainframe programmers and administrators are some of the highest in the IT industry. Starting salaries for college graduates are ranging from $50.000 to $75.000 a year. In combination with the already high mainframe MIPS cost, this cranks up the TCO of legacy systems even more.

Honor the past and embrace the future

Instead of teaching the next generation to work with the old generation’s legacy, wouldn’t it be better to transform the good old stuff into the new world? By taking the valuable knowledge and business logic that resides in legacy systems and transforming that to a modern .NET based environment you will have the best of both worlds.

A fully automated like for like migration will do just that. You will even have the choice of whether to continue programming in Cobol or switch to C#/VB.NET. This way you continue to capitalize on your current Cobol knowledge while opening the door for new technology at the same time. Click here for more information.

Sources:
Grains Chicago Business article by John Pletz

Datacenter Dynamics Article by Max Smolaks

The future of COBOL

October 21, 2015

Action time! When developing your future plans, it is a good idea to take a close look at your current COBOL applications and consider the following:

Today COBOL has an outdated image issue and is often no longer the strategic language on which the business builds new applications.

COBOL, as a procedural language, is not perceived to be as agile as object-oriented languages for modern programming needs such as mobile apps and the web. There are alternatives.
But, COBOL applications still represent the “foundation” of many businesses. So what should you do with these business critical applications?

Is there a role for COBOL off the mainframe?

COBOL and the mainframe run well together, and that’s where it will probably stay for very large applications. But what to do with the majority of your COBOL applications that can be moved off the Mainframe?

Upcoming retirement of COBOL programmers creates skills gap

Board members often do not see the immediate urgency. Only when their COBOL programmers are about to retire they’ll get nervous. At that moment it is too late to transfer the business knowledge, the deep understanding of the business rules, business logic embedded within the COBOL programs, creating a massive skills gap.

Despite the availability of state-of-the-art COBOL development environments and the effort of education institutes, the young generation is not interested in COBOL. It is just a fact that organizations should be aware of.

What to do NOW?

Before it is too late to transfer your business knowledge to the next generation, you should take action NOW and start looking for a solution that fits your organization.

What are the COBOL alternatives?

There are many alternatives, like: Re-writing, Re-hosting, Re-placing by a standard commercial packages or a standard migration. The issue is that all of these solutions never fit 100% of your business demands, are too expensive or take too much time to implement.

But on the other hand, doing nothing is not an alternative. It will only make your situation more complex will put your business at risk!

Why not have the best of both worlds?

A new unique migration solution has been developed that offers you the possibility to continue to develop in COBOL and simultaneously generate 100% C#/.Net. This way you will maximize the value of your COBOL developers and involve and transfer your unique business knowledge to the new generation developers at the same time.

Maximize your competitive advantage

Reconsider your future IT situation now, instead of tomorrow….