Mainframe Migration and Modernization, Featuring Scott Silk, CEO of Astadia

Astadia CEO Scott Silk joins Patrick for a discussion on cloud migration and the mainframe modernization needs of enterprises globally. A recent Amdocs acquisition, Astadia focuses on the mainframe modernization opportunity within the broader digital transformation services space. Scott also shares insights into Astadia’s core partner strategy and how a smaller firm partners with larger hyperscalers, global systems integrators and legacy OEMs.

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Art by Amanda Hamilton Sy

Mainframe Migration and Modernization

TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem, from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.

I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about cloud migration and many other technology topics with Scott Silk, chairman and CEO of Astadia: an Amdocs company.

Introducing Astadia CEO Scott Silk

Scott, thank you so much for coming in, and I appreciate you being here on site at the TBR headquarters for this. Great opportunity for us to talk to people who are in the ecosystem that we cover, and in particular the company that you’re with, that you run Astadia, has been acquired by Amdocs. It’s been a client of ours for a long time, so we know Amdocs, but we haven’t known Astadia as much as we really need to. So maybe you give us a little bit of both your background, but then also what the company is doing now and sort of where it’s going.

Astadia CEO Scott Silk: Sounds good. Great to be here with you today, thank you so much for the time. So, my background, I’m a big company dropout. I started ironically selling mainframes at Unisys and kind of went up the management ranks at Unisys. And after 16 years I was voted off the boat and it was time to do startups. So, I did a series of startups ever since. The latest- how I got involved with Astadia was actually quite interesting. I was trying to retire in Naples, Florida, and I wanted to move to Naples because it was an opportunity for real estate appreciation. Because baby boomers retire, they drive property values up. And then after two weeks of retirement, my wife said, go get a job. And, I found Astadia and Astadia was interesting me because a lot of the companies in the mainframe migration space, the companies that would move workloads from mainframes to distributer or mainframes to cloud, had been in the business for over 30 years, but the mainframe never died. And I was just kind of curious that- I’m just wondering if the baby boomers retiring might have been the death of the mainframe. So, about ten years ago, I joined Astadia with the mission to build the greatest mainframe migration company and making a bet that when these boomers retire, the market was going to cooperate, and we could become the market leader. 

Patrick: Yeah, it’s fascinating. And, a couple things. I am also a refugee from the big company’s space. I was actually with the federal government for a while, which is perhaps the biggest employer, and then with Deloitte for a while after that. So, now here at a much smaller firm, it’s fantastic. I’m curious too, because of your background especially with Unisys back in the day and now with Astadia, you’ve seen the way that the ecosystem has changed, not just around mainframes, around everything technology. And so, I’m curious when you think about the way that partnering and alliances and going to market together, how much that’s changed, and sort of how critical an alliance or ecosystem play is for Astadia. 

Co-opetition

Scott: Ecosystems are very important, and we probably drive over 85% of our revenues through partners or with partner assistance, and it’s a delicate balancing act. For starters, our partners tend to fall into three buckets. They tend to be platform players, like IBM and Kyndryl. It could be the big SIs, like Capgemini or Cognizant. And it’s the hyperscalers, AWS, Azure and GCP. 

Patrick: Right.

Scott: But, it is co-opetition because if you think about it, oftentimes we’ll partner with AWS, but they also have a competing product to what we do. So, it’s delicate there. Same with the GSIs. We do a lot with the Capgemini’s, as I mentioned, and the Cognizant’s of the world, but we are now owned by a GSI. So, we have to balance those types of things out. So, it’s co-opetition so everybody wins. And then finally- similar delicate balance with IBM or Kyndryl because we have great technology to move workloads off the mainframe. But in many cases IBM and Kyndryl want to control the speed at which that migration takes place. So, it’s changed a lot because it is co-opetition and it is a delicate balancing act. 

Patrick: And the co-opetition part requires a different kind of mindset on the part of the people that do- that run alliances. In the past, it was sort of how much are we selling through you, now it’s got to be how are we partnering together to go-to-market. Is it- have you seen like a sort of a change in the way that people at a leadership level appreciate the importance of alliances? 

Scott: Yeah, they’re real business people at this point. Because if you think about it, you need to structure win-win business partnerships. So, if you’re going to partner with one of your competitors, so to speak, it’s got to work for both of you. And that’s why we’re looking for more seasoned business people for these types of roles. 

Astadia’s superpower

Patrick: Okay. Yeah. Makes sense. And then you talk about co-opetition because, what you do, maybe AWS has some of those services as well. So, there’s a company that we worked with a lot that that is really keen on talking about what their superpower is. And so, I’m curious, what is Astadia’s Superpower? Two questions. One. What is it? But then also, how well do you think your alliance partners can articulate that?

Scott: Great question. So, kind of a funny story. We made a decision to get into the refactoring space, which is the software that automates the movement of COBOL to Java or COBOL to C sharp. And we had a choice, do we make it or do we buy it? And we decided to acquire. And my investors at the time said something that I’ll never forget. They said, don’t come back to me in six months and say, “you bought the wrong company.” And I was taken aback by that because I’m thinking, I’m going to be thorough- what are they talking about? But what we found was interesting. We looked at companies like Blue Age and Modern Systems and TSRI and Cisco, ExperSolve, and they were okay. But what we found is five more companies that did refactoring, and then five more and then five more, and we ended up finding 22 companies that we had to go to school on, and we had to be thorough. And it took us the better part of two years to do a thorough evaluation on all 22 companies. So, when you get to superpower, though, here’s the way we looked at it. We wanted the tooling that was the most automated when moving COBOL to Java and C sharp. As close to 100% was the goal. We wanted automated testing because up to 50% of the time and cost of a project can be testing, and if we can automate that, that would really help deliver a great ROI. And probably the third one was enterprise class references. A lot of the people, a lot of these 22 companies we looked at, they were pretty good at POCs or pilots or nibbling around the edge or doing small projects, but we wanted somebody that could do Societe General, Liberty Mutual, AT&T, Citibank, Deutsche Bank, companies like that. And we found a diamond in the rough. We found a company called Anubex Space in Antwerp, Belgium. And they were a classic case of next generation technology, world class references. So automated, it was a generation ahead of anybody else out there. They probably weren’t the best on the go to market side, which allowed us to buy them, we could afford them. 

Patrick: Yeah. So, in your experience, while you’ve worked with big companies and small companies, it sounds like most of your clients though, in your career, have been those larger clients, you’ve been working with enterprise clients. 

Scott: Correct.

Patrick: How much have the buyers’ at those enterprise clients changed in the sense of like the decision makers themselves are so much more technologically savvy, experienced, like you’re not trying to sell them the technology anymore, right?

Scott: Correct. 

Patrick: Yeah. 

Selling business impact

Scott: Correct. We’re selling business impact, business results. 

Patrick: Does that make your job harder that you have to be able to articulate it as business impact instead of “these are the speeds and feeds and what works best.”

Scott: It makes my job so much easier, it’s not funny. 

Patrick: Yeah.

Scott: I’m the least technical person on the planet who’s run tech companies. So anytime I can have the conversation and be technology aware, but turn it a business or ROI discussion. I’m happy doing that. And to your question too, the buyers have changed. I guess I’m going to date myself when I use these terms. But back in the 80s it was the DP director and then the MIS director. Now the CIOs and CTOs that are involved in the decision-making process, they’re pretty business savvy as well. And up through the C-suite from CFO, COO, and CEO. They’re tech savvy. Yeah. So, it has definitely changed where it’s a blend of businesses, roles, technology.

Patrick: Yeah, it makes a lot of sense. So, at Technology Business Research, one of our- sort of the core way we described our superpower is, we look at companies by looking at their strategy, we look at their financial performance. We say, what should we expect out of that? 

Scott: Yep. 

Patrick: Do they have the right strategies, is their business model put to their strategy. Are they performing the way they should and all of those things together, including how they put it to market. You know, what can we expect out of them? So, when you think about- I know you can’t give me for financials and that’s fine. But when you think about Astadia’s core strategy, how the company/how the firm’s been doing so far and then where you expect it to go, like how would you lay those three things out? 

Scott: Sure. So, when I joined Astadia, we had a little bit of an unfair advantage. And the unfair advantage was time. Nine years ago, ten years ago, baby boomers hadn’t retired in earnest yet. So, it gave us the time to really think about what building the ultimate mainframe migration company would look like. What type of leadership team did we need, what type of technology team did we need, what type of solution offerings and so forth. So, we were very pragmatic when we built it. When we launched our new capability, it worked out really, really well. With the exception of COVID, COVID flattened things out for a couple of years. But the strategy worked really well. And I tell people that it was one of the rarest experiences in my life where we threw up a strategy on the flip chart nine years ago. Bang! It came through. It was almost like we drew it up and 

Patrick: Right.

Scott: You know, when we were acquired by Amdocs in November of last year. We were the largest player in the space, but we were also the fastest growing. We were growing at over 155%. And while our investors like that, I think the most important part was we were pulling away from the pack, which meant we were delivering value to customers. 

Astadia and Amdocs

Patrick: So, it made sense then, I mean, for Amdocs, an incredibly smart play by them to acquire you guys. And again, this is where it’s going to get a little delicate. But, you’ve been through this before. So, what were the things that you expected to be harder about being acquired by Amdocs and it ended up being easier? And what were some of the things that you thought joining at Amdocs would unlock, you know, a certain acceleration for you guys and it wasn’t there. 

Scott: Yeah. Great question. And probably the shock value is a little bit less for me because I’d been in a C-suite in a Fortune 100 company.

Patrick: Right.

Scott: But the rationale behind the merger made really good sense. And that was, let’s say we were walking into a large company and saying it’s a $50 million migration. And they look at us and say, well, you’re only $50 million. You really need the backing of a bigger company. So, Amdocs is a $5 billion company. So having that backing was important. The second thing that Amdocs brought to the table was system integration capability. When we would go into clients and move them from their mainframe to one of the clouds, we’d earn trusted advisor status. And then after that the customer would say, “well, I want to do managed services or I want to do generative AI. I want to do predictive analytics, I want to do DevSecOps,” and we’d have to bring in a partner. And now, while we still have a partner network of GSIs to do that work, if somebody wanted one throat to choke or vertical integration, they can buy it all from one location. And that’s Amdocs.

GenAI

Patrick: So, I want to come back to GenAI for a minute, but you brought up something that we’ve been fascinated by for the last couple of years, which is the shift in the way that consulting opportunities have emerged or the way that consulting opportunities have come about. And it used to be consultants were the tip of the spear. Right? They would go in and say, here are your problems, we’ll help you solve them, and by the way, there’s going to be some managed services and some other implementation stuff down the line. Now we’re seeing a lot of the managed services providers in the IT- the folks doing the implementation, they’re on the ground, in the thick of it. They know what’s going on, particularly managed services. And they can surface problems that can then bring the consultants in. In your experience so far with Amdocs, are you getting that ability to see with Amdocs’ clients, okay, here are some of the things that are that are surfacing or is Astadia bringing that capability to Amdocs? 

Scott: That’s a great question. And we’re seeing both. It’s kind of the yin and the yang of we bring some, they bring some. We’re approaching them from different places, but that’s been one of the big leverage points of Amdocs. We’ve been super busy. I mean, you come in and, you know, we have more presentations and demonstrations and things like that than we have ever had. So, it’s been a busy time, which is a good thing.

Patrick: Yeah. Excellent. So, let’s wrap up with GenAI, you can’t have a conversation

Scott: Right.

Patrick: In the last two years without talking about generative or artificial intelligence, which is fine. I know it’s part of your business. I know it’s part of Amdocs’ business. But I’m curious if they’re- just to take- you referenced your age and so, I’m old enough too. So, let’s talk the big picture, the sort of grand technology scheme of things, you’ve seen lots of different trends come and go. This one is here now, so, we’re all fixated on it. But are there certain changes you think are going to happen within enterprises around IT because of GenAI that we’re just now beginning to appreciate, and then are there some use cases that you’ve seen that are like “okay, this this is what makes it all click for me.”

Scott: Yeah. It’s so true. There’s not one sales opportunity we can go on without people mentioning GenAI, I think it’s, you know, it’s gone through its hype phase a little bit. When people started talking about it, it was going to put us out of business. And you can migrate a Fortune 100 mainframe in 15 minutes with GenAI. I think it’s kind of off the hype curve right now where people see a role for it, but it’s not going to be ready for prime time probably for 2 or 3 more years. 

Patrick: Yeah. 

Scott: That said, and I’ll go back to our superpower, I mentioned that we’re very automated. We’re more automated than anybody, and we do automated testing. The benefit to the client is we can get you to the cloud faster, more cost effectively, and at less risk. So, while I lot of our competitors will be using GenAI to go for maybe 60% or 70% automation to 100% like automation, like we are. We really can’t use it there

Patrick: Right. 

Scott: Because we’re already that automated. So, we’re looking at complimentary use cases to complement our core highly automated platform. One example might be when you move somebody to Java, and you may want to use GenAI to make it more modernized, more containerized microservices, things of that nature. That’s a wonderful use case. Another use case might be around test case automation, rather than having humans do the building of the test cases, have GenAI use that. So, we at this point see it as more of a complementary strategy to what we do. And then maybe, I mentioned 2 to 3 years, maybe the next generation of these platforms probably will be more GenAI centric. And it can be 2 or 3, if not more, years out. 

Patrick: So, it’s a good accelerant to the automation that you already have in place. But it’s not replacing that. 

Scott: Correct. 

Modernizing the mainframe

Patrick: Right. Yeah, that makes sense. One more question, because just the way you framed that out, especially the thought about migrating to the cloud faster. One thing that we’ve heard in the last year or so, has been a certain fatigue on the part of IT buyers, that they’re saying, look, you sold us on cloud, you sold us on blockchain, you sold us on metaverse, you sold it- you know, you kept selling us on all these things that we had to buy. And so, they’re saying, like, now you’re coming to us with GenAI and now it’s going to cost even more. And there was a little bit of sort of fatigue combined with, take my technology I’ve already got and make it work. So how does Astadia play in that sort of, when you’ve got a client that says, look, take the tech I’ve already got and make it work better for me, is that is that a good opening for you all?

Scott: Yeah. I mentioned our tagline is mainframe to cloud, however, we do that because that’s just a very focused part of the market to capture. There are clients that will say, I want to stay in the mainframe, but swap out Broadcom or CA and just modernize on the mainframe.

Patrick: Right.

Scott: Or, I’ve got a boatload of these x86 servers laying around, can you take workloads off my mainframe and run them on x86. And we can do that as well. But if I can close on kind of a plug for Astadia. 

Patrick: Yeah.

Scott: I mentioned our high degree of automation and I mentioned our automated testing. The biggest benefit to the client is predictability. So, in over 95% of our cases, since we’ve eliminated probably 75% of the humans that have to migrate a mainframe, because the software is doing the work, in 95% of those cases, we go in fixed price and fixed bid. 

Patrick: Yeah.

Scott: We hold the risk. And that’s very refreshing to clients that always are getting billed to death. In our case, if we say the projects $10 million in two years, that’s what it’s going to be. If it’s $12 million, guess what we just lost $2 million.

Patrick: To me, that seems like it’s going to be amazingly compelling for clients where they are right now, which is, the industry told us cloud was going to save us money and in fact, that’s the biggest bill we have now. And the same thing back- like you said, it was going to cost this and now it costs that much more. If you guys are actually coming in saying this is what it actually costs and we’ll take the hit if it doesn’t. That sort of outcomes based pricing is- we think it’s going to increase, it sounds like you guys are already on the front edge of that. 

Scott: Yeah. And our typical customers. I know there’s a lot of people that move to cloud and they’re like, holy smokes. It costs more than it did before. But on average clients save 60 to 80% annual operating cost. So, that’s a good place to be.

Final thoughts

Patrick: Huh. Alright, well thanks so much. We’re going to keep an eye on you guys. 

Scott: Sounds good.

Patrick: As you could imagine and maybe, towards the end of the year, we’ll bring you back in to give us an update on where things are and talk about how GenAI just completely disappeared or whatever the case may be. 

Scott: Sounds good Patrick. 

Patrick: Excellent. Thank you so much.

Scott: I’ll look forward to it. Thank you.

Patrick: Tune in next week for another episode of TBR Talks. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data, and analysis my guests bring to this conversation every week. Once again, I’m your host, Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.

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