Fresche Buys Abacus To Integrate From IBM i To Cloud To Code
October 4, 2021 Timothy Prickett Morgan
Last week, Fresche Solutions, arguably the largest provider of application development and modernization tools for the IBM i platform and its predecessors, acquired Abacus Solutions, a long-time provider of cloud and managed services for the same market, giving a new meaning to the word integration in the IBM i brand. Now, with the combination of Fresche and Abacus, we can add an adverb to the intransitive form of the verb: vertically integrated.
Vertical integration is all the rage these days, at least among the hyperscalers and cloud builders that consume half of the IT gear in the world and that are trying to build, in one form or another, a kind of big, distributed AS/400 for programmers to code modern and highly scalable applications upon. By doing so, cross selling and upselling is incredibly easy, and eventually a company can build up a massive customer base and then expand into adjacent markets.
This is why we have seen the rise of conglomerates like Fresche, HelpSystems, and Precisely in the IBM i market, although they each have slightly different focuses. Fresche is the first of the big IBM i conglomerates to move aggressively down the stack by acquiring a Power Systems and IBM i reseller that has also built its own IBM i and X86 cloud infrastructure and datacenters to host it, and then layered on a whole bunch of managed services that IBM i shops will be increasingly in need of as the years go by. We think that is going to give Fresche a chance to do a different kind of vertical integration and help customers address a lot of the concerns they have with infrastructure and the applications they have created to run on it.
The word created is an important one in that sentence. As you all know full well, the vast majority of AS/400 and IBM i shops have spent decades writing, tuning, and maintaining their own applications, and it is hard to quantify exactly how much value is represented in all that code running on somewhere between 120,000 and 150,000 customers in the current IBM i base. (The size of the base depends on who you ask.) And now, here in the 21st century, they not only need to modernize their applications, they need to be, as we discussed with Steve Woodard when he was tapped to be chief executive officer at Fresche in the wake of American Pacific Group (APG) becoming the majority shareholder in the company, doing what we have called continuous modernization, quite possibly as a service, with hired programming guns from Fresche, and not by buying a toolbox and doing it themselves.
But it is equally true that there are many IBM i shops that are running legacy applications created by a third party, and they are sometimes stuck on old hardware and software as well, which is what Abacus knows how to support – among many other services it provides.
It is probably a good idea to talk about these services. As for managed services, Abacus has services to remotely manage backups, operations, and high availability clusters, and it also provides disaster recovery platforms for customers in its cloud and using machines on their own premises. They also do break/fix maintenance for customers and things like OS patching. And as we said, Abacus runs Power Systems and Windows Server X86 systems in its cloud, which reflects the infrastructure that the majority of IBM i shops have installed.
Now, with the combination of Fresche and Abacus, the embiggened Fresche can broaden its reach in the IBM i market as well as increasing its depth of services. Abacus is a reseller of second-hand equipment as well as new Power Systems servers, and it offers hosting and cloud services in two datacenters in Georgia – one in its home base of Marietta and the other in metro Atlanta – and another in Irving, Texas. Fresche has a datacenter of its own that it set up in the Netherlands on behalf of one of its large customers in Europe, according to Woodard, and will be expanded that next year and, we are guessing, it will put one in Canada somewhere for data sovereignty reasons although Woodard is mum on that subject. But what is clear is that APG has the capital to invest in datacenter capacity for providing cloud services, and in a way that Abacus almost certainly did not.
“APG is completely in lockstep with our strategy, and whether it’s an acquisition or it’s a strategic investment, they will work with us,” explains Woodard. “Remember, I have really smart people on my board and they understand this space as well as we do.”
This is remarkably different from IBM’s hybrid cloud strategy, which to be fair, has done a pretty good job in the recent two years of creating a Power Systems machine with subscription-style pricing that looks and feels like the cloudy instances it sells on the IBM Cloud. But this is a kind of horizontal integration, as if having utility pricing and massive compute and storage scale were the real problems at IBM i shops. As we talked about earlier this week, this is not their problem. They have valuable applications that are running their businesses, and they are going to need help modernizing them as their programmers keep inching up towards retirement. They have to build a new skills base or buy one as a service. And that is the bet Woodard made when he took the CEO job less than a year ago. And at the time, Woodard said he had some acquisitions up his sleeve, and this is the first one, which gives Fresche two feet planted in used and new hardware plus a bunch of managed services that can be scaled up to chase more customers – starting first and foremost with the base of Fresche customers.
Over the years, the companies that were conglomerated into Fresche – Fresche itself, Quadrant Software, BCD Software, looksoftware, and Databorough – have had over 20,000 customers for a slew of tools, but as the company has focused on application and database modernization, it has a much tighter customer base. The company is privately held and does not release its revenues or profits, but we strongly suspect that it is growing faster than HelpSystems or Precisely and, with the addition of hardware sales, cloud, and various managed services, it can grow even faster as the IBM i base ages. Fresche is also not disclosing the terms of the Abacus acquisition, being private. What Woodard can say is that Abacus has been growing sales in the double digits for the past three years and that it has 40 employees, bringing the total number of employees at Fresche to 350 people.
“We have a pretty strong global reach – we have EMEA offices now – but our goal is to grow in North America,” says Woodard. “We are both growing strongly in North America, and we see that as an opportunity to cross sell and then we are going to push harder in EMEA. As for Abacus, we are really going to learn this business and we are going to grow it, quickly and organically.”
For Abacus customers, the Fresche deal does not change anything, at least for now, says Patrick Schutz, vice president of managed services at Abacus. But over time, we all expect for a tighter integration between Abacus and Fresche, which are both owned by APG.
It is pretty obvious why Fresche wanted to buy Abacus, once it made up its mind to look for a cloud and managed services provider to bulk up with. But what may not be obvious is why Abacus did not deflect the deal, since it was growing on its own. Schutz provides some insight.
“Abacus has been courted by a number of potential buyers and they went nowhere very quickly,” explains Schutz. “We were interested only in a partnership or an acquisition by a company that that was AS/400 focused, and yes, I still say AS/400 even though I know it is the iSeries. And we wanted a partner that was going to be able to help us continue to grow. And then finally, we wanted a partner that brought something to the table that expanded the portfolio. We can do the cloud. We can do manage services. We can do Power Systems products. We can do everything below the application line. But now we have the ability to sell up the stack, and whenever you are selling anything, the further you go up the stack, the more value you can capture. The partnership between Abacus and Fresche allows us to go to our customers and figure out how to stay on the platform and to not just do the day to day blocking and tackling on the hardware on premises or in the cloud, but to actually work on the applications. That to me is the most exciting thing.”
The important fact as far as IBM i shops are concerned is that Fresche and Abacus are focused entirely and completely on the IBM i platform and on the future as well.
“Part of our goal in life for our customer base is to modernize them so they can continue running a modern business in a modern way, and on a solid platform, either in their shops or in the cloud,” says Jeff Lovette, chief revenue officer at Fresche. “You know our track record. We do modernization and transformation, but our customers stay on the platform. That’s where we’re at, and that’s where we want to stay. We want to modernize them so they can stay on the platform, and hire people out of college and program in a modern way. If they want to go to the cloud, now we can take them to the cloud.”
From its very beginnings, the Application System/400 was created to deliver a system with application development and database capabilities on which normal programmers – if there is such a thing – could encode the flow of goods, services, and money that encapsulated their businesses. The AS/400 and its progeny, which The Four Hundred has been dedicated to serving for more than 32 years, was about having an integrated environment largely from a single vendor with very good support. The “i” in IBM i, the successor to the AS/400, was all about integration, which is the hallmark of this platform.
Both Fresche and Abacus get this. It will be interesting to see what vertical stack they build, and how customers take to it.