Izzi Throws Retiring IBM i Software Company Founders A Lifeline
February 3, 2025 Alex Woodie
Founders of smaller IBM i and System z software vendors who are looking to sell their companies before they retire may want to check out a new venture called Izzi Software. In an interview with IT Jungle, the executives heading the startup explain that it has a mandate to spend millions of private equity dollars on acquiring midrange and mainframe ISVs that have solid products and businesses, but may not be big enough to attract M&A attention from bigger firms.
It’s no secret that the IBM i and System z communities tend toward the older side of the age spectrum. While there has been a concerted effort to attract younger people to the two platforms over the past decade – with some success – there’s no denying that Baby Boomers are disproportionately represented on Big Iron systems from IBM, and that it remains a serious concern to the health and longevity of these ecosystems.
The looming retirement of tens of thousands of Baby Boomers in the IBM i and System z communities will not only influence the job market for midrange and mainframe developers, administrators, and operators, but it will also have an impact on the thousands of independent software vendors (ISVs) that serve these critical business platforms.
That’s where Izzi Software comes in. In an interview with IT Jungle last week, Izzi chief executive officer Jennifer Nelson and senior vice president of operations Steve Nelson (no relation) explained the company’s strategy.
“Izzi Software is buying smaller, founder-led, successful companies that might have one or two really good products and they’re really feature-rich products, but maybe have a challenge getting into customer sites because they’re up against big players that have whole solution sets,” Jennifer Nelson said. “The idea is to put some of these smaller companies together to create a bigger entity where, over time, we integrate these technologies to provide good quality solution sets that can compete at a good price point, but the small-to-medium market can more easily digest.”
Izzi is the IBM i and System z arm of Big Band Software, which was founded in 2023 and which is actively executing on its strategy to acquire and grow smaller software as a service (SaaS) companies in the broader IT market. Both companies are backed by private equity firms ParkerGale, Talisman, and Dan Martell, and are actively seeking acquisitions.
Izzi Software CEO Jennifer Nelson (center) with members of Big Band Software (Image courtesy Big Band Software)
Jennifer Nelson understands that PE firms do not have the greatest reputations, in the software business or business in general. But she said that, as a holding company, Izzi will be committed to maintaining the businesses, products, and customers relationships of the companies that it acquires.
“Private equity just in general tends to have a bad name, only because it happens so often in what I call a ‘strip and flip,’” she said. “You strip the company down to bare bones, and then you flip it for a profit. I would just say to a customer that we’re really here to do the best good that we can with what we’ve been entrusted by the founder.”
Izzi made its first acquisition last week. It bought ColeSoft, a Virginia-based developer of debugging software for mainframes. The company’s founder, David Cole, said he is happy that his z/XDC suite has found a home.
“In recent years, I have received and ignored numerous ‘partnership’ and buyout inquiries,” Cole said in a press release. “Izzi was different because they are people are from the mainframe world, they know the mainframe software development process, and they understand the importance of our products to our customers.”
Both Nelsons spent time together as executives at Rocket Software, the Waltham, Massachusetts, software company. Jennifer Nelson, who previously was an intelligence analyst for the United States Air Force, worked at Rocket for 15 years and left in 2019, when she was senior director of software engineering and the head of its Austin, Texas office. Steve Nelson, meanwhile, spent six years at the Waltham office, where he was managing director of R&D. He was once was employed as an RPG programmer and also teaches a mainframe coding class at Amherst College.
The idea is to recreate parts of Rocket’s successful acquisition strategy at Izzi, said Jennifer Nelson.
“Rocket Software would make acquisitions, then over the years, integrate pieces of their portfolio with the existing Rocket portfolio, or take pieces of an existing products IP, add some new IP to it and create another offering,” she said. “And it’s turned out successful, predominantly. So it’s definitely something that we’ve seen. We’re taking some good lessons learned from our experience at Rocket Software.”
Izzi is open to a range of potential acquisitions in the IBM i and System Z (the company’s name reflects its focus on i and z). While the wider IT world views midrange systems and mainframes as technological dinosaurs, Izzi recognizes that “these ecosystems are still uber-critical to the modern world,” Jennifer Nelson said.
The Minneapolis, Minnesota-based company is looking to buy companies with between $2 million and $10 million annual recurring revenue (ARR). It’s open to companies developing a wide range of different software, from backup and recovery and software development to security and system performance.
Far from a “strip and flip” strategy, Izzi actually intends to invest in the companies and the products that it acquires. The improvements could come in the form of upgrading the user interfaces, rewriting old products in a new language, porting from IBM i to System Z or vice versa (which is the plan for ColeSoft’s z/XDC utility), and making older products compliant with new regulations, such as GDPR or DORA, Jennifer Nelson said.
There is also the possibility of using microservices or APIs to integrate multiple acquired products together to create a superset of capabilities. That could enable Izzi to more effectively compete better some of the larger companies that have bulked up through M&A (or the “Big Four” of IBM i ISVs, namely Fortra, Fresche, Precisely, and Rocket).
“We’ve been talking to some [prospects] who hadn’t considered compartmentalizing their products into smaller microservices, that could be callable by additional acquisitions that we make further down the road,” Jennifer Nelson said. “What that does is open up the opportunity for different functions to be called by other products that make it easier to integrate over time, but then also offer up new ways that we could repurpose those same functions or include that same IP.”
Izzi is already in talks with some IBM i ISV founders, and the first acquisition will likely be made within several months, Jennifer Nelson said. With the backing of the PE firms, she has a war chest of at least $10 million to start acquiring firms, with a goal of potentially rehome one to two dozen IBM i and System Z software firms, she said.
With retirement beckoning for many Baby Boomer founders, the race to find a new caretaker for their life’s work is on. The larger PE-backed conglomerates will likely land their fair share. It’s Izzi’s hope that many of the smaller ISVs that don’t have the ARR to land on the big PE radar screens to consider their offer and seriously consider Izzie’s commitment to maintaining and even growing the business the founders spent their lives building.
“It’s not really a guarantee, but it’s a pledge – a pledge to protect the IP that you’ve worked so hard to create, to protect the image that you’ve worked so hard to build,” Jennifer Nelson said. “It’s an investment in your employees, that they have an opportunity to cross-skill or upskill and work on new technology.”
Having worked in the IBM i and mainframe ecosystems, both Nelsons know what they’re getting into. While there will undoubtedly be challenges ahead, they’re both optimistic that the strategy will pay off.
“We know who the mainframe and the IBM i community are,” Jennifer Nelson said. “They’re really good people, and we’ve made such good friends over the years at conferences in ways that we that we wouldn’t have otherwise. We understand that they’re trying to be judicious with their company’s funds, and they’re trying to partner with vendors who will not just understand their paycheck, but their people behind that with corporate goals and business challenges they’re trying to solve. We’ve been on the receiving end of it, too, so we understand first and foremost what it is to be a customer and why it matters.”
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