Digital transformation — the process of transforming outdated apps and processes with cloud technologies and digital workflows — can be a risky undertaking. In 2023, Harvard Business Review reported that while 89% of large companies have a digital and AI transformation underway, they’ve only captured 31% of the expected revenue uplift and 25% of anticipated cost savings from the effort.
Rob Mee, previously the CEO of Pivotal, says that he was inspired to tackle the challenges around digital transformation after spending years working with enterprises dealing in old infrastructure. In 2022, Mee founded Mechanical Orchard, a startup that uses “AI-enhanced” tools and cloud instances to build modernized copies of companies’ aging apps and services.
“The stakes involved in modernizing critical legacy systems have left many IT leaders feeling the risk is simply not worth the reward,” Mee said. “But, with aging software increasingly becoming an existential threat to business, there is simply no more road to kick the can down.”
Pivotal had a rough go. The company’s stock lost more than 40% of its value in one day after a poor earnings report, and the stock price never fully recovered; eventually VMware bought the company for an enterprise value of $2.7 billion, well down from its peak.
But Mee assures TechCrunch that Mechanical Orchard is on a strong growth trajectory, with large enterprise customers in retail and logistics in the pipeline.
“There’s interest and opportunity across many sectors where legacy IT is a challenge, like manufacturing, transport and financial services,” he said. “Our approach is all about risk reduction — IT leaders can see continuous proof that the migration is working, which builds confidence in the process and reassurance that there will be a positive outcome.”
In a vote of a confidence, Mechanical Orchard this week closed a $50 million Series B round led by GV (formerly Google Ventures), Alphabet’s corporate venture arm, bringing its total raised to $74 million.
“The raise was unsolicited,” Mee said. “Mechanical Orchard was not proactively raising, but GV presented a great partnership opportunity.”
Plenty of vendors have built tooling — and entire business divisions — to support digital transformation. Storage giant Box, for example, once ran a consulting division called Box Transform, designed to help organizations with the minutiae involved in their digital transformation journeys.
So what makes Mechanical Orchard different? Well, for one, it relies on generative AI to act as a “pair programmer” in rewriting and creating new software for companies. There are inherent risks in leveraging AI for programming, but Mee says that Mechanical Orchard always has developers in the loop debug and review the finished product.
Mee wouldn’t say which generative AI platform Mechanical Orchard uses, or whether it trains its own internal coding models. That might matter to some customers with sensitive code wary of having that code run through a third-party service like GitHub Copilot or AWS Q Developer.
To “transform” a company’s legacy system — for instance, software running on a mainframe — Mechanical Orchard works to understand the system’s behavior, identify its dependencies and break down its components to define their purposes and how they work. Then Mechanical Orchard’s team writes cloud-hosted code that replicates the old system’s functionality. Customers own this code and can deploy it wherever they see fit.
Mee says that the new funds will be put toward R&D with a focus on expanding the company’s AI capabilities. The San Francisco-based company currently has around 90 employees across its offices in the U.K., Ireland, Italy and Germany.