The Gulf is writing checks that Silicon Valley can't match, but when AI startup Anthropic announced its tool capable of modernizing COBOL systems, it wasn't the Gulf but the global financial system that felt a tremor. This development sent IBM shares tumbling by 13%, marking their worst plunge in over 25 years. Anthropic's Claude Code is a potential major shift for businesses still relying on the antiquated coding language.
COBOL's Stubborn Presence
Despite its age, COBOL remains deeply entrenched in our daily lives. It's the backbone of over 95% of ATM transactions in the United States. Hundreds of billions of lines of COBOL code power critical systems across finance and government sectors, making it indispensable yet challenging due to a dwindling pool of knowledgeable developers. The scarcity of COBOL expertise has historically rendered modernization efforts both costly and prolonged.
Anthropic aims to change this narrative. The company claims its AI tool can dramatically reduce the time and expense traditionally associated with updating COBOL systems, claiming that what once took years can now be completed in mere quarters.
IBM's Argument
IBM has been on this path too. Nearly three years ago, they introduced the 'watsonx Code Assistant for Z', designed to help transition COBOL to Java. Their argument hinges on the resilience of mainframe platforms, which they say deliver strong performance and security across languages. IBM's CEO Arvind Krishna has highlighted their AI assistant's strong adoption, yet the market's reaction to Anthropic's announcement suggests missed nuances.
IBM insists that modernizing a platform involves more than just translating code. The value, they argue, resides in the vertically integrated systems under the mainframe, something AI translation tools like Claude Code can't replicate. But does this technicality resonate with investors eyeing new tech horizons?
A Broader Ripple Effect
It's not just IBM feeling the heat. Consulting giants like Accenture and Cognizant also saw declines, reflecting investor sentiment that AI could disrupt the legacy modernization consulting model itself. This isn't isolated to COBOL. last week's sell-off in cybersecurity stocks following another Anthropic announcement underscores a broader pattern.
Rob Thomas, IBM's Senior Vice President, argues that Anthropic's approach, while addressing a real problem, doesn't tackle the core challenges for enterprises operating on IBM's systems. He points out that a substantial portion of COBOL runs on non-mainframe platforms, hinting at a more complex landscape than headlines suggest.
The big question remains: Is AI's encroachment on legacy systems a threat or an opportunity for companies like IBM? They argue it's the latter, an acceleration of change they're already spearheading. However, the market's initial reaction indicates an undercurrent of fear about the future.
In this fast-evolving tech corridor, one thing is clear: the dialogue around AI, legacy systems, and enterprise transformation is just beginning. And as it unfolds, businesses will need to decide whether they're ready to embrace AI's role in reshaping the old guard.
