Digital transformation — the process of transforming outdated apps and processes with cloud technologies and digital workflows — can be a risky endeavor: In 2023, Harvard Business Review reported that 89% of large enterprises have undertaken digital and AI transformation but have only realized 31% of expected revenue gains and 25% of anticipated cost savings from their efforts.
Rob Mee, former CEO of Pivotal, says years of working with companies dealing with old infrastructure inspired him to tackle the challenge of digital transformation. In 2022, Mee founded Mechanical Orchard, a startup that uses “AI-enhanced” tools and cloud instances to build modern versions of companies' aging apps and services.
“Given the risks associated with modernizing critical legacy systems, many IT leaders feel the benefits aren't worth the risk,” Mee says. “But with aging software becoming an existential threat to businesses, there's no room for putting the issue off any longer.”
Pivotal struggled: its stock price fell more than 40% in one day after a lackluster earnings report and never fully recovered, and it was eventually acquired by VMware for an enterprise value of $2.7 billion, significantly lower than its peak.
But Mee assures TechCrunch that Mechanical Orchard is on a strong growth trajectory and is winning over large enterprise clients in retail and logistics.
“We're seeing interest and opportunity in many sectors where legacy IT is a challenge, including manufacturing, transportation and financial services,” he says. “Our approach is focused on mitigating risk. IT leaders can continually see evidence that the transition is working, which gives them more confidence in the process and peace of mind that they're getting a good outcome.”
Following a vote of confidence, Mechanical Orchard closed a $50 million Series B round this week led by Alphabet's corporate venture arm, GV (formerly Google Ventures), bringing its total funding to $74 million.
“This funding was unsolicited,” Mee said. “Mechanical Orchard was not actively seeking funding, but GV presented a great partnership opportunity.”
Many vendors are building tools and lines of business to support digital transformation — for example, storage giant Box once ran a consulting division called Box Transform designed to help organizations with the finer details of their digital transformation efforts.
So what makes Mechanical Orchard different? First, it uses generative AI to act as a “pair programmer” to rewrite or write new software for companies. Using AI for programming can be risky, but Mee says Mechanical Orchard keeps developers on-hand at all times to debug and review the finished product.
Mee didn't say which generative AI platform Mechanical Orchard uses or whether it trains its own internal coding models, which could be an issue for some customers who have sensitive code and are uncomfortable running it on third-party services like GitHub Copilot or AWS Q Developer.
To “transform” a company's legacy systems (such as software running on a mainframe), Mechanical Orchard understands how the systems work, identifies dependencies, and breaks them down into components to define their purpose and behavior. The Mechanical Orchard team then writes cloud-hosted code that replicates the functionality of the old system, which the customer owns and can deploy wherever they see fit.
Mee said the new funding will be used for research and development, with a focus on expanding the company's AI capabilities. The San Francisco-based company currently has about 90 employees across offices in the UK, Ireland, Italy and Germany.