Pega and AWS: Leading the Charge in AI-Driven Legacy Modernization

The $800 billion legacy modernization market is ripe for disruption, and Pega (NASDAQ: PEGA) has just positioned itself at the forefront. Its new five-year partnership with Amazon Web Services (AWS), announced on July 14, 2025, merges Pega's workflow automation expertise with AWS's generative AI capabilities—creating a powerful toolset to tackle the 68% of enterprises still shackled by outdated systems. For investors, this marks a high-growth opportunity in an industry primed for transformation.

The Problem: Legacy Systems as Innovation Roadblocks

Legacy systems—often built decades ago in COBOL or running on mainframes—are still the backbone of industries like banking, healthcare, and government. Yet these systems are incompatible with modern AI, cloud computing, and automation tools. A Pega survey underscores the urgency: 68% of IT decision-makers cite legacy systems as barriers to adopting cutting-edge technologies. The result? Stagnant productivity, soaring technical debt, and missed opportunities in customer experience.

The Solution: AI as the Catalyst for Modernization

Pega's collaboration with AWS delivers a two-pronged approach:
1. Integration of Amazon Bedrock: Pega's platforms (Blueprint and Platform™) now embed Bedrock's large language models (LLMs), enabling clients to analyze legacy code, extract business logic, and auto-generate modern documentation. This reduces the skills gap and speeds up knowledge transfer.
2. AWS Transform for Mainframe: Launched in December 2024 and now generally available in key regions like US East and Europe (Frankfurt), this AI-driven tool automates code refactoring (e.g., COBOL to Java), cuts modernization timelines from years to months, and slashes costs by up to 33%, as reported by partners like Accenture and Capgemini.

Why Pega Wins in This Market

Pega's partnership with AWS creates a moat in three critical areas:
1. Scalability via AWS Marketplace: Pega's “as-a-Service” model, sold through AWS Marketplace, simplifies procurement and accelerates time-to-value. This contrasts with traditional on-premise licensing, making it easier for enterprises to adopt.
2. Agentic Automation: By combining AWS Transform's AI workflows with Pega's AI agents (e.g., Reforge's code restructuring tool), the duo automates not just code migration but also workflow design, reducing manual effort and errors.
3. Ecosystem Power: Daniel Kasun, Pega's new global partner chief (formerly of AWS), is expanding alliances with systems integrators like Cognizant and Infosys. These partners have already demonstrated 30%+ efficiency gains using the tools, creating a network effect for Pega.

The Investment Case: PEGA as a Play on Enterprise Digitization

For investors, PEGA is a leveraged play on two megatrends:
- Legacy Modernization Surge: The $800B market is expected to grow at 12% CAGR through 2030 as enterprises prioritize AI integration.
- AI-Driven SaaS Adoption: Pega's shift to a cloud-based, subscription model aligns with the rising demand for flexible, scalable solutions.

Risks and Considerations

• Execution Risk: Integrating AWS's tools into Pega's platforms requires seamless collaboration. Any delays in product launches or partner adoption could hurt momentum.
• Competitor Moves: Microsoft (Azure + Copilot) and Google (Anthos + Gemini) are also targeting legacy modernization. Pega's differentiation hinges on its workflow expertise.
• Regulatory Scrutiny: AI-driven code refactoring could face compliance hurdles in regulated sectors like finance or healthcare.

Conclusion: PEGA as a Strategic Bet on Enterprise Agility

Pega's AWS partnership isn't just a tech deal—it's a blueprint for enterprises to escape legacy systems and embrace AI-driven workflows. With a scalable, partner-powered model and a $800B addressable market, PEGA is positioned to capture outsized growth. Investors seeking exposure to enterprise digitization should consider PEGA as a core holding, particularly if they believe in the inevitability of legacy modernization in the AI era.

Recommendation: Buy PEGA for a 3-5 year horizon, with a focus on its cloud/SaaS transition and market leadership in agentic automation. Monitor AWS Transform adoption rates and Pega's partnership wins as key catalysts.

Data sources: BusinessWire, Pega press releases, AWS blog, and third-party surveys referenced in the research.