Technology vendors are aware of this issue, but many of them are challenged with finding the right balance between differentiating their solutions from competitors, while still being able to leverage all major buzzwords in this growing market. The fact is, true opportunities for differentiation are already presenting themselves in the market and are predominantly being driven by new technologies that organizations are deploying, processes and methodologies they are adopting and changes in needs of different market segments.

New opportunities for differentiation

Some key initiatives that are significantly impacting market dynamics and could cause the power shift in the market for application performance technologies include:

Agile. 61% of respondents in TRAC's recent survey indicated that it takes them, on average, 60 minutes or more to instrument their APM solutions to adjust to the application changes (changes in application code, adding or eliminating features, etc.). As organizations are adopting Agile methodology for software development, the ability to reduce the amount of instrumentation required to continue using the APM solution after the application is changed is becoming very important. For that reason, the amount of overhead required for managing application performance is becoming one of the key differentiators in this market and, as more companies are adopting Agile methodology, it is expected that this trend will be accelerated even further. This trend could strengthen the market position of vendors whose products are not being impacted by application changes, as well as create opportunities for new vendors that are entering into the market with solutions designed for taking advantage of this opportunity. A good example of a company that recently entered the market with a solution that is well positioned to address this issue is AppDynamics.

DevOps. Lack of formal communication channels between IT job roles in charge of managing application performance in pre-production and production has been a challenge for end-user organizations for some time. Hence, it shouldn't come as a surprise that the DevOps movement is getting more traction in the enterprise. DevOps methodology allows application developers, QA and IT operations to collaborate and share information so they can be more effective in preventing performance issues and resolving them in timely manner. APM solutions that can facilitate this collaboration and allow developers and IT operations to share and correlate performance information that is relevant for their job roles would be appealing to organizations that are adopting DevOps methodology. dynaTrace is a good example of a company that is already well positioned to take advantage of this opportunity, as their products provide relevant information to both developers and production teams.

Mid-market. Very few APM vendors are providing solutions that are tailored to the SMB and many organizations from this market segment do not really need all of the capabilities of enterprise-class APM solutions, and more importantly, they are not able to afford them. That leaves many of these companies with limited choices when looking to ensure optimal performance of business-critical applications. Their options mostly include freeware, open source products, or low-end solutions that primarily focus on network or server monitoring. At the same time, many of these organizations are increasingly aware of the importance of full visibility into the performance of business-critical applications and the impact that performance issues are having on their business. This trend created an opportunity for APM vendors to create new versions of their products that would be more appealing to mid-market companies and improve coverage of this market segment. Some of the new vendors in the APM space are aware of this opportunity and AppFirst recently entered the market with an offering that is positioned to capitalize on this trend. Even though AppFirst's product is also being deployed by a number of large enterprises, the combination of its pricing model, capabilities provided and ease of management makes it especially appealing to end-users in mid-market.

Enabling IT performance management tools to talk to each other. The term APM, as it currently stands, defines more of an ecosystem or a spectrum of technologies than an individual market or a technology class per se. Organizations that are looking to have full visibility into application performance are often deploying multiple toolsets to achieve this goal. Also, even though many APM vendors are perceived as competitors of large enterprise IT management systems, such as HP OpenView or IBM Tivoli, the reality is that they are more likely to co-exist with them and fill visibility gaps that these solutions are providing than actually replacing them. Therefore, it is becoming increasingly important that multiple tools of which are addressing different aspects of managing application performance talk to each other and that data collected by these tools can be analyzed and correlated together. Keynote Systems and Coradiant, vendors that specialize in monitoring the performance of Web applications, realized the importance of this opportunity and recently created a number of partnerships focused on integrating their products with tools for monitoring IT infrastructure. Similarly, Catchpoint recently launched a new partnership program that would make it easier for end-users to leverage their solution with APM and other infrastructure monitoring tools. Additionally, companies like Compuware, Oracle and CA Technologies expanded the reach of their solutions for managing application performance by acquiring Gomez, AmberPoint and NetQoS respectively.

In addition to these trends, IT initiatives, such as cloud and virtualization technologies, already have a major impact on the dynamics in the APM market and as more organizations conduct these projects the importance of certain capabilities of APM solutions will significantly increase. The impact of cloud and virtualization technologies on the performance of IT services is a major part of TRAC's research calendar for 2011 and it will be covered in detail in our upcoming articles and reports.

The impact of adjacent markets

Innovations and key trends in markets that are adjacent to the APM are also impacting how application performance management products are being used, as well as the value that they are delivering to end-users. For example, network monitoring vendors are realizing that organizations are increasingly using metrics such as application availability and response times to evaluate network performance and some of the leading vendors in this space were quick to adopt the term APM in their messaging. However, new vendors in this space are looking to take advantage of this trend in a different way and do more for visibility in application performance than just applying some traditional network monitoring techniques. A good example of this type of company is ExtraHop Networks, who provides an appliance for passive monitoring of layers 2 to 7 (unlike the majority of other network monitoring vendors ) and it also captures information on the performance of other parts of infrastructure (database, storage, etc.). This put ExtraHop in a position to challenge both APM and network vendors. Also, Heroix and InfoVista are example of vendors that saw this trend coming and enhanced its product offering with capabilities for monitoring application performance.