2010 could be a very eventful year in the IT performance management market. It is already becoming apparent that virtualization technologies are moving from lab environments to production, and end-user organization are gaining a better understanding of what cloud computing really means for them and how it should be managed. Also, performance monitoring concepts such as “aligning IT with business”, “end-to-end management of application performance” and “making performance data more actionable” are no longer marketing terms. End-users are now able to translate each of these terms into a set of specific technology capabilities, those that are really needed to achieve their IT management goals. These trends are putting additional pressure on leading IT management vendors to expand their product portfolios and differentiate from the competition.

Even though the majority of large IT management vendors have similar visions of where this market is headed, it is becoming apparent to most of them that they cannot execute these visions by solely depending on their marketing, sales and product development muscles. Their competitors are already getting ahead by acquiring vendors that are leaders in their markets (i.e. Compuware acquiring Gomez, CA acquiring NetQoS, etc.) and many of them will have to act quickly before someone else grabs those few leaders or truly innovative solutions in the various IT performance management sub-markets that are left.

This three-part article series will cover our predictions about the 10 technology companies that are likely to be acquired in 2010. In the first part, we’ll start with two technology vendors, both of which are providing different flavors of application acceleration and traffic management.

One of the key questions in IT performance management is: Does an improved ability to collect more performance data generally lead to an improved performance of IT services? The answer is: No, not necessarily. Actually, a number of end-user organizations that I have spoken with reported that their ability to prevent and resolve performance issues deteriorated after they invested in additional monitoring tools. As new challenges of managing application performance “jump out”, organizations tend to deploy new point solutions that are addressing each of these problems. This does allow them to collect more information about these specific problems, but it doesn’t necessarily allow them to have  better control of the overall IT performance.

Managing application performance is one of the key IT initiatives for end-users, but there is not a single class of technology or solution provider that can address every single issue of managing the performance of business-critical applications. Some major IT management vendors are investing significant resources in acquiring companies to enhance their product offering and enable them to tackle more performance challenges. However, the capabilities needed for end-to-end management of IT performance are rapidly changing and companies that are looking to provide capabilities for addressing each of the major IT management challenges are likely to keep playing “catch-up”. End-user requirements are changing at a pace that is faster than product development cycles or times needed for acquisitions to be initiated, agreed on and completed. So, are organizations that are looking to access all relevant IT performance data through a single platform are out of luck?

Once in a while, IT management vendors pick up a theme that their customers are very interested in; they start building their marketing messaging around it, write white papers about it, and have it all over their websites. Before you know it, what originally was a legitimate request from end-user organizations for addressing challenges that they have, it becomes a marketing term that is very difficult to define for end-users. “Aligning IT with business” is becoming a very good example of that.

The fact is, the majority of end-user organizations are still struggling to come up with a set of metrics that would help them understand how their IT initiatives are contributing to their business goals. These organizations are allocating a significant part of their enterprise budgets to their IT initiatives and they need to figure out:

• How their past investments in IT are contributing to their bottom line
• What criteria they should be using when evaluating the value of new technology investments
• How to prioritize their current IT management initiatives

So the need to align IT is a true pain point for end-user organizations and they are willing to invest in technology that will help them with that. But what technology is the best fit?

Some of the key reasons for the proliferation of cloud services and virtualization technologies in the enterprise are measurable business benefits, such as improved flexibility of managing computing resources, decreases in operating cost and total cost of ownership (TCO). Many management vendors recognized this opportunity and enhanced their product portfolios with capabilities for managing the performance of virtualization and cloud technologies. However, only a few of these vendors are actually offering management products that are based on virtualization technology or using SaaS as a delivery method. So this brings up the following question: If organizations can achieve significant business benefits from virtualization and the Cloud when managing their computing resources, can they achieve similar benefits from using these technologies for managing the performance of IT and business services?

The changes in the economic climate that happened in late 2008 and 2009 forced organizations to take a hard look into their IT spend and find areas where they can cut cost and still be able to support the needs of end-users. Some of the main areas that many of them identified where:

• They were paying for management capabilities that they were not using
• They had computing resources that were underutilized
• Their operational cost for managing IT performance was too high

Network performance monitoring solutions are not one of those “cool” technologies that get a lot of coverage in the media and these products are sometimes perceived as using an old approach to solve new problems. It’s all about capturing and analyzing packet flow data, right? Well, not really. Not many people realize how much this market has changed over the last 3-4 years.

TRAC Research will cover trends and key vendors in this market in several upcoming reports, but here is a high level overview of 4 key trends that drove some major changes in this market.

It is About Applications on the Network, Not the Network Itself

Back in 2006, I conducted a number of interviews with folks that were in charge of network performance.  The top metric that they were using in that time to evaluate how their networks were doing was unplanned network downtime. I did a similar round of interviews in late 2007 and unplanned network down time wasn’t even one of the top three KPIs that they were using to evaluate network performance (even though it was still extremely important for them). Between these two rounds of interviews, metrics, such as application response times and application availability, became the top indicators of the health of enterprise networks. These changes in end-user needs had a major impact on network monitoring vendors. They caused several major acquisitions, a lot of significant product upgrades, new vendors entering this market, significant changes in messaging and positioning and opened several new markets for vendors that were able to adjust to these changes.

When talking to end-users I often get questions like: who are the WAN Optimization vendors that should be on our “short list”? And it is nearly impossible to answer this question without asking them 10 or so questions, such as: how many network locations does your company have, how many users per location, what applications are your company running, what IT projects are you looking to support, what are your security and compliance requirements, etc.

If we are talking about an end-user company that has thousands of locations, an average of 30+ users per location and is looking to conduct a data center consolidation, companies like Ipanema Technologies and Silver Peak are very likely to be on their list. If we are talking about a company that has less than 500 employees, has a relatively small IT department and is running bandwidth-intensive, time-sensitive applications and technologies such as video conferencing or VoIP, then vendors like Exinda should be higher on their list then some of the others. This is not to say that the vendors mentioned above are the best solutions for the usage scenarios that I described, it is only to say that these solutions are more effective (from both business and technology perspectives) in certain use cases.

Over the last 2-3 years, the term “Application Performance Management” (APM) became an integral part of marketing messaging for more than 70 technology vendors. Even though solutions provided by all of these vendors are helping to improve the speed and availability of business-critical applications, these vendors are providing solutions that are significantly different. These solutions could range anywhere from network performance monitoring to application acceleration, Web management and even managed/carrier services.

However, the APM as a general concept has become relatively easy for decision makers of end-user organizations to digest, as it hits all key pain points that IT organizations are dealing with. As a result, multiple vendors were more than happy to jump on this bandwagon and position themselves as players in this space.

Other than the language in their press releases and marketing collateral, these vendors really have nothing else in common. Technology wise, how similar are the offerings of F5, NetQoS, Keynote Systems and OpTier? They are not similar at all.