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.

*The following listings are NOT based on inside information

Expand Networks

The WAN optimization market changed dramatically in 2009. Back in 2007, there were vendors that weren’t even competing with the Riverbeds, Blue Coats and Ciscos of the world, but they had “WAN optimization” all over their websites and press releases. “WAN optimization” was one of the hottest terms in the IT market and many vendors that are providing solutions for accelerating data transfers, monitoring WAN bandwidth consumption and even load balancing vendors were very happy to jump on this bandwagon. These days, even traditional WAN optimization players are not quite sure what this term really means and they are not overly excited about being associated with it.

As WAN optimization is becoming a less well defined market and more of a set of techniques for enabling top IT projects (virtualization, cloud computing, etc.), it is very likely that some of the vendors that are in the business of enabling these projects would look to acquire a company that would help them take care of the networking side of delivering their technology.

At the same time, some vendors in this space saw this trend coming and they stopped trying to be everything to everyone. Instead, they focused on problems that they can solve better than most of their competition. Expand Networks is a perfect example of this type of company. They understood that going against Riverbed solely to showcase your acceleration capabilities is not the smartest strategy in this space, so Expand decided to play on their strengths and focus on environments where they are most likely to win. As a result, Expand went from being just one of many WAN acceleration vendors to being a leader in enabling some of the hottest IT projects, such as desktop virtualization and server consolidation. This approach paid some major dividends. Over the last 12 months, Expand was able to grow their customer base at a very impressive rate, while getting more industry accolades and adding new technology capabilities. Additionally, Expand acquired NetPriva and added a new mobile client to its portfolio and further enhanced it’s capabilities for visibility and control of network traffic.

Back in November of 2009, there was some talk about Riverbed getting close to acquiring Expand Networks. This reminds me of an agent “leaking” rumors to selected media saying that a free agent baseball player who he represents is just about to sign a big contract, just so he can create a sense of urgency with other teams and test how interested they are in his client. This is not to say that Riverbed might not be interested in adding Expand’s capabilities to its portfolio, but there are at least five companies that could be more interested.

Potential suitors: Citrix, Juniper Networks, IBM, EMC, Cisco

Zeus Technologies

If you look into marketing messaging or roadmaps of leading application acceleration vendors there are two words that pop up: “virtual appliance”. Not that long ago, software solutions for accelerating application delivery to end-users were perceived as a “poor man’s” alternative to traditional hardware-based load balancing and traffic management solutions. All of sudden, companies that have been selling hardware solutions for years are trying to take these products and turn it into a piece of software. What happened there? It’s simple. Flexibility of software solutions for load balancing or traffic management plays much better in virtualized and cloud environments and into strategies for improving the manageability of enterprise infrastructure and optimizing infrastructure cost.

Zeus technology is one of the few pure software solutions for load balancing and traffic management. For years, Zeus has been competing with F5, Citrix and Cisco, and they have been trying to prove that software-based acceleration solutions can move data as fast as leading hardware products. They tried to differentiate based on lowering TOC (which is true), the value of combining their capabilities for acceleration, visibility and control (which is also true), but they were still not able to get ahead of the leading application acceleration vendors. Then, cloud computing came along and leading providers of public cloud services realized the value of using a software solution for enabling their services and all of the opportunities around  the flexibility of incorporating technology like this into their current offerings.

Even though taking hardware solutions for application acceleration and turning them into virtual appliances makes a lot of sense, this type of approach is associated with a number of challenges from both technology and go-to-market perspectives. Cloud computing and virtualization are changing the playfield for application acceleration players and it is likely that one of the leading vendors will go after Zeus’ technology to create a competitive advantage in this rapidly changing market space.

Potential suitors: F5, Cisco, Citrix, Riverbed, Amazon