Industry analysts tend to classify vendors into technology "buckets" and create "labels" for each of them, as that makes it easier to compare products, capture key trends and provide context around problems that these products are addressing. This method also resonates with some technology marketers, as it allows them to partially benefit from promotions that other vendors and media are conducting around a label of a technology bucket their product was put into.

The term "application performance management" (APM) has been one of the hottest technology "labels" over the last few years. Performance of enterprise applications impacts nearly all of the key business goals, and it shouldn't come as a surprise that technology solutions for managing performance of these applications has been very high on IT agendas. With that said, it should be even less of a surprise that technology vendors, who are involved in managing the delivery of applications to business users in any way, realized this opportunity and started calling themselves "APM vendors". However, every "hot" industry term has an expiration date attached to it and sometimes it doesn't take long for a company to go from being one of the biggest promoters of an industry term to getting to the point where it doesn't even want to be associated with it.

Back in 2008, there were more than 50 technology vendors that used the term APM to position products that they provide and that number is now down to less than 30. So, had these 20+ companies gone out of business or completely changed their product portfolios? No, but they had realized that the term APM got diluted and that it is in their best interest to separate themselves from technologies that address the same problem as they do, only from a different perspective.

Emergence of new categories

Being thrown into the same technology bucket with companies that are addressing a similar problem from a different perspective could be a major challenge for many technology companies. Organizations that are in this position typically have two options: 1) wait until the market matures to the point when it becomes obvious that their solution is significantly different than other products in the same "bucket", or 2) coin a new term to describe a category in which their product belongs, promote the heck out of it and hope that it will become an industry accepted term. It took a combination of these two approaches to somewhat change the boundaries of the APM "bucket". That resulted in more market awareness about the differences between two groups of products that are also addressing challenges of managing application performance, but doing it from different perspectives: end-user experience monitoring and business transaction management (BTM).

The increased interest of end-user organizations in having visibility into how their applications are performing, not only from the perspective of their IT departments but from the perspective of business users, resulted in more market awareness about the role that end-user experience monitoring solutions are playing in managing application performance. The market matured enough to become more aware of the fact that different flavors of technologies for monitoring the quality of end-user experience, such as those provided by Aternity, Knoa Software, Coradiant or AlertSite, do not compete against, but complement vendors such as OPNET, OpTier or Quest's Foglight.

On the other side, vendors that specialize in managing application performance from a business transaction perspective also found a way to raise awareness about the differences between their solutions and many other APM products. This resulted in an increased adoption of the term BTM when describing capabilities of these solutions. These solutions are taking a different approach when addressing issues with application performance, as compared to some other APM vendors, and enable organizations to monitor the performance of applications across an entire transaction flow. Some of the vendors that fall in this group include OpTier, Nastel, INETCO, Correlsense, Precise Software, dynaTrace and AmberPoint (acquired by Oracle).

It should be noted that because end-user experience monitoring and BTM products are addressing issues with application performance, this alone does not necessarily make these categories subsets of the APM. It is also important to mention that an end-user experience monitoring product category is not heterogeneous, as it includes products that provide different capabilities, are based on different underlining technologies or are being leveraged in different use cases.

Even though the emergence of new technology categories for managing application performance eliminated some of the confusion in the market, it did not make it much easier for end-users to sort through marketing messaging and find a product that is the best fit for their needs. If you look at messaging of APM vendors, many of them sound very similar, as the majority of them still rely on common themes such as "proactive management", "end-to-end visibility", "aligning IT with business" to describe their value propositions . But when you see how these products work, what they can do and listen to users talk about their experiences with deploying them, it becomes obvious why many vendors that fall into the APM category are almost never a part of the same RFP process.

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.

Additionally, business service management (BSM) and systems management vendors are realizing that providing a single platform for monitoring the performance of different infrastructure parts resonates with end-user organizations. As a result, many of them are enhancing their "single pane of glass" platforms with more robust capabilities for application performance monitoring, either through building new monitoring features of their products or making it easier to import data collected by specialty APM tools into their platforms. Some of the vendors that fall into this category include Uptime Software, AccelOps, Nimsoft and Zyrion. Also, eG Innovations is a good example of a company in this market that was able to use its capabilities for application performance monitoring to create a competitive advantage, both through its own capabilities for active and passive monitoring and by partnering with APM vendors such as Tevron.

Furthermore, self-learning technologies and IT management products that are using business intelligence (BI) concepts for aggregating and correlating information collected by other IT performance management tools are also having an impact on the role that APM solutions play in the enterprise. These products allow organizations to improve the value of IT performance management data that they are already collecting by putting it in the right context and enabling organizations to create synergies between different IT management tools, including APM products. Some of the solutions based on active learning technologies that leverage information collected by APM tools include Netuitive and Prelert, while vendors such as ASG Software and Monolith Software provide centralized repository and correlation platforms for analyzing different types of IT performance data.

2011 outlook – Enabling service-centric approach for IT performance management

Going into 2011, a major task for APM vendors could be finding the best way to support the growing need of end-user organizations to center their IT management efforts on the overall health of IT services, as opposed to managing the performance of infrastructure parts separately. Network monitoring vendors, such as NetScout and Network Instruments, are already moving in that direction. NetScout recently introduced nGenius Service Delivery Manager, while Network Instruments enhanced its Observer Reporting Server with capabilities for monitoring IT service delivery. Also, OPNET recently announced that its Service Xpert product will be available in Q2 of 2011. This is not to say that products for managing application performance are becoming less important, it just further exemplifies that many organizations are looking to evaluate application performance in broader context and be able to understand how the performance of applications impacts the overall health of IT services.

In the meantime, APM vendors have their work cut out for them, as needs of end-users are creating new requirements for capabilities, delivery methods and pricing models. With the increased competition in this market and pressures from end-users to innovate finding a new "label" that would be the most descriptive for their solutions should be the least of their worries. More importantly, the majority of end-users don't really care about what "label" is being attached to technology products that they are evaluating, but about how effective they are in addressing specific problems that their organizations are looking to address.