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After AppDynamics sale, is anyone going to snap up the rest of the APM market?

Jon Gold | Jan. 31, 2017
New Relic, Datadog among attractive players in application performance management

Cisco’s purchase last week of application performance management vendor AppDynamics for $3.7 billion in cash and assumed equity awards could signal that the APM sector in general is a potential M&A target, according to industry analysts.

The APM market, which Gartner last summer said grew to $2.7B billion in 2015, is fragmented, and has been for some time. That means that consolidation may be overdue, with Cisco’s AppDynamics buy marking the start of the race.

“The ice is broken,” said Milan Hanson, a senior analyst at Forrester Research. “There are a lot of APM players in the market, some thinning seems inevitable, and M&A always plays a part in that thinning.”

That said, what’s less clear is the particular type of company that might be next to swoop in and break off a chunk of the APM market. It’s difficult to generalize, according to Hanson, because different types of companies might want those assets for different reasons.

“[There’s] no generalization,” he told Network World. “Just a company with the resources, a desire to expand, and a gap that an APM vendor fills.”

In Cisco’s case, the company’s long-standing and publicized intention to transform itself from a hardware business to a software-and-services firm made AppDynamics a natural fit, but it doesn’t have to happen that way in every case.

Nancy Gohring, a senior application and infrastructure performance analyst at 451 Research, said that the potential targets are easier to see than the potential buyers. New Relic and potentially Datadog are the obvious ones, she said, although they’re far from alone.

“There’s a long list of smaller APM vendors that might have valuable technology for a buyer interested in expanding into this space,” she said.

One thing that might actually slow the process down, Gohring added, is that large legacy APM vendors like CA and BMC have been investing in their own tools lately, making them less likely to want to consolidate by buying someone else.

Both Gohring and Hanson caution that the idea of mass consolidation and acquisition in the APM sector is largely speculative at the moment, but both are keeping an eye on the possibility.

“If AppDynamics can be bought, so can every other APM vendor,” said Hanson. “Now that it's happened once, it seems more likely it will happen again.”

 

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