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Compuware's DynaTrace Acquisition An APM Game-Changer

Compuware is paying a 10x premium to acquire fellow application performance management developer DynaTrace Software, but the $256 million cash deal is expected to reshape the $6 billion APM market, say company officials. Compuware didn't give specific numbers on its annual APM revenues, other than that they are in the hundreds of millions and growing, about 30% to 40% a year.

Although considerably smaller, DynaTrace took in $26 million in the last 12 months, and it is growing at a rate of 80% to 100% year-over-year, with its last six months worth about $20 million and revenues expected to accelerate to almost $100 million by fiscal 2013. We're in a "truly game-changing position in the market," said Compuware CEO Bob Paul in a Web conference to announce the deal on Wednesday. He added it should deliver one-plus-one-equals-three growth.

Boston-based DynaTrace has 180 employees, most of whom are expected to stay, and 400 customers. Through its PurePath technology, the company offers what it calls the only continuous APM system on the market, transforming how applications are built, tested and managed.

With more than 7,000 customers, Detroit-based Compuware reported revenues of $487 million for fiscal 2011. APM license and subscription fees shot up 91.7% year-over year to $145.5 million.

This is an extremely significant development, as this is the first example of one of the "traditional" systems management vendors (IBM, HP, CA, BMC, Compuware and Quest) stepping up its game to acquire one of these new innovators that address these new use cases and requirements, writes APM analyst Bernd Harzog in his blog.

He added, "APM is destined to assume a key role in the future IT environment that is characterized by workloads getting dynamically provisioned (through IT as a service or private cloud management offerings), being subject to dynamic operations (through vMotions triggered either manually, or automatically by DRS or other service assurance solutions), and getting distributed across physical data centers either within an enterprise or across a private cloud and a public cloud." DynaTrace is one of several vendors that are leading the charge in terms of redefining the APM space to meet these new criteria.

With its Purepath technology, DynaTrace has made its mark by being the only vendor that can trace individual transactions from the end user’s browser through web servers, middle-tier servers, database servers, various layers of enterprise middleware and back to the end user.

The 2011 APM report is due out shortly, but Compuware was in the coveted leaders quadrant in Gartner's 2010 APM Magic Quadrant, along with competitors CA, HP and Quest Software. According to this report, the APM market was roughly $1.65 billion in 2010, up from $1.58 billion in 2009, and the lion's share of that market is in distributed APM software, as opposed to software that runs on a mainframe computer.

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