In Part 3 of APMdigest's exclusive interview, Jonah Kowall, Research Vice President, IT Operations Management at Gartner, discusses the changing and volatile APM market in 2014 and beyond.

Start with Part 1 of the interview

Start with Part 2 of the interview

APM: In your new market note released in March – Prepare for a Changing and Volatile APM Market in 2014 – you advise companies to re-evaluate APM options. Is this because of the many new features and capabilities coming out?

JK: Yes, and APM tools are still generally expensive so you don't see people implementing APM across a large portion of their environment today. APM is not designed to be deployed on every server environment. It is typically on a subset of servers that are running the most critical applications that need that type of visibility.

There are other tools, which we call Application Aware Infrastructure Performance Monitoring (AA-IPM), and in recent research we discuss this approach and tools providing it. The angle is a higher level approach to viewing performance data, but they lack the granularity and end user experience monitoring which APM tools have. These tools are like a steppingstone to APM, in many ways. They provide a broader level of performance visibility.

APM tools are granular and deep, working within the application, but they should be used for the most important applications, until the cost and complexity come down considerably. Much of that future state is driven by application modernization and more automation in environments.

APM: A little over a year ago, Gartner was talking about the downturn in the APM business in 2012. There was talk about ITOA purchases taking budget away from APM.

JK: The analytics market has been growing significantly faster than the APM market. And granted, the analytics market is smaller in total, hence it's easier to grow. If you take a $300 million market and double it every year, that's good growth. But it's very difficult to do the same thing with a $2.5 billion market.

End users are investing heavily in analytics tools, and that can definitely detract from investments in APM tools. It is not to say that people are not buying APM still, but they are clearly investing quite a bit in the analytics space outside of APM, because of the value those tools can provide. Even in the last several months we have seen more analytics companies start to emerge in that competitive space. I think that growth is going to continue to accelerate, as well as the number of options available to buyers, which is a good thing.

APM: In spite of that, however, from your market note it sounds like APM sales are also coming back.

JK: We are still seeing acceleration in the APM market, and the 2013 growth rates we recently published were higher than the 2012 numbers even though the market expanded.

APM sales have always been strong, especially for the newer vendors out there. We clearly see market share lost by some of the larger vendors that have taken their eye off the ball so to speak. But plenty of gain and growth from the smaller vendors.

There is definitely a momentum shift, and those that are able to address the discrete APM market have seen better success. Many of the large companies have taken action within their organizations to really refocus on APM as a discrete market versus trying to sell everyone this huge suite of enterprise tools. For example, CA Technologies recently created a new APM business unit. I think those types of changes will enable better focus on APM as a discrete market versus trying to include it in a broader sale of IT operations management tooling.

APM: In your new market note, is this what you mean by "market volatility" in APM?

JK: The large APM vendors are going through changes. Their inability to address this market specifically has enabled emerging players to come in and clean up on opportunities. That is definitely creating volatility in the market, in terms of being able to take customers from the big companies and turn them into fans of the other solutions out there.

Any company that is public is under an increasing set of expectations from shareholders that don't necessarily agree with the market demands. An example of that in general would be if a company decides they need to invest more in marketing or R&D, outside of the budget. A public company cannot do that because the shareholders have expectations. However, a private company can make those types of business decisions behind closed doors, independent of external scrutiny. That is the basic summary of what has been going on in the public market and the private market.

APM: Where do you see the APM market going from here?

JK: I see a couple of changes happening. One interesting point is that APM tools - at least the way we define them at Gartner, and those that are in the Magic Quadrant - live inside the application. Because they are inside the application, they can see every transaction, and everything that is happening within the application logic. That makes for some very interesting additional use cases, such as being able to extract business metrics and other understanding from within the transactions with transactional context and visualize those along with the performance data that APM tools are typically focused on.

So I see broader software analytics, and even business analytics, being facilitated by APM tools in the future. This includes better analytics, better extraction of business understanding within the applications, the way they are instrumented today. Additional use cases and buyers for that technology will emerge, and those analytics capabilities will be the key to broadening.

This broader software analytics merge first tends to be on mobile were you see the mobile APM companies moving into general mobile software analytics, and you also see mobile analytics companies moving more into performance, because there clearly is a correlation between business execution, customer satisfaction and performance. Those are a natural blend with one another. These are a few of the common trends we are seeing among the APM vendors in terms of where they're going and what they are able to address.

APM: When is the next APM Magic Quadrant coming out?

JK: The APM Magic Quadrant for 2014 will be a fourth-quarter deliverable, because we delivered it in the fourth quarter last year. We tend to publish the criteria in advance, so I would expect the criteria to be out in May. It will show the changes in the criteria for 2014. We encourage any vendors that feel they should be included, based on the criteria, to reach out, whether they are Gartner clients or not.

ABOUT Jonah Kowall

Jonah Kowall is a Research VP in Gartner's IT Operations Management group. He focuses on application performance monitoring (APM), event correlation and analysis (ECA), network fault monitoring (NFM), network performance monitoring (NPM), network configuration and change management (NCCM), and general system and infrastructure monitoring technologies (storage, virtualization, public cloud and private cloud). He also covers SLA monitoring of services and applications.

Related Links:

Gartner Q&A: Jonah Kowall Talks About APM - Part 1

Gartner Q&A: Jonah Kowall Talks About APM - Part 2

Gartner Analyst Profile: Jonah Kowall

Gartner Blog: The State of APM in 2014 – Prepare for a Changing and Volatile Market

Download a complimentary copy of Gartner's 2013 APM Magic Quadrant from AppDynamics

Gartner's 2013 APM Magic Quadrant for Gartner clients