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AppDynamics IPO: Application Performance Management (APM) Alert for MSPs

As AppDynamics prepares for a potential IPO (initial public offering), it’s an ideal time for MSPs to take a closer look at rapidly evolving APM (application performance management) opportunities.

Update December 28, 2016: AppDynamics filed an IPO prospectus in December 2016 after multiple delays.

AppDynamics apparently has hired Goldman Sachs Group Inc. and Morgan Stanley as lead underwriters for an IPO that could come later this year, reports suggested late last week. AppDynamics, with 1,600 paying customers,raised $158 million in November 2015 in a private round that valued the company at $1.9 billion, multiple reports have stated.

Rival New Relic went public in December 2014, and the company has continued to grow rapidly since that time. For its fiscal Q4 ended March 31, 2016, New Relic said revenue jumped 57 percent to $52.5 million compared to Q4 the previous year. Admittedly, the company’s GAAP loss from operations was $19.3 million (up from a $14.7 million loss in Q4 the previous year). But New Relic has been plowing money back into its business — including continued partner program investments.

The situation is likely similar at AppDynamics, though we haven’t seen an IPO prospectus yet. More than 1,500 people attended the company’s AppSphere conference in 2015, and an even larger crowd is expected at AppSphere 2016 in November.

APM vs RMM: What’s the Difference?

In some ways, the emerging APM market and the established RMM (remote monitoring and management) software market overlap with one another. A growing number of RMM providers that work with MSPs also have APM offerings. A key example involves SolarWinds MSP — which has APM solutions that mid-market enterprises frequently adopt.

Still, AppDynamics and New Relic are riding multiple IT waves to build and expand the market for APM tools. As workloads shift to public clouds or hybrid clouds, both AppDynamics and New Relic offer monitoring capabilities to help troubleshoot application workloads — regardless of where they run.

That’s particularly important in the age of DevOps and continuous software delivery. Each time a business rolls out a new application — or an upgrade to that application — they need to closely monitor and troubleshoot the user experience. AppDynamics and New Relic fills that void.

APM Channel Partner Programs, MSP Engagements

Predictably, multiple APM partner models are emerging:

  • Resellers can sell AppDynamics or New Relic into end-customer settings. Corporate IT departments, in turn, can leverage those tools internally.
  • MSPs can leverage the tools to monitor customer workloads running on-premises or in third-party clouds.
  • And MSPs can leverage the tools to monitor and manage applications running on their own networks.

In some ways, the APM wave is still building. And of course, AppDynamics and New Relic both need to prove that they can generate sustainable profits. But in other ways, it feels like APM tools are the next major wave for MSPs. As networks and infrastructure become more reliable, the real value-add will continue to shift to custom applications and overall performance management. In theory, APM is the clear answer to those needs…

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