Managing expectations

According to the latest analysis from IT advisory group Gartner, the freeze on technology spending that has been in place since 2001 is beginning to thaw. And one area where businesses have been keen to invest has been in systems management tools.

The systems management market has been growing since 2003, and is expected to grow from a worldwide value of $2.3 billion in 2004, to $3.9 billion in 2009. But having familiarised themselves with the intricacies of systems management and its various facets, potential purchasers could be forgiven for being daunted by complexities in the landscape of the market, which appears to be undergoing some turbulence at the current time.

Most conspicuously, Mercury Interactive, a business technology optimisation vendor, has been battered by corporate scandals. Eventually, in January 2006, Mercury was delisted from the Nasdaq stock exchange for failing to produce its financial reports on time. Meanwhile, CA (formerly Computer Associates) – itself no stranger to corporate scandals – has made an attempt at reinvigoration: rebranding itself, revising its core focus, and expanding its arsenal through a series of acquisitions. Most recently it snapped up application management developer Wily Technologies for $365 million.

Elsewhere, industry rumours have suggested that systems management vendor BMC Software is locked in discussions that would see the company taken over by a group of private equity investors. And while there has been no confirmation of those rumours, BMC's industry experience, paired with its slow growth, make it a prime candidate for such an acquisition.

The appearance of this turmoil just at the moment the market starts to generate big money is no coincidence, says Siki Giunta, CEO of business service management software vendor, Managed Objects.

"IT spending predictions have moved from the solid 6% [growth] to between 8% and 12%. So the investors are looking to find out who is going to make that money," she explains. That places companies under pressure to get their houses in order as suitors circle.

And while that applies to all IT companies, in systems management there is a lucrative opportunity to provide an industry standard that has yet to be claimed. Businesses are becoming increasingly interdependent, and their ability to provide customers with continuous service depends as much upon the IT systems of their service providers as their own. That makes a universally applicable, easily interconnected system, for monitoring the availability of hardware and applications, highly desirable.

Gartner analyst Ruggero Contu believes that the principal benefactors of the turmoil in the industry will be the giants of systems management, such as CA, HP and IBM. "In response to negative experiences in 2000 and 2001 with startup companies and small vendors that were unable to support customers, businesses continue to prefer lower-risk suppliers," writes Contu. "This benefits the larger vendors who have broader portfolios and greater financial resources."

Giunta, though, is optimistic of her company's prospects, and sees 2006 as a key year to lay the groundwork for a sustained and profitable business. "We have a lot of demand for BSM and service level management, and at last we see customers wanting to do this, and to do this fast," she explains. "But the demand is so fast, maybe we won't be able build it all on our own."

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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