Appeared in The451 today….interesting independant analysis

Nimsoft poised to remain consolidator in quest to challenge Big Four

Now that it has completed its product integration of Indicative Software and is beginning to do the same with the assets that it recently obtained from Cittio, what is Nimsoft’s next move in its continuing effort to compete with IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ), BMC Software (NYSE: BMC) and CA Inc (NYSE: CA)? Business transaction management, desktop monitoring and management and more root cause analysis tools could all be on the company’s shopping list.

Context

Nimsoft recently closed its second acquisition in a little over a year, buying source code and other IP from Cittio for an undisclosed amount in a deal made with cash on hand that likely amounted to a fire sale. Once the transaction became public, Cittio shut down its website, replacing it with a message saying that it was winding down operations and dissolving. The purchase will give Nimsoft technology for level 2 and 3 network discovery and topology mapping, monitoring and root cause analysis, filling another gap in its growing suite of IT performance and availability management offerings that it is positioning as an alternative to the Big Four IT management framework vendors’ software.

This follows up on Nimsoft’s purchase last April of Indicative. That pickup has given the acquirer new software for user experience management and its recently announced Business Service Management (BSM) Express offering, which shows how IT service performance impacts the business services they support.

Nimsoft has enjoyed a great deal of success and rapid growth selling mostly to the midmarket and to managed service providers (MSPs). The vendor has expanded from just over 300 customers in mid-2006 to about 850 today. It grew from $10.2m in bookings in 2005 to $29.4m in 2007, then stated that 2008 bookings were $40m-50m. However, it also disclosed that bookings increased by 47% over 2007, which would put the exact number at about $43.2m. While Nimsoft likely did not reach its stated goal of $50m in revenue by 2008, it continues to grow.

Filling more technology gaps, especially those that will make it more appealing to large enterprises, will ensure continued growth for Nimsoft.

Likely targets

Nimsoft’s strength remains performance and availability monitoring. Cittio gives it solid technology in this area for the network. Indicative upgraded Nimsoft’s technology for the user-experience end of application monitoring and gave it the kind of reporting, metrics and dashboards that enable IT organizations to measure the impact of IT service performance on the business services they support. Nimsoft already had extensive monitoring capabilities for applications, servers, databases and service-level agreements.

The firm is positioning its existing offerings for the cloud, which we think it should be able to do fairly easily given its penetration of the MSP market and the fact that its software has extensive capabilities for monitoring IT service levels � including in virtualized environments � and assessing their impact on business services, which is technology that would be necessary for managing private cloud environments. We believe Nimsoft will for now maintain its focus on performance and availability management rather than make a leap into IT asset, service and configuration management, though it will certainly have opportunities to enter the latter down the road.

So how can Nimsoft extend its IT performance management and availability wares? The desktop is one possibility. Beyond managing application performance from the end-user perspective, the vendor doesn’t really have monitoring software for client devices. We wouldn’t expect it to make a huge investment, either, but a tuck-in acquisition is possible.

One potential target is Persystent Technologies, which has strong technology for detecting and resolving PC system failures or performance degradations at boot-up. Buying Persystent could also give Nimsoft a start in IT asset and configuration management as well as policy management and enforcement. Acquiring Vector Networks would have similar benefits for Nimsoft: extending performance management to the desktop, while providing IT asset and service management, including helpdesk, at the same time.

Triumfant would be another possibility with its desktop monitoring plus automated incident management and problem resolution, which is technology that Nimsoft doesn’t really have at any level, but could move into and apply to the other layers of IT infrastructure that it monitors. However, much of Triumfant’s focus is on finding and removing malware, corrupted registry keys and detecting violations of IT policy. Nimsoft is more likely to stick to performance and availability management rather than make a foray into endpoint security.

Another option for Nimsoft would be to extend its service-level monitoring into business transaction management � tracking business transactions through layers of IT infrastructure and pinpointing the cause of service degradations, which Nimsoft already monitors for. DynaTrace software, whose strength is primarily in pre-deployment testing, could be a good fit for Nimsoft here. OpTier is another startup in this space, but is currently well-funded and growing, and is not seeking a buyer. Israeli company Correlsense, which hasn’t made the big splash it intended to in this sector, is a better match. BlueStripe Software has some interesting technology in this area for heavily virtualized environments and some early customer traction, but will likely seek more growth on its own for the time being.

Nimsoft might also make a foray into the performance management of service-oriented architectures (SOAs) and the composite applications that comprise them. SOA Software, AmberPoint and Nastel Technologies are all possibilities here, with Nastel probably being the closest thing to a performance management pure play among those three and therefore perhaps the best option.

Acquiring Cittio gave Nimsoft root cause analysis software for the network, which was a key part of the deal. Nimsoft may look to add root cause analysis software for the other layers of IT that it monitors. Netuitive and Integrien would be the most suitable targets here, with a better deal to be had for the smaller Integrien.

While it’s tempting to predict that Nimsoft will make an acquisition to improve its cloud management positioning, we think the company will make the most of its moves in this area from technology that it already has. Besides, cloud management means a lot of things right now, and any emerging players in this space are way too early stage to be ideal targets.

Looking ahead

After buying Indicative, Nimsoft released two new products obtained through the acquisition over the next year, the Real User Monitoring appliance last summer and the BSM Express offering in April. Less than a month after the second launch, the vendor announced that it had purchased certain assets of Cittio. If that pattern continues, Nimsoft will first integrate the acquired IP and source code into its software, which is a process that likely won’t be completed until sometime in the fourth quarter. We would then expect Nimsoft to become acquisitive again. It may move sooner, though, since the product integration of Cittio’s technology will be a much smaller job than that of Indicative’s.

We’d rank dynaTrace as the best fit for Nimsoft. Its pre-deployment capabilities, deep-dive diagnostics, root cause analysis and even SOA visibility would fill many of the gaps in Nimsoft’s existing product suite and be an excellent complement to its extensive monitoring capabilities. Failing dynaTrace, we could also see Nimsoft picking up Integrien, a company that has achieved limited traction with its strict focus on root cause analysis, and is clearly positioning itself to be bought at the right price. Either Persystent or Vector would be a good catch for Nimsoft at the desktop performance management level, with Vector providing the added benefit of IT asset and service management, should Nimsoft choose to close that IT management loop.

In any case, with the economic downturn forcing some vendors to make the best deal they can and move on (see Cittio), this remains a buyer’s market and we don’t think Nimsoft will wait another year to strike again.

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