Wednesday, March 10, 2010

CA and Nimsoft: Because smaller companies have different IT management requirements, but seem eager for cloud

If you’ve been watching CA, you’ve noticed some recently announced acquisitions that, when they close, will help us enable customers to make a transition to a cloud-connected enterprise, notably 3Tera, Oblicore, and Cassatt. And while the 3Tera and Oblicore deals in particular have a strong focus on managed service providers (MSPs) as customers, much of the end user interest in these solutions comes pretty exclusively from the largest enterprises.
Which begs the question, what about the slightly smaller companies? How are they looking to navigate the clouds and approach IT management in general?

Funny you should ask…
Today’s announcement that CA has signed a definitive agreement to acquire Nimsoft is an acknowledgement by CA that the group of companies a bit below the world’s biggest ones has a very particular set of requirements that, up until now, we have not really addressed. Nimsoft, however, as a provider of IT performance and availability software, has done a very good job of tailoring both its product (you can see a 13-minute demo here) and its way of working with customers to their specific needs.

With Nimsoft, CA can bring a tailored IT management solution to a new set of customers -- emerging enterprises, emerging national markets, and the MPSs and cloud service providers that serve those markets.

Who are the “emerging enterprises”?

To be clear, we’re still talking about some pretty large companies. Our internal categorization calls the group the “emerging enterprises” (of course, everyone has a different label). To CA, these emerging enterprises are the companies with annual revenues of less than $2 billion, but more than about $300 million. While the world’s mega-corporations may be a bit sluggish about adopting cloud computing, many signs point to the fact these emerging enterprises are also the ones that are experimenting with cloud computing in a much more significant way.

In addition, the MSPs and cloud service providers that serve these organizations are also some of the entities making the biggest strides when it comes to cloud computing.

But to serve these emerging enterprises, you have to do things differently
As Nimsoft knows firsthand, the emerging enterprises and these MSPs and cloud service providers require you to do things differently. How?

First, the software needs to be straightforward (and even easy) to install, use, and maintain. It needs to have a very broad but focused set of functional capabilities, stretching across a significant amount of the environments, components, and devices that an organization will want to manage, inside and outside its four walls.
Nimsoft fits that bill nicely. In fact, Nimsoft has been doing that so well, that many have called it (rightly or wrongly) an alternative to solutions from the Big Four management vendors. More about that in a moment.

The second requirement that’s pretty drastically different for smaller enterprises is that they are actually much more likely to buy their IT management capabilities from MSPs. 300 of Nimsoft’s 800 customers are MSPs today, often providing IT management services via the cloud to their end users.

When you start thinking about markets that are served via MSPs, there’s another whole set of customers that can be addressed – emerging national geographies. In the same way that some developing countries skipped the land-line phone infrastructure and went straight to wireless, many end user organizations outside of the more IT-mature geographies are thinking about avoiding data center build-outs altogether, and going to cloud computing. Or, if they are doing their own data center, then they are considering managing their environment by an MSP’s remote monitoring capabilities. Either way, IT management provided as a service is front and center.
So why is this customer segment (and therefore Nimsoft itself) interesting to CA?

CA has long been in the IT management software space. However, what I’ve seen in the past 6 months since I came aboard is a very serious focus on making changes to move CA from the slow, steady, “value” company it has been to one focused on growth. You can see the big bets that CA is placing to make this transition: we’re making significant invesments (through acquisition and internal development) on the software that large customers will need to be successful transitioning to and managing cloud computing. With Nimsoft, we’re also expanding the set of customers that we serve.

Why? That is where the new growth is. While the largest of the large companies do account for a big chunk of the IT management spending now and over the next few years, you may be surprised at how significant the emerging enterprises will be. Our numbers find them making up approximately 25% of the software spending in the market CA addresses (parts of the IT management software market, plus a few other areas) by 2013. That’s big, and something that CA hasn’t really touched before now.

If the product is that cool, what’s kept Nimsoft from having luck selling to larger companies?

Nimsoft has had great success. They fill the gap in the market above open source and low-end solutions, but below things like what CA’s Service Assurance products (Spectrum, eHealth, NetQoS, and Wily) provide. The truth is that Nimsoft has also had luck with some very large companies who, at first blush, you’d expect to buy a more global-style solution. However, what we mostly heard when we talked to their customers was that where large customers had bought Nimsoft, they use it for specific, departmental needs, while making use of another tool from CA or others for the enterprise-wide or more in-depth tasks or analysis. This is the reason CA is saying it plans to invest in both its current Service Assurance product line and Nimsoft – these products address different markets with different customer requirements. There will always be some gray area, but we’ll work through that as the companies come together.

Nimsoft fits into the CA Cloud Products & Solutions Business Line

To bring Nimsoft onboard, CA seems to have learned a lot from its Wily acquisition a number of years back. Like Wily, Nimsoft will be kept intact as a stand-alone business unit. It will become major new piece of Chris O'Malley's new Cloud Products and Solutions Business Line. CA plans to build on what Nimsoft has done and the success they’ve had with MSPs and emerging enterprises. This should also enable us to tap into those emerging geographic markets I mentioned earlier.

Nimsoft should fit nicely into the Cloud organization at CA – they’ve been thinking about their tool as something that helps monitor both internal and cloud environments. Check out their Unified Monitoring site for a peek at some of the cool things they can do. It’s a bit of a high-level weather report for the cloud. It monitors up/down status for popular public cloud offerings from the likes of Amazon Web Services, Google App Engine,, Rackspace, and others.

This acquisition is not about technology, it’s about the market

The bottom line for this announcement is that it’s very different from the others recently announced by CA. The Nimsoft deal is less about the technology (though their technology is pretty interesting on its own) and more about the market.

By acquiring Nimsoft, CA gets a solution for customer segments that it has not typically had offerings for. These markets become one of the key places CA is going to focus for growth going forward.

And, Nimsoft will (after the close) provide CA with a really good example of what happens when you listen to your customers’ needs very precisely. Here’s to more of the same.


benb said...

It it too bad that it is not about the technology. I can see this working so well for not only CA but any of the other big four vendors needing to quickly provide value for their customers while integrating into the larger enterprise management infrastructure with a service desk, service catalog, and service level measurements. Nimsoft has technology that works!

Jay Fry said...

OK, Ben, good point. Maybe the subhead is less accurate than what I said in the text below it: this acquisition is *less* about the technology and more about enabling CA to provide solutions to an additional set of customers.

For Nimsoft to have had the success that they have with MSPs and emerging enterprises, their technology has to perform as advertised. That point has come through loud and clear in the customers CA has talked to and in many of the comments on Gary Read's blog since the announcement.

You can read Gary's blog here:

iqlas said...


Very nice analysis on the acquisition. As you said, it's more about the market than the technology itself. It's going to be interesting to see what other 3 firms(from Big 4) are going to do to counter this acquisition.

Also see another interesting analysis on this acquisition and in general about Data Center Monitoring.