Competition Driving New Behavior in Application Performance Monitoring Pricing

By Kristian Tuinzing

Client Services Manager, NPI

November 15, 2019

Interested in learning more about NPI’s services?

Contact Us

Back in 2017, when Cisco acquired AppDynamics, it was clear the application performance monitoring (APM) space was in for a shakeup. That assumption has proven true in the two years since the AppDynamics acquisition, and is backed by NPI’s observations in what we consider to be one of the more turbulent areas of pricing in the enterprise IT solutions arena.

Our analysts have seen a noticeable increase in APM deals over the last couple of years, and the disparity in pricing offered to clients of all sizes can only be described as wide-ranging. We frequently see smaller clients getting the same or better pricing than some vendors’ largest customers. It’s a high margin business where price benchmark analysis can make a crucial difference.

What’s Driving Shifts in Application Performance Monitoring Pricing?

A number of factors are behind recent pricing shifts in the application performance monitoring space. Foremost is increased competition between AppDynamics, Dynatrace and New Relic. While NPI is vendor-neutral in our deal reviews, we do rely on market chatter to inform pricing and negotiation recommendations that give our clients leverage.

The chatter in the APM space is loud and clear. AppDynamics was generally regarded as the premium solution in the marketplace in 2017, but since Cisco’s acquisition, some clients feel that AppDynamics has gotten lost within Cisco’s portfolio. Dynatrace and New Relic have responded by nabbing some of AppDynamics customers, in part by rolling out new releases and at times making the market look like it’s in the midst of a features war.

These factors are leading to pricing that’s both inconsistent and unpredictable, and the opportunity for overspending on APM purchases is extraordinarily high. This validates the need to conduct IT price benchmarking on all APM purchases and renewals.

How to Get the Best Price for Application Performance Management Solutions

Across our client base, we’ve observed a few important factors that lead to pricing that’s at or better than market for APM purchases and renewals:

Deployment Rates: NPI finds that in many cases usage rates of APM subscriptions can be quite low. While it’s normal for a buffer amount to be built into these deals, past a certain point can detract from the value of the highest of discounts off list.

Feature Set Utilization: As vendors rapidly develop new capabilities, the differences between the offerings in their portfolio have grown. This can create a mix of APM licenses in the environment. This is a good opportunity for license optimization that can drive savings across all areas of APM spends. Figuring out the cryptic license pricing, however, is another matter!

Investigate SaaS APM Options: The continued push to the cloud and emphasis on strong business applications delivering a balanced customer experience is only getting stronger. Even if not looking to move now, NPI recommends looking to see what sort of ‘swap rights’ would exist if a client switches over to a provider’s SaaS options from current license models.

Plot the Historic Spend and Current BAU Case: Putting the lay of the land on paper and getting more than one option on the table can be a useful strategy. Many APM vendors feel confident in providing proposals that vastly overstate customer needs, even if unit pricing is already well above market. Aligning the current business and use case with reality typically results in lower pricing.

A bit of good news – any hungry market is an opportunity for killer deals and savings! Just be sure to validate pricing is within the range of fair market value and licensing is optimized for your specific usage requirements.