Observations on Key Infrastructure Software Trends1,2,3,4

  • Led by big moves from strategic buyers, including Microsoft, IBM, and Salesforce, year to date 2018 has been an active period for infrastructure software with over 200 transactions in Q3 2018 alone
  • The public markets have also continued to be favorable, with nearly 25 initial public offerings in the last 24 months
  • Software targeted at teams – developers, marketers, and professional services – that are lightweight, easy to use, and can be purchased and deployed over the web are witnessing increased demand and bypassing the traditional IT and enterprise buying processes
  • Security remains top of mind for both large and small organizations as large-scale cloud adoption leaves them with connected devices and increased exposure to threats
  • While industrial tech and infrastructure tech companies continue to make separate investments in their IoT platforms, this area will come increasingly into focus with resulting partnerships and M&A, especially as billions of intelligent devices are connected to the cloud, and organizations look for platforms that can turn these massive amounts of data into real-time business value

Infrastructure Software Taxonomy

Software Development / DevOps

Solutions that enable the software development lifecycle, including planning, creating, testing, and deploying software applications and systems

  • Application Lifecycle Management
  • Continuous Integration / Continuous Delivery
  • Version Management
  • Test Management

Select Market Participants

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IT Operations Management

Solutions that help to manage the provisioning, capacity, performance, and availability of an organization's IT infrastructure

  • Infrastructure App / Database Performance Monitoring
  • IT GRC and Asset Management
  • Service and Support Management
  • Operations Analytics

Select Market Participants

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Security 

Solutions that protect software and systems against malicious attacks, unauthorized access and resource use, and other external and internal risks

  • Identity and Access Management
  • Network / App / Data Security
  • Advanced Threat Protection
  • SIEM / Security Analysis

Select Market Participants

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Data Management

Solutions that integrate, cleanse, migrate, and manage data across platforms to produce accurate and consistent information

  • Data Integration
  • Data Quality and Governance
  • Database Management
  • Data Analytics

Select Market Participants

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Cloud Managed Services

Solutions that manage cloud security, computing, storage, network operations, and application stacks to automate and enhance business operations

  • PaaS / aPaaS / iPaaS
  • Managed Hosting and Applications
  • Managed Security
  • Backup and Disaster Recovery

Select Market Participants

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Collaboration / Communication

Solutions that enable groups and teams to communicate, share, coordinate, cooperate, and solve problems for the purpose of completing a task

  • Project Portfolio Management
  • Business Process Management
  • Communications PaaS
  • Agile Project Management

Select Market Participants

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Select Infrastructure Software M&A Transactions1,2

screen_shot_2018-12-04_at_10.57.42_am.pngEQT’s Pending Acquisition of SUSE

  • SUSE provides enterprise-grade open source solutions including Linux enterprise server, Open Stack cloud technology, and software defined storage, for managing on-premise and cloud workloads.
  • The Company’s main product is SUSE Linux Enterprise server - an enterprise-grade supported version of open source Linux, that competes directly with and occupies the #2 position behind Red Hat Enterprise Linux in the paid Linux market.
  • For EQT, SUSE provides a compelling thesis around open source and cloud, as Linux increasingly becomes the OS of choice across public and private clouds as a result of better performance, lower TCO and ability to use commodity hardware, and reduced vendor lock-in across paid and unpaid versions, as well as an increased uptake of OpenStack-based infrastructure.

screen_shot_2018-12-04_at_10.58.55_am.pngBroadcom’s Acquisition of CA

  • CA provides a diversified portfolio of IT management and application development solutions across mainframe, cloud, mobile and distributed environments.
  • The Company’s Mainframe solutions comprise more than 50% of revenue and it is a leader in the space (only behind IBM) with nearly 90% of the Fortune 500 as customers.
  • The acquisition will provide Broadcom with significant customer and product diversification, and cross sell through access to larger enterprise data centers where CA’s mainframe solutions are deeply embedded and mission critical. Broadcom has since sold Veracode, the application security company acquired by CA in March 2017, whose customer base is largely midsize enterprises.

screen_shot_2018-12-04_at_10.59.57_am.pngMicrosoft’s Acquisition of GitHub

  • GitHub is a source code management platform based on the open source Git distributed version control system. The company enables the hosting of open-source projects while providing paid support for private code repositories.
  • The Company’s solutions provide code review, project management, documentation, and code hosting along with many other developer collaboration features. Over 30 million developers utilize the platform including a large portion of the open source community.
  • Microsoft paid a significant premium to for access to a large and loyal developer ecosystem which over time will provide a strong base for cross sell (especially Azure). Similar to LinkedIn, Microsoft plans to run GitHub independently.

screen_shot_2018-12-04_at_11.01.15_am.pngSiemens’ Acquisition of mendix

  • mendix is a low-code application development environment that empowers business users to build web and mobile applications using visual modeling tools and high level code constructs. It allows business users to tap into existing disparate applications, databases, and reusable components/templates to quickly and easily create rich and more relevant applications.
  • The acquisition is highly complementary to Siemens’ Mindsphere IoT platform which is enabling business users to create rich apps that tap into the physical infrastructure of their products, plants, systems, and machines.
  • The acquisition will allow Siemens to combine mendix’s leadership in low code development, providing rich user experience and digital connectivity, with Mindsphere’s wealth of IoT data and physical infrastructure connectivity.

screen_shot_2018-12-04_at_11.05.33_am.pngThoma Bravo’s Acquisition of Centrify

  • Centrify provides identity and access management (“IAM”) software solutions to over 5,000 organization worldwide, including more than 50% of the Fortune 50.
  • The Company’s solutions include privileged access management (“PAM”) where the client base is majority larger enterprises and Identity as a Service (“IDaaS”) solutions where client base is largely small to midsize enterprises. 50% of sales are direct.
  • Thoma Bravo has been a long time investor in cybersecurity companies, including Sailpoint and Bomgar in the IAM segment. Since the acquisition the Company has been split into two separate businesses – Centrify focused on privileged access management, and Idaptive focused on Identity as a Service.

Note: Announced or Closed in Q3 2018.

Select Sector Spotlight3,4

Identity and Access Management (“IAM”)

Market Observations

  • IAM is a $5 – 10 billion market across Identity as a Service (“IDaaS”), Privileged Access Management (“PAM”) and Identity Governance and Administration (“IGA)”)
  • Majority of the IDaaS activity is being driven by the need to manage user access across multiple cloud and mobile applications and shift to the cloud
  • A number of public security breaches have increased the focus on PAM and the need for better monitoring and auditing of privileged user accounts, including administrators, vendors, etc.
  • IGA solutions are more complex to implement since they require modelling policies, workflows, and reporting, and are taking longer to move to a service model

Select Market Participants

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Recent Transactions

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Test Automation and Management

Market Observations

  • Testing remains one of the few areas within the Software Development Lifecycle (“SDLC”) that is largely manual, with opportunity for technology disruption
  • As cloud, mobile, IoT, web services/API, and low code/business user development models proliferate, the need for testing solutions that capture these “omni-channels” continues to evolve
  • The testing market is over $30 billion (including manual) and the current test automation market is about $2 billion

Select Market Participants

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Recent Transactions

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Version Management

  • Version management software acts as the code repository on software development projects, and enables collaboration across developers
  • It is one of the few tools that provides an opportunity for a platform play besides Application Lifecycle Management (“ALM”) and Project Portfolio Management (“PPM”) tools
  • Cloud-based, developer centric, team-based software tools are experiencing significant demand as they allow developers to bypass the traditional enterprise buying processes

Select Market Participants

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Recent Transactions

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Key Performance Metrics for Recent Infrastructure Software IPOs1

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Infrastructure Software – Trading Comparables Metrics

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Infrastructure Software – Trading Comparables Metrics by Sector

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Security Software – Trading Comparables Metrics by Sector

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Infrastructure Software – Transaction Activity

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Select HW TMT Transactions

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1. Factset

2. Pitchbook

3. Gartner

4. IDC

 

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