Dynatrace Aims For $300 Million IPO As IT Monitoring Market Heats Up

The Waltham, Mass.-based company looks to go public in a heating market for cloud and application monitoring solutions. Private equity powerhouse Thoma Bravo will preserve a controlling interest after the listing on the New York Stock Exchange.


Dynatrace on Friday revealed plans to go public in an IPO that will heat up an IT monitoring market benefiting from the proliferation of increasingly complex infrastructure environments and application architectures.

The application and cloud infrastructure monitoring software vendor looks to remain under the control of private equity powerhouse Thoma Bravo after it's listed on the New York Stock Exchange. The company specified a $300 million target as a placeholder on the S-1 filing with the SEC.

Dynatrace, based in Waltham, Mass., has branded its solutions as a "software intelligence" approach to monitoring, with unified tools across the technology stack, artificial intelligence, and integrations with major cloud providers and cloud-native technologies.

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In the S-1, the company touted relationships with resellers, global systems integrators, managed services providers, and major cloud infrastructure providers.

"We intend to continue to invest in our partner ecosystem, with a particular emphasis on expanding our strategic alliances and cloud-focused partnerships, such as AWS, Azure, Google Cloud Platform, Red Hat OpenShift, and Pivotal Cloud Foundry."

The integrations with Amazon Web Services, Microsoft Azure and Google Cloud Platform, the three largest cloud infrastructure providers, "simplifies development and operational efforts, increases visibility, and improves situational awareness for our customers," it said.

Alliances with Pivotal Cloud Foundry, the industry's leading Platform-as-a-Service, Red Hat OpenShift and other Kubernetes environments deliver visibility into modern applications built with cloud-native methods that span multiple infrastructures.

"In these environments, Dynatrace automatically launches and monitors the full cloud stack and all the applications and containers running anywhere in the stack, including applications and workloads that may traverse multiple cloud and hybrid environments," the company said in the S-1.

Dynatrace claims more than 2,300 customers across all major industries.

The company has shifted an overwhelming majority of that base to a subscription model, while looking to deliver its management platform with the convenience and simplicity of a Software-as-a-Service model.

In 2017, subscriptions accounted for more than $232 million in Dynatrace revenue, compared to more than $130 million in license sales, according to the filing. That ratio has become even more lopsided in the fiscal year ending March 31, 2019, with 81 percent of total revenue of $431 million coming through a recurring basis.

But for enterprise customers that still want an on-premises solution for data sovereignty or other concerns, the company offers Dynatrace Managed, which lives in the corporate data center, but receives monthly updates from the vendor.

Dynatrace has been actively embedding artificial intelligence into its platform as part of an AIOps model that empowers operations teams with deeper insight into application performance, underlying hybrid cloud infrastructure and the user experience.

In the filing to the SEC, the company highlights as a point of differentiation its solutions are designed specifically for the enterprise cloud.

With cloud transformation, the advent of modern apps built from loosely coupled micro-services, adoption of DevOps practices for rapid software release rates, and high expectations for user experience, point solutions and mish-mashed tooling no longer serve the needs of the enterprise, Dynatrace said in the S-1.

"Traditional approaches for developing, operating, and monitoring software were not designed for the enterprise cloud environment," it said. "Traditional monitoring solutions were developed in an era in which applications were monolithic, updated infrequently, and run in static data center environments."

Modern dynamic environments, incorporating on-premises servers and instances provisioned from IaaS providers, have created massive new complexities.

Dynatrace tackles those challenges with an integrated and comprehensive view spanning hybrid infrastructure to applications, it said.

The company’s competitors include application performance management vendors such as Cisco AppDynamics, Broadcom, and New Relic; infrastructure monitoring vendors, such as BMC, Datadog, and Nagios; and digital experience monitoring vendors, such as Akamai and Catchpoint.

Dynatrace was founded in 2006 in Austria, but relocated to the Boston area after an investment from Bain Capital.

The company has a complicated holding structure due to previous acquisitions; a series of intermediate transactions will be necessary to make a share of equity available for public investors.

Compuware, a large and diversified IT products company, acquired Dynatrace in 2011. Thoma Bravo then picked up Compuware for $2.5 billion in 2014, taking the company, and subsidiaries like Dynatrace, private.