Dell + Quest: First Thoughts

Well, it looks like what many of us have watched and predicted been made official. Dell announced their intent to acquire Quest for $2.4B, outbidding and supposedly besting Insight Venture on M&A terms. This, along with the WYSE deal earlier this year seems to solidify Dell’s intent to compete as a full service IT player.

Notice I said “intent”. Whether they succeed I their execution and capitalize on either deal is yet to be seen. The twitterverse is abuzz with chatter and speculation going both ways.

The way I see it, Dell could be on to something pretty smart here if they put these pieces together right, are spot on with delivery, keep pace with the market and their customers, and are able to manage the conglomeration of people and technologies while still maintaining a singular focus and face to their customers.

It’s clear Dell wants and needs to be a single-source vendor and solution for hardware, software, and services. The WYSE and now Quest acquisitions provide some huge jump starts towards these goals, particularly in the areas of enterprise systems management and virtualization tools.  I see a couple of strategic advantages for Dell here if they can capitalize on these acquisitions and successfully merge what I have observed to be completely different cultures into the sprawling organization that Dell is becoming, without losing talent, focus, and efficiency in innovation and delivery.  Dell (and HP, IBM, etc.) have all struggled with this in the past, sometimes with ugly results.

Strategic Advantage #1: Professional Services
With the new tools and talent brought on board, Dell Professional Services has a much broader arsenal with which to tackle enterprise IT issues and become more of a single-source vendor.  They’ve been at this for a while through the partner relationships with and merger/acquisition of storage companies, networking companies, and virtualization companies.  I’ve seen a ton of headcount openings in Dell’s professional services and consulting teams, specifically in desktop virtualization lately.  To me this signifies a sensible strategy around using these new technologies in their portfolio to help sell and deliver solutions to customers around their traditional or virtualized desktop and end-user device lifecycle management.  They’ll need to ramp up quickly and figure out how to productize the new, expanded portfolio and deliver it with the added value of their professional services teams.  Focus on strategic verticals like healthcare might present significant opportunities here since they are now driven by what most expect to be lasting mandates towards regulatory compliance (Meaningful Use Stage 2).  Capitalizing on markets where efficiencies are a premium should be a critical focus – the WYSE and Quest acquisitions could be huge here – especially when they can merge with Win7/8 migration projects, VDI projects that make sense, etc.

Strategic Advantage #2:  The Post-PC Era Toolbox
The new Dell, if it wants to be a player and a major software vendor, is going to have to adopt and gain ground on smaller, more agile competitors in providing products and services to meet the needs of computing in the post-PC era.  This could mean many different things to many different companies, but I could see plenty of potential if they go to market right.  For example, I see a significant opportunity to make VDI adoption easier by being able to offer WYSE technologies and hardware, Quest Management, and EqualLogic storage in one package.  Dell’s proven they can do this with partners (a la the Dell DVS offering with Citrix) – now they can take it one step further and offer the parts bundle with professional services around it as a value-add (as opposed to handing that part over to its partners like Compellent, as they have in the past), and you’ve got enterprise-grade solutions in your portfolio now.

The Challenges
Definitely more than one challenge will lie in Dell’s path to being a complete enterprise solution provider. 

  1. 1.  The Channel.  Dell, as well as it’s acquisition targets, have significant channel partner relationships that call for significant consideration, especially in specific verticals and the SMB market.  Dell cannot afford to alienate or disavow those partners in this evolution.  To do so could be disastrous. 2.  Mobility, Consumerization, and the Cloud.  Dell is going to have to watch this one closely as well.  It’s clear Dell has spent far more dollars and development (business and technical) on the enterprise side rather than on the consumer side.  However, I think it would be unwise for Dell to completely disregard the consumer customer base, many of whom buy their products because of their familiarity with them from their enterprise experience.  While they aren’t a player really in mobility, and don’t intend to be, they are still obviously in the laptop game with a significant line of Ultrabooks that they could  easily feed into BYO programs and perhaps even unify the hardware offerings into a shortened, purpose-built product line that would fit many niches.  Imagine having all the enterprise-grade management and security features built into an Alienware gaming laptop or Ultrabook offered through your employer’s BYO program.  Dell interestingly doesn’t seem to have a focused strategy or vision around their cloud strategy.  That could hurt them on these fronts and could be an impediment both internally and externally to fully developing the potential of recent acquisitions.

    3.  Dell.  This company could end up being its own worst enemy.  Dell corporate culture and structure wasn’t without issues before all these acquisitions.  In the past few years, there’s been no less than a dozen acquisitions in storage, professional/business services, datacenter management, and some cloud platform services.  As a partner or vendor, some organizations have found Dell fragmented and confusing to work with – much of their delivery and services work was offloaded to partners, and this sometimes caused confusion in Dell’s direct enterprise sales engagements.  I’m also not 100% sold on Dell’s transition away from consumer PC’s to enterprise IT.  The organic sales in the hardware market isn’t going to be enough to sustain any costly failures or mis-steps in this mission to become a unified technology provider.  Virtualization and cloud-based offerings are going to bite chunks out of that sales segment for every hardware vendor as it is.  So in short, execution on this strategy will be key.  Dell would do well to focus very heavily on their message, on branding and bundling their offerings and portfolio in all verticals and in the SMB space, and continuing to leverage strategic partnerships with ISV’s they rely on to deliver productivity to their solutions (I’m talking Microsoft, Citrix, VMWare, Oracle, etc.).  The Dell amalgamation has a broad palette from which to paint its own way to prosperity, influence, and innovation if it can unify what it has in the way of talent and technology.  That’s going to need strong leadership and commitment to listening to the customer from Dell – areas which analysts have been critical of in the past.

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