The recent announcement of Dell going private remind us that, these days the only thing that doesn’t change is change itself. In an era defined by transition, Dell must remake itself from top to bottom as it adapts to the post-PC world.
There is no doubt, tablets and smartphones have shaken the PC market to its core. Dell’s decision is a clear example that it is better to turn the wheel than to simply lie down and succumb to the competition. While founder Michael Dell’s decision to return to the private sector may be a controversial one, he and his management team may perceive the market as the one underestimating Dell’s ability to produce a profitable portfolio in the near future.
HP and Lenovo were quick to react to Dell’s decision. While the world’s top PC maker, HP, claims that Dell faces a very tough road ahead, Lenovo nonchalantly stated that the move won’t affect its own strategy. It’s no surprise that both the companies have also started exploring new vertical markets to expand their presence beyond PC sales, without the market shock of seceding from Wall Street’s trading floor.
Wikibon senior analyst recently Stu Miniman appeared on our morning NewsDesk show to discuss how Dell’s decision to go private will impact the hardware giant’s ability to innovate for the future, as well as the impact on an entire industry. Many of his points are discussed below.
Dell’s long-term software strategy
Dell is in the middle of a complex restructuring, realigning its focus away from primarily hardware sales to become more of a full-featured, enterprise-oriented Service company. While HP claims Dell will have a hard time making the necessary investments to remain competitive, the company has already made several acquisitions towards its long-term goals in the software space.
Recent years have brought acquisitions by Dell in the areas of servers, services, networking products and storage — a clear indication that Dell wants to develop software products compatible with its datacenter offerings to become a market leader in the faste-growing cloud computing, storage, virtualization, software-led infrastructure and Big Data markets.
In fact, Dell’s acquired over 25 companies over the past three years, including the security firm SonicWall and Wyse Technology, which sells thin clients and virtualization software for data centers. Analyst firm Wikibon predicts that PC vendor leaders, including Microsoft, will abandon both PC and tablet development in favor of its data center software business.
IaaS and beyond
Dell is also plunging into Infrastructure-as-a-Service, storage, business applications and datacenter management with the acquisition of companies such as EqualLogic, Compellent and Force 10. And with the purchase of Quest, Gale Technologies, Kace, SonicWall or SecureWorks, Dell already generates $1.5 billion in revenue. The acquisition of Gale Technologies in particular has enabled Dell to the launch Active System Management, a converged cloud deployment management tool to facilitate the deployment and management of applications in a virtualized architecture. The system is powered by Gale Technologies to support the growth of data centers, and also offers a simplified management deployment of VMs and their applications.
Security & BYOD
Then there’s the acquisition of Quest Software for $2.4 billion, where Dell scored a big hit in software solutions with infrastructure management servers, storage, and network. Quest provides world class solutions for management and control of IT, databases, security and backup, performance management, access management and identity and environment management.
The acquisition of SonicWall strengthens the position of Dell on security services, security solutions for cloud solutions and data encryption. In addition, the acquired Credant technologies solution enables Dell to enter into mobile data management security protection by encrypting the data and keeps it secure as it moves across PC, mobile devices, USB drives, Internet services and elsewhere.
HP is no different
Like Dell, HP is working to find a way to take the business away from the not-so-profitable hardware business to software services. A possible path considered in terms of redesigning HP appears to be a more pronounced shift towards enterprise software, cloud, storage and converged infrastructure.
Aside from Palm, HP has essentially favored acquisitions of business solutions providers, and in different areas of IT: Network with 3Com, storage with 3PAR, security with ArcSight and Fortify and business intelligence with Autonomy and Vertica. HP has integrated 3PAR’s storage technology into the storage and network stack of its converged infrastructure portfolio, as part of HP’s cloud computing services. Arcsight’s products have joined HP’s Enterprise Security Solutions portfolio, which helps businesses deal with BYOD, cloud and social media security threats.
The Converged cloud framework, alongside software-led infrastructure and storage, could have what it takes to help turn HP’s fortunes around. Wikibon senior analyst David Floyer backs this up, noting HP’s commitment to Software-Defined or the Software-Led direction. Patrick Osborne, Director of Product Management, HP Storage Division recently discussed how HP’s 3PAR storage solutions and how solution based storage technology based on 3PAR is filing the system dedicated to Big Data.
Thin client manufacturer Neoware was purchased by HP in 2007 as part of HP’s general push towards thin client virtualized business desktop PCs. The acquisitions of Compaq, Autonomy and EDS might have failed, but it provided HP to boost outsourcing portfolio, and building business intelligence services by combining HP’s services portfolios with delivery platforms.