Glenn O’Donnell, principal analyst at Forrester Research, noted that the decline of the traditional PC market–which Dell used to play heavily in–was evident, and the company cannot pin its hopes on this market. The latest sign came in its fourth quarter results announced Tuesday, in which net income fell 18 percent to US$764 million from a year ago. By contrast, its services division unit grew 12 percent to US$2.2 billion and represented 14 percent of Dell’s overall business, it noted.
Thus, Dell has to reinvent itself in the evolved market for technology consumption, also known as the post-PC era, and go into areas it has not played before, O’Donnell added.
Dell’s shift in focus could be seen as early as 2009, when the company bought IT services company Perot Systems for US$3.9 billion, the analyst noted in a separate blog post. The buying spree continued into the next year when it bought cloud integration company Boomi and infrastructure software maker Scalent, O’Donnell wrote.
These software technologies, particularly Scalent, form the backbone of the company’s virtual integrated system (VIS) vision, which will deliver a “highly adaptive converged infrastructure offering” to companies looking to deploy private cloud systems, he added.
“You can fill a stage with musical virtuosos, but that doesn’t mean they will play good music. They have to be properly orchestrated. The same applies to bundles of infrastructure. This is the future of the data center, and Dell needs to be a prominent player,” he stated.
Stuart Williams, director of software industry research at TBR, added that the “cornerstone portfolio elements”–such as its applications development capability through Perot, systems management and cloud integration from Boomi–are already in hand for the division to grow.
He predicted that Dell would likely add software capabilities to complement its existing core hardware business, essentially in middleware and infrastructure software. Possible target areas include expanding its systems management business, cloud services delivery, building up its security business, and expanding virtual desktop capabilities, he added.
O’Donnell also said that the PC maker will definitely need to make some acquisitions to achieve its vision as there is “no way” it can reach its goals by developing its own technology. “There isn’t enough time,” he said.
Right man to fill the gaps
However, the Forrester analyst highlighted that Dell had “many gaps” in its current portfolio. Scalent, for example, was “good” but it was also complex and the company will need to simplify it. It will also have to ensure that its products integrate with other vendors’ software in the current heterogeneous environment, he said.
The company itself recognized that there was work to be done to better compete in the enterprise IT arena. A Dell spokesperson told ZDNet Asia that its “holistic combination” of strong internal development capabilities in hardware, software and services will extend its ability to improve its customers’ productivity.
“Therefore, our immediate priorities for the software division are to extend our existing enterprise solutions capability, accelerate profitable growth, improve brand perception and further differentiate our brand from competitors,” she said, adding that these would help Dell grow its market share within the US$3 trillion industry.
This is why the appointment of John Swainson as the president of Dell’s software group was critical to helping the company integrate these technologies and bringing viable products to market, O’Donnell stated.
He noted that Swainson had a “remarkable” track record in software, and his efforts in bringing CA Technologies back from the brink to become a good software company certainly boded well for Dell. Prior to this, Swainson had also led IBM’s software business until 2005.
Williams, too, urged the company to allow Swainson the leeway to craft a vision targeting areas where Dell would be most readily accepted such as in new emerging segments or ones currently not serviced well by existing vendors. He added that building that vision would need “acquisitions, internal development and partnerships”.
“Dell must play catch-up in this converged infrastructure world that revolves around software, but John Swainson can do it and the competition isn’t that far ahead. It’s still a battle that anyone can win,” summed up O’Donnell.