Dell/Quest Highlights
- Announces a $2.4 Billion acquisition
- Quest has 3,828 staff
- Revenues of $881 million in the year to March
- Will add its well known tools to Dell’s existing software business
- Is twice the size of Dell’s existing software business
- Is the first major move by Dell software group head, John Swainson
It’s been sometime since we profiled Quest and you’ll be interested in some background following Dell’s announced acquisition today. The purchase is in line with Dell’s decision to create a new software group earlier in the year under the leadership of John Swainson, who addressed Dell’s analyst meeting in Austin as it was formed.
Quest – A Medium-Sized Management Software Company
Quest has been in the market since 1987 and has grown through acquisition in recent years. Like Dell it is closely aligned with Microsoft operating systems and environments. Its products are in the areas of ‘database management, data protection, identity and access management, monitoring, user workspace management to Windows management’ according to today’s press release. It has 3,828 staff and revenues in the last year of $881 million – these include its latest quarterly results, unlike the annual numbers quoted in the press release. The acquisition price is $2.4 billion.
Our estimates for its revenues by area are shown in Figure 2, with its services revenues growing faster than licenses, classified by us as infrastructure software.
Dell Acquisition Strategy – Buy Intellectual Property
Dell has been active in acquiring companies to build its Storage division, expanding their revenues through its sales resources, while gaining adding their IP. In the past in some areas Dell made money from reselling – witness its relationship with EMC for storage systems or the fact that hitherto it’s bracketed its software and peripherals businesses together in its financial results.
Quest’s software revenues are twice the size of Dell’s currently and will certainly shape the nature of its business. In particular:
- Its database management tools are widely used should help Dell improve customers’ operational efficiency.
- Its Foglight application performance monitoring solution adds automation capabilities
- Its identity and access management offerings will be added to SonicWALL and Secureworks to widen its security coverage
- Its Windows server management offerings will help in Dell’s ‘application modernisation’ practice, started through the acquisition of Clerity Solutions and Make Technologies
In a sense Dell’s move is similar to HP’s acquisition of Autonomy, although Quest’s products are arguably more practical and easier to understand. No doubt some developers, database administrators and admin staff will regret Quest’s loss of independence – for us this is yet another sign of the growing vertical integration of major suppliers.
As with other vendors acquiring other suppliers adds non-organic revenues to help grow the business – we show Dell’s reported revenues and those of Compellent, Perot and Quest before acquisition in Figure 2.
Some Conclusions – More Acquisitions A Certainty
So here’s the proof of the non-organic elements John Swainson included in the growth plans he discussed in Austin. His many years of senior executive experience at IBM and CA should help him guide the new division. It seems highly likely that we’ll see more acquisitions along the way.
Hi!
I scanned your article, will come back later to read in depth, but the headline made me want to comment. I read it as “Why is Dell moving into software?”.
Answer -in future there will be no easy money in many areas of Dell’s server related hardware and much more advanced competition in Smart devices hardware.
Will it work?
I seriously doubt that it will work in the long term if they target “private” Cloud as this arena will be a shrinking pool full of large fish.
If they become server-side Cloud software and Android App publisher and service provider, it may work. Public Cloud is an exploding vast limitless pool with a decades worth of ample room. A new frontier.
You need to be in software mostly for Cloud, as far as I can see.
Hardware will be dealt with by automation in Cloud providers, and all Joe Average needs to do is find the best deal from an INDEPENDANT Cloud Broker like Passing Cloud is morphing to.
The independant part is important as most brokers are “tied” and offer the best in their portfolio, not the best deal!
NB This is the only way to buy mortgages, car insurance and Cloud services cheaply.
Rich
Clear observations. I was at the Red Hat developer conference last week, which made me think a lot about the role of Open Source and independent software suppliers in the rapidly integrating commercial world. To use an analolgy, there’s a need to separate the track from the trains – you don’t want to be using broad if the world’s adopted narrow guage; however there’s still a lot of work to be done and the infrastructure keeps changing. Big vertically integrating suppliers and developers need standards that will last. In Dell’s case Quest makes sense because of the work its done on bringing non- in to the Microsoft world. I wonder how Foglight users running on other vendors’ servers will think of getting their software from Dell from now on.
Best Wishes
Martin
I understand most of what you say. I googled foglight! This type of software will grow as Cloud grows, but buyer beware!
I have looked hard at Redhat and they are here too stay. (try the latest Centos desktop-install everything- it is easy to install and use!!!)
Dell could run their own Cloud services like Rackspace using OpenStack-I don’t understand why these companies are holding back.
Rackspace use Ubuntu and MS (I suspect they choose Ubuntu to trim Redhat down to size..) and OpenStack self-installs (nearly) on Ubuntu.
OpenStack allows you to run your own Cloud like Amazon. Runs on Linux best, is Open Source.
You can use most any type of VM hypervisor or VM type! OpenStack treats them all the same as far as I can determine. The data is backed up by 3 x “RAID” but a PC version, not disk-based RAID. (Is this the storage hypervisor concept?)
So if you and I and Dell can run our own Cloud, I expect the rush to start shortly…
I think the problem for Dell and the other giants moving into this software arena is;
1) They are late
2) They don’t necessarily have similar in-house skills to specialists S/W people and S/W SOHOs already in production
3) Software seems better when a small team or SOHO does it, not a huge corp.
4) They don’t have the management structure for S/W production, it is not like running assembly lines in remote foreign factories.
5) Buying S/W companies usually destroys the successful culture as key staff move on.
6) The costs and delays of integration into the mega corpus wastes time and money and probably destroys any lead they may have had.
7) The Marketing Depts are trying to add value by trying the old time-served methods of lock-in which will partly fail (there is one born every minute!) undermining take-up of their products.
The plus side is they have bought potential competitors.
I note comments in the media that the UK has “run-out” of major It companies to sell to USA I.T. giants.
I guess that is one way to secure UK marketplace for a few years at least?
Is it possible for ITCandor to look at the Take Over issue?
Your point on rail tracks is a good analogy, but OpenStack VMs can potentially be on any hardware or software. In my view energy cost is the key factor-I would forget licensed products.
The vast money piles of companies like Oracle and MS are now being turned into publicity and marketing, most subtle enough to slip under Joe Averages radar, just like this slipped under the radar of potential investors in Passing Cloud… :))
Rich K
Rich
A great perspective
Dell and HP 2 of the 183 companies endorsing OpenStack (http://openstack.org/community/companies/) and they both have some Software as a Service offerings of course (I couldn’t find IBM, so I’ll have to follow up with them later).
The big systems companies have to balance between existing and future business and customers: For instance
a) they have their own architectures and offerings predating OpenStack
b) often their biggest business is in supplying hardware and software components as part of Cloud building projects
c) they will cannibalise these revenues if they alienate existing customers through pushing their on Cloud services
On acquisitions, you might like to read my article (http://rainmakerfiles.com/2012/02/rd-acquisition/), which looks at the balance between R&D and acquisitions approaches in product innovation.
Best Wishes
Martin