Dell’s New Software Division Integrates – Kace’s New Role

Dell Kace Highlights

• Dell Software division is formed with 4 divisions – Security, Systems Management, Business Intelligence and Applications
• Kace becomes a product brand – its organisation becomes the basis of the new client systems management group
• For its software push Dell has added 8 companies, 6.7k employees and 157k customers for $5.7 billion, according to our estimates
• A new version of K1000 addresses new server operating systems and easier acquisition of asset information
• Full integration will take time

Kace was acquired by Dell in 2010 and specialises in an appliance approach to systems management. We’ve written before about its SMB approach and how it enhances Dell’s overall strategy and the efficacy of its mid-market design point.
Dell has been pursuing an aggressive acquisition strategy of the last few years, adding IP and customers to transform itself into a systems vendor from its previous status as hardware vendor and often reseller of other suppliers’ products: witness our analysis of how it is building its storage division. You’ll be interested to discover how its software division is forming and how Kace fits in.

A Software Division Built Through Acquisition

This year Dell has created a new software division under the leadership of John Swainson, who has many years of experience at CA and IBM. In July 2012 it added Quest. We estimate that in total it has added 6.7k employees, 157k customers for the $5.7 billion cost of buying 8 companies (although we note that Wyse is principally a thin client supplier, rather than systems management vendor): see Table 1.

Table 1 – Dell’s Software Acquisitions – 2010-2012

Notes: numbers in italics are estimates

Source: ITCandor

Kace Joins The Client Management Software Group

Kace under Rob Meinhardt ceases to be a brand in its own right, with its products forming part of the client systems management group, which in turn reports to Tom Kendra who heads up the new systems management. Systems Management is one of the 4 new divisions (Security, Business Intelligence and Applications – the others) making up the Software Group (see Figure 1).
Yesterday it also launched its new K1000 management was launched, which includes new features such as support for Windows 8 (x86, but not ARM), Mac OS Mountain Lion, Ubuntu and SuSe Linux distributions and Windows Server 2012, extending management to servers as well as PCs. It also includes enhanced asset reporting and the ability to address officially unsupported machines with what it calls ‘machine inventory APIs’.
The K1000 sits alongside the K2000 ‘deployment appliance’ and K3000 ‘mobile device management’ appliance in the Kace portfolio.

Some Conclusions – Carving Out The Organisation From Acquired IP

Nothing epitomises Dell’s mid-market deign point more than Kace’s system management appliances and the acquired company has grown impressively since acquisition, expanding its customer base to 6k and its employee number to 440. However it was clearly set to play a wider role once the building of the software division got under way. We believe there is plenty of scope for new appliance types – through adopting SonicWall’s software for instance – as well as unbundling some of Kace’s software into non-appliance offerings.
Dell’s overall challenge is to get all parts of the new organisation singing from the same hymn sheet and integration will be time-consuming (especially in deciding what to do with Quest’s 250 or so tools). We expect it to use Boomi to create a common portal and set of APIs. Dell has never had its own Unix systems and so is currently more aligned with Microsoft than IBM, HP and Oracle – so it will be interesting to watch the extent to which building its own IP will lead to stronger ties with Red Hat, SuSe and other Linux distributions. It will also be interesting to see how the software group enhances Dell’s Virtual Integrated System architecture.
Software is currently a tiny proportion of its revenues (see Figure 2) – it is essential to build the steadily in order to compete for higher value business and the shift in user attention from hardware features to applications, the Cloud and virtualisation.