Thursday, November 8

Dell’s Potential Acquisition Targets

By The VAR Guy

The following blog entry is a theory — rather than fact — from The VAR Guy. Based on some recent business moves at Dell, The VAR Guy thinks he knows where Michael next needs to spend Dell’s acquisition dollars. Ultimately, the king of direct sales will need to offer face-to-face support to small and mid-size businesses (SMBs). Here’s how The VAR Guy expects that strategy to play out — along with at least two potential acquisition targets for Dell.

First up, let’s review Dell’s recent moves. The company has successfully pushed beyond the Wintel market, finally offering AMD-based systems, while more strongly embracing Windows alternatives. The VAR Guy, for instance, spends his evenings blogging on a Dell PC running Ubuntu Linux. Relationships with Red Hat, Novell, MySQL and other open source specialists also continue to blossom.

Meanwhile, Michael has reached out to Global 2000 CIOs, assuring them that he wants their business. He’s also started to acquire companies, including Silverback Technologies (an MSP platform provider) and EqualLogic (a storage provider that relies heavily on VARs). Those are solid starts to a channel strategy — assuming Dell doesn’t alienate Silverback and EqualLogic partners.

If you take a closer look at Dell’s business, however, there’s still one glaring hole: Rapid, responsive on-site support for SMBs. Organically building out a national–or international–support network for SMBs will take too long for Dell to pull off. Instead, Dell will need to partner (perhaps with Best Buy’s Geek Squad) or make an acquisition in this area. SMBs can’t afford to ship their PCs away to a Dell service center every time they experience a laptop, desktop or server problem.

Potential Acquisition Targets

What’s the solution? Sure, Silverback’s software will allow VARs to remotely manage and troubleshoot SMB networks. But for the face-to-face support component, Dell should take a close look at either OnForce (here are some background blog entries) or Geeks on Call (see these related blog entries).

OnForce is an online marketplace where about 10,000 VARs connect with customers that need outsourced IT services. Many of those VARs are certified to support Dell equipment. Pursuing a relationship with OnForce would give Dell a national on-site support network for SMB customers. And with OnForce pushing into Canada (now) and Europe (2008), Dell’s SMB support network could quickly gain global reach.

The VAR Guy hears OnForce executives were at Dell the very day former CEO Kevin Rollins was shown the exit. Has Michael had acquisition conversations with OnForce? Not directly, The VAR Guy hears. But the two companies apparently have kicked around some partnership ideas.

Another sleeper acquisition opportunity is Geeks on Call, one of the fastest growing IT services franchises. Richard Cole, CEO of Geeks on Call, describes managed services as a two-part opportunity. Sure, you need a managed services platform to remotely monitor and administer customer networks. But you also need the face-to-face component to move customers from a break-fix model to a service contract model that provides ongoing on-site support for a recurring monthly fee. Here again, Dell could use Geeks on Call to gain access to hundreds of SMB VARs.

Will Michael open his wallet in 2007 to bulk up Dell’s face-to-face SMB support? The VAR Guy doubts it. Dell seems too preoccupied with building or buying new IT solutions (examples: storage, managed services). But at some point — perhaps mid 2008 — face-to-face on-site support will enter the equation for Dell’s success in the SMB space. It’s too big a hole for Michael to ignore.



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