Quest Acquisition Opens Door For Dell To Focus On Complete Solutions, Not Parts

Dell's planned acquisition of Quest Software not only gives the company a full portfolio of storage, security and management software platforms but also provides it the opportunity to prove that it is indeed on the way to becoming a provider of complete solutions and not just the parts, according to Dell executives.

Executives from Round Rock, Texas-based Dell and Aliso Viejo, Calif.-based Quest on Monday said the Quest software will be at the center of Dell's new push into the software business and will give Dell a chance to integrate it with its existing hardware and software businesses to provide integrated solutions for SMB and enterprise customers.

At the same time, solution providers of both companies will be watching to see whether the integration of Quest goes as well as recent Dell acquisitions of companies like Compellent and EqualLogic in terms of opportunities for channel partners to profit from those integrated solutions.

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Dell on Monday said it will acquire Quest for $2.4 billion, ending weeks of speculation that Dell was in negotiations to make the deal.

The acquisition gives Dell a very profitable new software business.

Quest, which has an annual revenue of $857 million, enjoys 86-percent gross margins and 11-percent operating margins, said David Johnson, senior vice president of corporate strategy for Dell.

Furthermore, Dell gets a business where 55 percent of revenue is recurring revenue thanks to Quest's direct sales force, a group of over 4,000 solution provider partners and a customer base of over 100,000 companies, Johnson said.

Quest's software will be at the center of Dell's strategy to provide customers complete, open solutions for physical, virtual and cloud environments, Johnson said. "Dell now has the tools to assist customers to migrate to open, scalable infrastructures whether [those infrastructures] are on-premise or off-premise," he said.

John Swainson, president of Dell's new Software Group and former CA CEO, said the Quest software matches the three key trends -- exponential data growth, the accelerating push to the cloud and the move by users to bring their own mobile devices to work -- which are driving the industry-wide push to develop dynamic business solutions.

For Dell, Quest provides a way to leverage a growing software business to enhance the company's stand-alone and embedded software strategy without cannibalizing existing hardware and software sales, Swainson said.

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The acquisition is proof that Dell is moving forward on its plans to be a provider of complete business solutions, said Paul Clifford, president of the Davenport Group, a St. Paul, Minn.-based solution provider and Dell partner via Dell's acquisition of storage vendor Compellent.

"It shows that Dell is not standing pat on what it already has but is interested in enhancing what it already has," Clifford said. "Quest is a pure software play, a very interesting play. It goes to the heart of what Dell's doing."

Clifford called the acquisition of Quest a very positive one for Dell. "The more tools Dell offers its partners and customers, the better it is for our customers," he said.

Davenport currently works with Quest by partnering with another channel partner on deals, and Clifford said he expects such partnering to continue based on Dell's acquisition history. "Dell will in all likelihood bring on Quest partners as Dell partners," he said.

All the acquisitions Dell has done in the last few years, from its 2008 acquisition of storage vendor EqualLogic through its May acquisition of thin-client vendor Wyse, have enhanced Dell, Clifford said.

"If Dell is spending $2.4 billion on Quest, they have to have a plan," he said. "Dell has done a great job with its acquisitions."

Before Dell acquired Compellent, Davenport's business came almost exclusively through its Compellent relationship, Clifford said.

Now Davenport is moving forward with solutions based on AppAssure data protection software, which Dell acquired early this year; its SecureWorks and SonicWall security acquisitions; and Wyse. Davenport is implementing them all as part of its business, Clifford said.

"Everything Dell is doing we are starting to implement," he said. "For instance, we were starting with VDI [virtual desktop infrastructure] before the Wyse acquisition. But now that Wyse is on-board at Dell, we use it for all our endpoints."

Robby Wright, chief technical consultant and CTO at Abtech, a Carlsbad, Calif.-based solution provider and partner to both Dell and Quest, said his company has been closely watching the possibility that Dell would acquire Quest.

Wright said he hopes Dell keeps the channel in mind when it closes its Quest acquisition.

"As long as the channel gets to stay in play and is taken care of, I will stay with it," he said. "We're watching it eagerly here."

NEXT: Dell Getting A Strong Software Portfolio Abtech's Wright said Quest has been doing a great job with the management consoles of its software, including a single console for licensing all its applications as well as new single management framework for unified storage management in physical, virtual and cloud environments.

"Dell's getting itself a real slick group of software products with Quest," Wright said.

Quest has done a good job of pushing more of its business through channel partners and in bringing out such new offerings as the upcoming version of its NetVault FastRecover, Wright said.

"The demo of FastRecover made me swallow my gum," he said. "Quest took a Microsoft Exchange server, did a hard delete of the database, proved it was gone, and then one minute later we were sending and receiving email."

Dell on Monday said it will make Quest a big part of its growing channel business.

Quest on Monday released a letter to channel partners from Michael Sotnick, vice president of worldwide channel and alliances for the company, in which Sotnick wrote that the acquisition by Dell is great news for solution providers.

Sotnick said that Dell will make Quest the foundation of its software business, and that Quest's capabilities in systems management and security will serve as critical components of Dell's in the software market.

"The benefits of a combined Dell and Quest to you and all partners will be significant. Upon transaction close, you will have access to Dell products, which we expect will open up new opportunities. You also will have the opportunity to join Dell’s PartnerDirect program if you are not already a member," he wrote.

The acquisition of Quest will over time impact Dell's partnership with such third-party software vendors as Symantec and CommVault, Swainson said.

"Clearly, we are going to become more biased toward our own technologies," he said. "That change is not just starting now. It started when we bought technologies like AppAssure."

Over time, Dell's software business will reflect the importance of its Quest acquisition, just as Dell's storage business was solidly influenced by its Compellent and EqualLogic acquisitions, Swainson said. "In many cases, we'll integrate into the Quest standards because of the size of that business," he said.

PUBLISHED JULY 2, 2012