Based on its recent acquisitions in the software and security space it’s pretty clear that Dell is gaining a much greater appreciation for the value of recurring revenue.
While Dell’s acquisition of SonicWall adds firewall and security gateway platforms to the portfolio of products that Dell has assembled to gain more sway in the data center, the thing that is most compelling about SonicWall is the recurring revenue that the company drives delivering services via its security platforms.
What most people outside of the channel tend to overlook is Dell Secureworks, the unit of Dell that acquired last year to deliver managed security services. Because SecureWorks is focused on an area that Dell didn’t have much sway in, SecureWorks tends to get lost in the wake of the major acquisition spree that Dell went on to bring companies such as Compellent and Force 10 Networks into the fold.
In addition to those companies, Dell acquired KACE, a provider of an automated systems management platform, back in 2010. When you put all these pieces together it’s clear that Dell long term is trying to integrate the management of systems, data storage and security around on a set of managed services that will all eventually be unified in the cloud.
It will no doubt take Dell some time to pull that off. But it raises some interesting questions for solution providers aligned with Dell. They can continue to build out their own managed services portfolios or decide to resell the ones that Dell brings to market. There is also no doubt that Dell will be pretty aggressive when it comes to pricing these services, so Dell’s overall ambitions in this space have some fairly significant implications for the profitability of managed services across the board. That writing has been on the channel wall now because like any product, managed services are subject to the laws of diminishing returns. What’s clear is that Dell will do everything in its power to accelerate that process as part of its ongoing war with IBM, Hewlett-Packard, Cisco and Oracle.
The issue that a lot of solution providers will have to address is whether they can continue to add value above the services that vendors such as Dell are bring to market. Many solution providers escaped from being overly dependent on reselling low-margin products by embracing managed services. Now that it looks like pricing is eroding in the managed services space, providers of these services need to start thinking now about what their company is going to be doing two or three years from now.
Clearly, Michael Dell has already decided to take the long view when it comes to managed services. That buys some time for solution providers to consider their options. But it may not be as much as time as it seems when you when consider how many big vendors there are already making a push into managed services.