Dell’s Jiu-Jitsu. Strategic Genius?

Posted on September 28, 2009 by


While I was off enjoying some brain candy by way of obtaining PMI’s PMP (Project Management Professional) certification last Monday, the IT landscape was busy reconfiguring itself.

I enjoyed reading Jeffrey Kaplan’s analysis of the Perot acquisition by Dell, and Information Week’s perspective.  At this early juncture I probably have more questions than answers, but also viewed the acquisition from a slightly different perspective.

All the players involved are cognizant of the changing IT landscape towards cloud computing, while they may differ in opinion as to the degree of impact it will have, speed to maturity and other factors, I doubt Dell has overlooked anything here.

Neither have most of the captains of the IT industry.

EMC’s CEO, Joe Tucci, believes this paradigm shift to cloud computing will take out some of the giants of IT.  And given how nervous Larry Ellison, Oracle’s CEO, appears to be about cloud computing, that storm may be closer than I originally thought.

Legacy IT approaches and legacy business models are about to be disrupted in the same way the Internet storm disrupted many industries.  Too many seem to be complacent, and think this will be a category I storm.  That’s a mistake.

Now, if we only look at Dell’s acquisition of Perot on the surface, it seems they’re simply imitating IBM and HP, and to Kaplan’s point of the pain in combining Systems and Services, I’m well aware of the “tug-of-war” between hardware and services divisions having worked for both IBM Global Services and IBM Systems and Technology, and concur it can be painful at times.

So I asked myself, “How is Dell viewing the future of IT?”  Perhaps they’re not convinced of cloud computing’s impact (unlikely).  If that’s not the case, then, what type of clouds are they seeing?  Who will they choose to compete with?

They can view the coming IT world as public clouds, private clouds, or a hybrid of those two.  Like cloud computing, these terms are not well defined, but generally we can look at Google and see their public cloud approach, and the government’s private cloud approach.  I just can’t see Dell competing from the public cloud angle, so it left two other options.

What if Dell’s approach is to build private clouds or manage a private cloud for other businesses?  They have the servers, so they don’t need a Unisys which has their own cloud strategy and probably has too much portfolio duplication.

What they would need is a services organization to pursue various industry segments.  And clearly the industry focus given the Perot acquisition is the healthcare segment.

That’s a segment that’s challenging to a company like IBM as much of the EMR / EHR solutions market will be in the SMB segment, SMB being a market segment IBM has had trouble reaching effectively over the years.

Microsoft is quite busy with Google, and pursuing more of a public cloud strategy.

HP has both a healthcare and SMB presence in that segment, but its cloud offerings don’t seem to address the healthcare SMB segment or at least my impression and perception is that they’re not top of mind in that segment.

So now we have IBM, HP/EDS, Oracle/Sun, and Dell/Perot.  It looks like the next 3-5 years is going to be a lot of fun though probably not from the client / customer perspective as they look to differentiate between the offerings provided by these vendors.

With end to end solutions there is less pricing transparency and it becomes very difficult to identify price points for a particular technology or service.

It seems that Dell sees an opening, and is looking to run right through it in order to survive the coming sea change.  As a server company in an increasingly commoditized space, facing competitive threats, with a weak consumer and economic environment that doesn’t lend itself very well to its world famous direct to consumer model, and given the changing IT landscape by way of cloud computing, I can easily see Dell offering a direct private cloud computing offering to Healthcare service providers in the SMB segment and expand that private or hybrid cloud offering across industries.

In Jiu-Jitsu matches it’s not uncommon to see a combatant that appears to have lost the match, come from being down, to win it.

Is Dell’s move simply an IBM / HP competitive response, or a stroke of strategic genius to have identified an opening to take cover from the coming cloud computing storm? 

What do you think?

-Tune The Future-