Dell's formation of a new software group, which was announced Thursday, could be the forerunner to a string of acquisitions by the vendor, with some observers predicting a focus on systems management and cloud services provisioning.
The new division will be led by John Swainson, a former CEO of CA Technologies who has been credited with improving that vendor's operations during his 2005-2009 tenure. CA Technologies also grew massively through a long run of acquisitions, many of which pre-dated Swainson's time there. Prior to CA, Swainson spent more than 20 years at IBM in various software-related roles.
Importantly for Dell, "he's got a rep for making mergers and acquisitions work, and he's bringing them enterprise software credibility," said analyst Ray Wang, CEO of Constellation Research.
Given Swainson's background, it seems likely that any deals will focus on middleware and infrastructure first, with a potential move toward business applications later, said Forrester Research analyst Paul Hamerman.
Dell is already in the applications business, but as a reseller of products like Salesforce.com, with a focus on small and medium-sized businesses.
The company also has a head start in infrastructure and middleware, given its line of KACE systems management applications and past acquisitions such as data-integration vendor Boomi.
While Dell has the opportunity to become a one-stop shop for cloud applications to SMBs, it has some holes yet to fill, such as in BI (business intelligence), Wang said. There are ample acquisition opportunities in that realm, with the possibilities including Birst, Pentaho, QlikView and others.
Dell may also need to acquire an e-commerce vendor, such as Avangate, as well as a software license management company like Flexera, Wang said.
But a major applications acquisition, such as of close partner Salesforce.com, seems "highly unlikely," Wang said.
Still, such a purchase would also give Dell an array of PaaS (platform-as-a-service) technologies, from the Force.com platform to Heroku.
Dell has already ventured into IaaS (infrastructure as a service), announcing an OpenStack-based system last year, but a full-blown PaaS would require additional development tools and services.
"I don't know if they're going to build a platform or just put everyone else's together," Wang said. "Long-term if they want to be serious about software they have to be in PaaS."
Other observers expect Dell to make strategic acquisitions in systems management applications.
A product such as ManageEngine, which is sold by Zoho Corp., could be a wise buy for Dell and help it build out a "service cloud" of offerings for its SMB base, said Dylan Persaud, managing director of Eval-Source, which advises companies on software purchases.
Similar to products like Hewlett-Packard's OpenView, ManageEngine is "dirt-cheap for organizations to get into" but offers a significant amount of functionality, he said.
Dell will also look to have relevant software offerings for mobility, despite having had little success in the tablet and smartphone markets. It's conceivable that Dell could partner with or buy out a portion of Research In Motion in order to gain mobile device management technologies, according to Persaud.
Don't expect Dell to attempt to topple the likes of HP and IBM in systems management at the enterprise level, however.
"[Dell's] focus is on the midmarket," said analyst Rob Enderle of Enderle Group.
A purchase of systems management vendor BMC, which has made some midmarket-centric acquisitions of late, would provide a serious jump start to those plans.
But such a megadeal is not likely, according to Enderle. "[Dell CEO Michael Dell] doesn't like to do big acquisitions." Instead, Dell will pick up "young companies" that fit its vision, he said.
Dell wants to create a systems management portfolio "where the whole is greater than the sum of the parts," Enderle said. "Having to go to a third party [for needed functionality] puts them down a tier from the HPs. In the midmarket, they want to lead. The stuff they pick up may be agnostic but the goal is to create solutions around Dell technology so they can compete with the other players."
Overall, it's obvious why Dell decided to form the software group, according to Frank Scavo, managing partner of the IT strategy firm Strativa.
"No one wants to be in the commodity hardware business these days, and Dell is no exception," he said via email. "IBM sold off its PC business to Lenovo, HP apparently toyed with the idea of selling off its PC business last year, and Oracle is refocusing its Sun business away from low-end servers."
Dell, Hewlett-Packard and Oracle are "all following similar strategies of combining hardware with software and services; they each have different starting points," Scavo added.
To this end, the Dell announcement should also be a warning sign for software vendors, according to Enderle.
"If you're a software company and have been relying on companies like Dell, this is a wake-up call that all of the hardware players are doing their own software," he said.
Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com