Dell Looks at Services in Wake of HP-EDS Deal

“I think some of that revenue has already been diverted from Dell over time, but the acquisition [of EDS] just opens the door for even more of that,” said Hanson. “With EDS, before and after it merges with HP, if the customer has a particular preference that is what the customer will get, but there is also a lot of room to influence the customers as well.”

Dell is not the only hardware vendor that works with EDS that could be affected by the HP merger. Sun Microsystems and Xerox each have a relationship with EDS and offer hardware that HP has within its product portfolios.

Focusing on Down Market Green Fields

The one services area where Dell is making some headway against competitors such as EDS is with small and midsize businesses that are looking for ways to manage e-mail, software licensing and other assets.

“That’s an area where some of the bigger outsourcers like EDS or HP haven’t focused on, and there’s definitely an untapped market there for Dell to push more managed services to the SMB market,” said Hanson, adding that Dell’s model, so far, is to build up its practice through smaller acquisitions and develop its own platforms for services.

In the past year, Dell has made the acquisitions it has needed to develop this services model, including Everdream for its SAAS platform and Silverback for its infrastructure management technology.

For Dell, Schuckenbrock believes that the type of services model his company is building will not only manage e-mails, but also provide the failover and disaster recovery services needed to ensure that e-mails continue to be processed in the case of a major disruption.

By going toward the cloud or SAAS model, Schuckenbrock believes that Dell is cutting down on the process customers go through when choosing an outsourcing provider, selecting the equipment needed and then signing long-term contracts. Whether Dell builds it own data centers for hosting or whether it builds those facilities for customers is yet to be determined.

HP and IBM are also eager to build out these types of cloud computer centers as well.

Although Dell wants to move toward this services model, Schuckenbrock concedes that the company will need additional pieces to support this business, especially when it comes to offering consulting services. He declined to discuss if Dell was thinking about a specific acquisition.

“We will continue to build out the software portfolio that builds the cloud and really present our customers with a choice between the traditional model that dominates the market and the complexity associated with that model versus the simplicity that we are trying to offer through the cloud,” said Schuckenbrock. “This is going to play out over the next three to five years, not the next three to five months.”