Dell's Perot Buyout Presents New Enterprise Challenge to HP

By Don Reisinger  |  Posted 2009-09-21

Dell's Perot Buyout Presents New Enterprise Challenge to HP

Dell's decision to acquire Perot Systems for $3.9 billion in an effort to expand its operation beyond the personal computing business is an extremely smart move.

Although Perot Systems operates in a different space than Dell, its services should go a long way in helping Dell find new avenues for revenue and corporate growth while improving and expanding its relationships with major enterprises.

Perot offers several technology-related services designed specifically for the enterprise, including consulting, data center management and software. These services should help Dell acquire more market share in the enterprise computing space where Hewlett-Packard has done a fine job of battling it out with Dell.

The new Dell

As long as both boards approve the deal and regulatory proceedings allow it, the new Dell will look quite different from how it does today. The PC maker won't just be a PC maker. Soon, it will be a multifaceted services company able to appeal to enterprise customers who want more than a simple PC contract.

In today's PC manufacturing business, margins are low. It's extremely difficult to make the kind of profits Dell enjoyed even 10 years ago. Worst of all, competition is fierce as notebooks are becoming increasingly commoditized.

In today's marketplace, it's practically impossible to tell the difference between an HP notebook and a Dell notebook. The logo might be different. One notebook's design might be sleeker than another. But when organizations are searching for capable machines with good specs, chances are that the two companies will be offering about the same product at about the same price. Both Dell and HP machines have Intel processors, Windows, the same display sizes and the same capabilities. There's really not much difference.

But Dell has changed that for the future. With the help of Perot, Dell can go to companies and explain that although it might be offering the same computer as the competition, it's not offering that as its only service. Sure, it will support PCs as before, but now it can provide data center and consulting solutions that make it a far more valuable partner. It's a powerful combination.

It's about the relationships

One of the most important elements of Dell's deal with Perot is that the company can now build stronger relationships with enterprise partners. 

Dells Latest Challenge to HP

Right now, Dell is only providing companies with a few solutions. For the most part, it's centered on its PC business. But with the help of offerings provided by Perot Systems, all that can change. Dell will be everywhere in the enterprise. It can sell companies on its PCs, it can offer them consulting services and it can even help organizations manage data centers. Those companies that Dell hasn't been able to partner with on the PC side can still become partners on the Perot side.

Assuming Dell's employees do a good job and customers are happy with the services it provides, it's entirely possible that when it's time to buy new PCs, Dell will top the list. Many (but certainly not all) companies like to work with one company that can provide viable services across the board, rather than partner with several companies that provide just one service each. With any luck, Dell will be able to build strong relationships through either branch of its operation to benefit the other.

Going forward

Looking ahead, that kind of ability is extremely dangerous for companies that Dell competes with. It's especially dangerous for HP, which has done a fine job over the past few years of rebuilding its relationship with the enterprise and capturing significant share in the space. Although HP provides several enterprise solutions, Dell is in the process of acquiring a company that enjoys billions of dollars of revenue and strong relationships with other companies.

With the acquisition of Perot Systems, Dell will have a strong position in the marketplace. Gone will be the days when the PC maker only offered computers to the enterprise. Soon, it will be delivering a full-fledged, end-to-end experience for companies that are looking for more than help getting the latest and greatest notebook into the hands of employees.

Although there is no guarantee that Dell will acquire approval for the deal, and there's still no way to tell if it will definitely help Dell's business, I think it will. Dell has made the right move by trying to expand its offerings to companies. It will help Dell sell more PCs. And, in the end, it could help Dell achieve more success in the enterprise space.

Perot is Dell's key to the future.

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