Has Dell Unleashed an 800-Pound Gorilla?

Dell's latest acquisition could be a significant piece of its business services promise, part of its strategy to woo the channel or another brick in its famous wall of channel conflict.

Dells acquisition of managed services technology provider SilverBack Technologies gives the company another major piece of infrastructure to build its business services offerings. It could also become a major part of Dells promised channel strategy—or put the company even more in conflict with the channel.

SilverBacks technology allows service providers to remotely monitor, manage and configure parts of a customers IT infrastructure across the Internet. The acquisition fits directly into Dells "Dell 2.0" revamp of its services and customer technical support launched last September. By expanding its services capabilities to allow for remote management of customer infrastructure such as servers, storage and networking hardware, Dell is poised to take a leap into a role as not just a hardware purveyor but the virtual IT department of small and midsize businesses.

"Services are a key part of Dells strategy for long-term growth, and this will be added to Dells capabilities for delivering those," said Dell spokesman David Graves. The acquisition, he said, "rounds out that overall services strategy."

John Spooner, analyst with Technology Business Research, sees the acquisition as a continuation of the trend Dell started with its acquisition of United Kingdom-based services provider ACS last November. ACSs technology packages software and software upgrades for delivery, allowing Dell to provide desktop management services to its customers.

/zimages/5/28571.gifClick here to read more about Dells acquisition of SilverBack.

"This acquisition is very much in the spirit of [the ACS acquisition]. Its really low-risk—if this doesnt pan out, its not a huge detriment to a $60 billion company," Spooner said. "Dell is investing in technology that it can apply broadly to its services group and leverage to serve as many customers as possible."

But the SilverBack acquisition does more than give Dell access to services technology. SilverBack is already in use by many managed service providers and other partners to provide a variety of IT infrastructure management services. The acquisition is seen by some in the MSP (managed services provider) market as a validation of their business and potentially a boon to service providers.

"I cant think of it being anything but good," said Bill Hood, president of Network Partners, a Dallas-based systems integrator and managed services provider. "Its exciting because SilverBack is one of those examples of a really good product that could be sold in a broader way. Whatever Silverback can do to drive up sales will help me immensely."

Hoods company has built a managed security service on top of SilverBacks technology, remotely managing firewalls for hundreds of customers. Because of the nature of SilverBacks technology, he believes Dell will have to rely on partners like him to provide the integration services required to get business customers plugged into managed services.

"MSP is different from hardware, and has to be sold in a different manner," Hood said. "You cant just throw people at it, send a thousand people out to sell it. Weve been as successful at selling MSP as anyone."

Just how SilverBacks partners will factor into Dells emerging channel strategy isnt yet clear. Hood is confident that Dell executives will see the value of SilverBacks channel partners and wont just move to make it an exclusively internal technology. "I think they will recognize a lot of the success of the technology is from how SilverBack managed their channel. Its the most effective channel relationship Ive ever seen, with only 40 or 50 partners, not a thousand. And the product has evolved quickly because of that."

But theres also uncertainty, and in some cases trepidation, about what Dell will do with a company that has already built its own fairly successful partner base.

"Dell could make this a very, very good thing," said Charles Weaver, president of MSPAlliance, a professional association of managed service providers. "Or they could completely decimate it."

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