Analysts: Dell-Perot buy limited in reach

Latest acquisition puts hardware maker in big leagues with the likes of HP, says Dell executive, but analysts are less optimistic about its impact.
Written by Victoria Ho, Contributor

Dell Computer's Perot acquisition this week puts the hardware maker in the big leagues, alongside the likes of Hewlett-Packard, says a Dell executive. However, analysts in Perot's influence will be limited in reach.

In a phone interview with ZDNet Asia, Tim Griffin, Dell's vice president of global SMB services, said Perot's existing backbone infrastructure will give Dell the extension it does not currently have, and provide the architecture it needs to compete with the big services players.

Griffin added that once the acquisition is finalized, Dell can accelerate its services effort without waiting and investing in the backbone infrastructure. "The remote capabilities we [were] trying to build out are already there for us to leverage," he said.

I do not think that HP or IBM are, at this stage, going to be quaking in their boots.
Phil Hassey, Springboard Research

While still smaller than HP and IBM with the addition of Perot, Dell expects to compete head-on with the two players for large enterprise customers, he said.

"Perot's strengths have been with large enterprises, and the public and healthcare [sectors]. We want to grow into that," Griffin noted, adding that the acquisition moves Dell into the top 10 services-based companies based on size.

Springboard Research's vice president of services, Phil Hassey, however, was less optimistic about how Dell stacks up against the competition.

In response to an e-mail from ZDNet Asia, he explained: "In my opinion, [the acquisition] does not put [Dell] in the same league as HP or IBM, or anyone else, for that matter.

"It is still too small from a services perspective and reliant upon Dell's hardware to really change the market with any degree of significance," Hassey said.

The analyst said the acquisition is a "stepping stone" along Dell's services path, but is unlikely to be disruptive in the market for now.

"I do not think that HP or IBM are, at this stage, going to be quaking in their boots," he said.

Patrick Chan, IDC Asia-Pacific's chief technology advisor of emerging technologies research, said in an e-mail that the acquisition is a "step in the right direction for Dell" in helping to broaden the company's services portfolio. He added that the merger will prove important going forward as cloud computing continues to gain traction.

The majority of Dell's services revenue currently comes from support services around its servers and storage products, Chan said, noting that Perot will allow Dell to expand its consulting and integration services beyond the x86 platform to include application software and managed services.

Dell has for the past year, been pushing its services business, where CEO Michael Dell highlighted opportunities for the company in systems management. This year also saw Dell offering cloud-based services a la carte.

Perot's Asia reach "limited"
According to the analysts, Perot's U.S.-based large enterprise focus means the Asia-Pacific region will unlikely see much spillover effect for now.

In the near term, Chan said the impact of the acquisition will be "limited to the Americas". He noted that it will take time for both companies to work through the acquisition, to optimize the cost and service delivery mechanisms in the Asia-Pacific region.

Hassey added that outside of the United States, Dell is likely to be highly reliant on its local partners to deliver services.

"Perot has some local Asia-Pacific relationships, but it is definitely a minor player in Asia. I do not think this will rock the region to a significant extent," he said.

Dell's Griffin acknowledged that Perot's U.S. base would keep the company's focus there for now, but said its "global infrastructure" will allow Dell to extend its services offerings in Asia.

He said the region's enterprises, predominantly small and midsize businesses (SMBs), still have the same needs as large organizations.

"For a customer's data protection needs, it doesn't matter if you're a [large company like] GE or a small operation in Thailand. SMBs just need their product package to be put together in a different way," he explained, noting that SMB offerings are typically offered at lower price points and take into account the customer's lack of dedicated IT support.

Griffin said Perot will allow Dell to repackage some of its offerings for the SMB market, while relying on Perot's infrastructure.

He added that more than a third of Perot's employee base is in Asia, with some 8,000 out of its 20,000 staff located in the region. Most of these are infrastructure personnel based in India, he said.

When contacted, HP declined to comment.

Editorial standards