451 Research on Dell’s managed mobility strategy

InsightaaS perspective: 451 Research is one of the world’s leading sources of insight into cutting edge technologies — especially in areas that are important to InsightaaS and our principals, including cloud, mobility, analytics, and sustainable IT.

InsightaaS.com works with 451 Research to bring occasional thought leadership pieces to our readers. This report, "Dell's managed mobility strategy," illustrates why 451 Research's perspective is important to the IT community. Moving beyond the current Dell-related speculation around prospects for a change in ownership status, Chris Hazelton, research director, mobile and wireless for 451 Research, digs into the company's product and revenue mix and finds that going private provides "an opportunity to rebuild Dell to support the datacenter market — as well as offer software and services to support mobile enterprise without the need to be dependent on the future of the PC space."

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As the battle over Dell's plan to go private continues, it is unclear how or when the company will be taken private. What is clear is that going private offers the best opportunity to put more emphasis on its software and services without Wall Street punishing the company every three months. With 49% of its fiscal Q1 2014 revenue of $14.07bn coming from hardware sales of desktops and laptops, down from 53.1% one year ago, the End-User Computing Group is still driving massive cash flows that Dell won't walk away from anytime soon. Hardware sales also provide significant relationships in which the company can offer additional products — including services. The sweet spot for Dell Services is the 100-5,000-employee-sized companies that it claims is more difficult for its competitors to serve. The PC vendor's goal in serving this market segment is to simplify the lives of IT staff, helping organizations evolve while increasing their dependence on Dell beyond that of just a hardware provider.

The 451 Take

 

Context

At the beginning of this year, Dell moved its reporting structure from four customer-centric operating segments that revolved around customer type and size, to four product- and services-based business units. These business units consist of the End-User Computing Group, Enterprise Solutions Group, Dell Services Group and Dell Software Group. In terms of revenue size, End-User Computing, which is made up of Dell's hardware division, is responsible for more than 63% of quarterly sales ending May 31. In terms of revenue growth, Enterprise Solutions and Dell Services each experienced moderate growth in that last quarter year over year.

Providing a model of what the integration of hardware and services can look like, Enterprise Solutions accounted for 22% of revenue, with a growth rate of 10% over the same quarter last year. Dell Services comprised 15% of revenue, but only saw a 2% increase over the same period. Dell Software saw its quarterly revenue grow to $295m from $38m the year before. The challenge for the company will be leveraging its hardware-driven business to sell software and services profitably. Going private will allow Dell to make the tough decisions to align hardware as more of a driver for services — something it claims to be doing already — which will be particularly important as margins on hardware sales face continued pressure.

Dell Software for mobile

Over the past 11 years, Dell has acquired 32 companies for more than $11.68bn, according to The 451 M&A KnowledgeBase. Within the Software division, two deals are driving Dell's mobility strategy. The first was the pickup in February 2010 of systems management provider KACE Networks, whose management offerings have evolved as part of Dell with the KACE K3000 Mobile Management Appliance. Billed as part of Dell's Mobile Access Solution Set, the K3000 can be bolted on to customers' current KACE appliance servers or used as a stand-alone offering. The K3000 provides all of the key mobile management capabilities. In combination with the K1000 Systems Management Appliance and the K2000 Systems Deployment Appliance, KACE can provide IT with a single view into desktop and mobile.

The acquisition of Wyse Technology in April 2012 is also driving Dell's enterprise mobility strategy with a focus on virtualization. The Wyse Cloud Client Manager, which is part of Dell's Cloud Experience Solution Set, is a SaaS-based management offering for virtual environments on desktops, as well as iOS and Android devices. Cloud Client Manager also provides content management, analytics and a user self-service portal.

It's interesting that these two very different companies are at the heart of Dell's mobile device management story. KACE is very much focused on premises-based offerings with its appliance servers, and Wyse is delivered via the cloud. While the capabilities of these two offerings overlap, their delivery models allow Dell to target two very different IT philosophies. KACE will be used to target enterprises that want to retain control of management tools, while Wyse will target IT shops that are more cloud-focused and have populations of users working in virtualized environments that need to be managed.

Down the road, in addition to offering app management with both the K3000 and Cloud Client Manager, Dell is looking to own more of the work environment on mobile devices. As a potential future path for mobile tools, Dell is exploring the use of containers. Given the different approaches to delivery, the focus on containerizing the mobile workspace may be a potential synergy point for KACE and Wyse.

Dell Services for mobile

The focus for any future transformation at Dell will be on services supporting the enterprise. As the enterprise becomes more dependent on mobility, there is an opportunity for the company to expand on its software offerings with mobile enterprise services. Within the Services Group, Dell focuses on mobile application enablement. The division includes a mobility consulting practice with subject matter experts that will evaluate organizations to understand mobility needs. From there, Dell's own team of developers builds mobile apps that are native or HTML5-based using agile software development methods. These developers also provide advanced user experience/user-user interface (UX/UI) work to ensure that applications meet user expectations. Dell offers mobile app testing to ensure reliability and security across devices. From there, these apps are integrated into mobile app management from Dell's Software Group to ensure that apps are distributed to appropriate users, and that data running through theses apps is secure. The company can manage the entire process to integrate these apps within existing IT infrastructure — as well as help determine proper monitoring and governance.

This is a growing area for Dell as the company puts more focus on services. The app development team within the Services unit can provide validation for work done by an organization, or it can offer pure custom development, from design to implementation. This team is OS-agnostic, having worked to port BlackBerry apps to iOS as companies shift their mobile strategies. Dell Services has a strong focus on mobilizing SAP applications to support field workers that need access to business applications — including access to apps powered by SAP's HANA.

Competition

Dell's broad product and services portfolio means that it has an equally broad number of competitors. Its primary competition comes from players like Fujitsu, HP and IBM that provide IT services to the enterprise — albeit with less emphasis on the midsized market. CSC is also a player here, and is expanding its own services for enterprise mobile infrastructure. On the mobile app development side, Dell runs into system integrators like Accenture and Capgemini that are invested in enterprise mobility. Mobile operators like AT&T and Verizon that partner with Dell on some level are also rivals for many enterprise services, including mobility. Direct-to-enterprise players like SAP, which is also a partner of Dell, have their own managed mobility offerings.

SWOT Analysis

Strengths

Weaknesses

Dell is one of the primary hardware providers for the enterprise, which means that it has existing relationships with a large population of IT buyers that could consider it a key partner for future managed services. The company's hardware business does not yet have an answer to the growing percentage of computing that is moving to mobile operating systems. Awareness of Dell's expertise in traditional computing does not automatically translate to awareness of its mobile expertise.

Opportunities

Threats

IT shops that are seeking continuity between the desktop and mobile worlds could look to Dell to provide controls for all hardware and software across the expanding range of devices coming into the enterprise. The PC is under threat from mobile devices, so the revenue from Dell's End-User Computing Group will not be an endless fountain of cash. Dell needs to transform its business quickly to support growth areas like mobile.

For more information on the 451 Mobile and Wireless program, please contact 451 directly, or contact InsightaaS at reportinfo@insightaas.com.

 

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