Dell's evolution fueled by acquisitions

To understand where Dell Inc. is headed in the government, just look at the acquisitions the company has made during the past 18 months.

The obvious one, of course, is the Perot Systems acquisition in November 2009.

“That was a huge step to add capabilities to be a prime on certain contracts,” said Frank Muehleman, vice president of Dell’s public and large enterprise business.

Perot brought systems integration and outsourcing chops that Dell lacked.

But it is the eight acquisitions in the last 12 months that are perhaps more telling of the role Dell envisions for itself. The company has acquired companies that provide virtualization, storage, data center, and cloud computing.

“If you look at these it might seem like a hodgepodge, but they support three towers of capabilities that our customers are telling us are important to them,” Muehleman said.

Dell’s public sector business reached the No. 15 spot on the 2011 Top 100 with $2.2 billion in prime contracts.

The so-called hodgepodge of acquisitions includes the purchase of KACE, Exanet, Scalent, Ocarina Networks, Boomi, Compellent Technologies, Insight One and SecureWorks.

The deals are helping Dell build products and services around three capabilities:

• Intelligent data management.
• Next generation data centers,
• Next generation end-users,

The idea is to marry products and services to deliver a cost-effective solution that addresses a customer need, said Richard Pineda, vice president of Dell’s federal government services division.

“This business has always been about head count and staff augmentation, but with today’s funding that’s not a choice,” Pineda said.

And for Dell to play more of a roll as a solutions provider, it is becoming more vendor neutral, he said.

“The change at Dell is enormous,” Muehleman said. “We are integrating these new capabilities from the acquisitions and our customers are changing dramatically as well.”

The government market used to be about procurement. The IT shop would say, this is what I want and procurement would go get it. “Then it migrated to the CIO, who were setting standards and putting in controls,” he said.

Now it's the agency heads, the combat commanders and program managers. “They are saying, I want the ability to do X,” Muehleman said. The ability they want isn’t a faster desktop computer. “They want things like secure end-user computing or secure access to their data from any device and any time,” he said.

Dell’s business now falls in three broad categories: traditional hardware sales, outsourcing and project-oriented services, Pineda said.

“The challenge is that they all have different sales cycles and delivery times, but it is working today and we are very excited about it,” he said.

“It is a complete transformation of how we do sales,” Muehleman said. “It is about understanding the customer and talking about vertical solutions. The sales process becomes more consultative and more about expertise.”

Dell plans to continue its transformation toward a solution based company. Acquisitions will be a part of that strategy. Although, on their face, some deals may not seem directly applicable to the government market, any acquisition will have an effect across multiple markets, Muehleman said.

“The acquisitions are all linked to those three domains – managing storage, the data center and the end-user computing environment,” he said.

The company brought in Dave Johnson from IBM Corp. to be the company’s senior vice president of strategy. He is the lead on the company’s acquisition activities.

“If you aren’t changing and adjusting and transforming yourself, you become irrelevant,” Muehleman said. “You have to adjust to the needs of your customers. Successful companies do that.”