Dell announced it’s intention today to acquire Sonicwall, a well-respected firewall vendor.  This is just a latest in a long line of fairly recent buys for Dell, including AppAssure, Force10, and Compellent.  There’s been a lot of speculation about the reasons behind the recent flurry of purchases coming out of Austin, TX.  I agree with the majority of what I’m hearing, but I thought I’d point out a few things that I think make a lot of sense and might give us a glimpse into where Dell might be headed next.

Dell is a wonderful supply chain company.  I’ve heard them compared to Walmart and the US military in the same breath when discussing efficiency of logistic management.  Dell has the capability of putting a box of something on your doorstep within days of ordering.  It just so happens that they make computer stuff.  For years, Dell seemed to be content to partner with companies to utilize their supply chain to deliver other people’s stuff.  After a while, Dell decided to start making that stuff for themselves and cut out the middle man.  This is why you see things like Dell printers and switches.  It didn’t take long for Dell to change it’s mind, though.  It made little sense to devote so much R&D to copying other products.  Why not just spend the money on buying those companies outright?  I mean, that’s how HP does it, right?  And so we start the acquisition phase for Dell.  Since acquiring Equallogic in 2008, they’ve bought 5 other companies that make everything from enterprise storage to desktop management. They only thing they’ve missed on was acquiring 3PAR, which happened because HP threw a pile of cash at 3PAR to not go to Dell.  I’m sure that was more about denying Dell an enterprise storage vendor than it was using 3PAR to its fullest capabilities.

Dell still has a lot of OEM relationships, though.  Their wireless solution is OEMed from Aruba.  They resell Juniper and Brocade equipment as their J-series and B-series respectively.  However, Dell is trying to move into the data center to fight with HP, Cisco, and IBM.  HP already owns a data center solution top to bottom.  Cisco is currently OEMing their solution with EMC (vBlock).  I think Dell realizes that it’s not only more profitable to own the entire solution in the DC, it’s also safer in the long term.  You either support all your own equipment, or you have to support everyone’s equipment.  And if you try to support someone else’s stuff, you have to be very careful you don’t upset the apple cart.  Case in point: last year many assumed Cisco was on the outs with EMC because they started supporting NetApp and Hyper-V.  If you can’t keep your OEM DC solution partners happy, you don’t have a solution.  From Dell’s perspective, it’s much easier to appease everyone if they’re getting their paychecks from the same HR department.  Dell’s acquisitions of Force10 and, now, Sonicwall seem to support the idea that they want the “one throat to choke” model of solution delivery.  Very strategic.

They only problem that I have with this kind of Innovation by Acquisition strategy is that it only works when upper management is competent and focused.  So long as Michael Dell is running the show in Austin, I’m confident that Dell will make solid choices and bring on companies that complement their strategies.  Where the “buy it” model breaks down is when you bring in someone that runs counter to your core beliefs.  Yes, I’m looking at HP now.  Ask them how they feel about Mark Hurd basically shutting down R&D and spending their war chest on Palm/WebOS.  Ask them if they’re still okay with Leo Apotheker reversing that decision only months later and putting PSG on a chopping block because he needed some cash to buy a software company (Autonomy) because software is all he knows.  If the ship has a good captain, you get where you’re going.  If the cook’s assistant is in charge, you’re just going to steam in circles until you run out of gas.  HP is having real issues right now trying to figure out who they want to be.  A year of second guessing and trajectory reversals (and re-reversals) have left many shell shocked and gun shy, afraid to make any more bold moves until the dust settles.  The same can be said of many other vendors.  In this industry, you’re only as successful as your last failed acquisition.

On the other hand, you also have to keep moving ahead and innovating.  Otherwise the mighty giants get left behind.  Ask IBM how it feels to now be considered an also-ran in the industry.  I can remember not too long ago when IBM was a three-letter combination that commanded power and respect.  After all, as the old saying goes “No one every got fired for buying IBM.”  Today, the same can’t be said.  IBM has divested all of its old power to Lenovo, spinning off the personal systems and small server business to concentrate more on the data center and services division.  It’s made them a much leaner, meaner competitor.  However, it’s also reaved away much of what made them so unstoppable in the past.  People now look to companies like Dell and HP to provide top-to-bottom support for every part of their infrastructure.  I can speak from experience here.  I work for a company founded by an ex-IBMer.  For years we wouldn’t sell anything that didn’t have a Big Blue logo on it.  Today, I can’t tell you the last time I sold something from IBM.  It feels like the industry that IBM built passed them by because they sold off much of who they were trying to be what they wanted.  Now that they are where they want to be, no one recognizes who they were.  They will need to start fighting again to regain their relevance.  Dell would do good to avoid acquiring too much too fast to avoid a similar fate.  Once you grow too large, you have to start shedding things to stay agile.  That’s when you start losing your identity.

Tom’s Take

So far, reaction to the Sonicwall purchase has been overwhelmingly positive.  It sets the stage for Dell to begin to compete with the Big Boys of Networking across their product lines.  It also more or less completes Dell’s product line by bringing everything they need in-house.  They only major piece they are still missing is wireless.  They OEM from Aruba today, but if they want to seriously compete they’ll need to acquire a wireless company sooner rather than later.  Aruba is the logical target, but are they too big to swallow so soon after Sonicwall?  And what of their new switching line?  No sense trampling on PowerConnect or Force10.  That leaves other smaller vendors like Aerohive or Meraki.  Either one might be a good fit for Dell.  But that’s a blog post for another day.  For right now, Dell needs to spend time making the transition with Sonicwall as smooth as possible.  That way, they can just be Dell.  Not the New HP.  And not the Old IBM.