Dell Said To Weigh Buying Quest To Add Computer-Management Tools
Dell Inc. (DELL) is in discussions to acquire Quest Software Inc. (QSFT), a maker of tools that help companies manage their computer systems, according to people with knowledge of the matter.
Context & Ripple Effects
The rumored Quest Software talks cap an unusually acquisitive spring for Dell: in April alone the company closed the Wyse acquisition, buying into thin clients and virtualization, picked up Make Technologies as its third deal in four days, and staked out a confirmed position that enterprises will need to re-host legacy applications to make them cloud-friendly. Systems-management tools are the missing layer in that stack — software that manages whatever hardware the customer already runs.
The story traveled widely on the day, with pickups at Reuters, AllThingsD, GigaOM and ZDNet all sourcing the same Bloomberg report, though both Dell and Quest have left the discussions unconfirmed.
First-order effects
- If the talks produce a deal, Quest's computer-management tools slot directly under Dell's April purchases — the Wyse virtualization play plus the legacy-app modernization bet — turning Dell's pitch from selling servers and PCs into selling the software layer that runs them.
- Quest, currently an independent management-tools vendor, would lose its standalone identity, and its customers would face a single acquirer deciding product roadmaps and licensing.
Second-order effects
- Bundling management software with hardware shifts Dell's revenue mix toward support and services contracts, pressuring PC and server peers who still sell mostly boxes to respond with their own software acquisitions or partnerships.
- An independent Quest had sold tools into heterogeneous estates regardless of hardware brand; folding it into Dell gives those cross-platform customers a reason to consolidate purchases with one vendor, squeezing rival toolmakers' renewal bases.
Third-order effects
- A completed deal would extend the pattern visible since March 2012 — Michael Dell confirming enterprise tablets tied to Windows 8's ship date alongside a string of infrastructure-software buys — pointing toward a structural repositioning of a PC maker as an end-to-end enterprise supplier.
- If hardware majors keep absorbing mid-tier IT-management vendors, independent systems-management software consolidates into a few large suites, raising switching costs for enterprise buyers.
The trend: Hardware makers are acquiring management-software assets to convert commoditizing box businesses into recurring-revenue enterprise stacks, with Dell's spring 2012 deal run as a leading data point.