Dell to acquire Quest Software – really starting their software business now?

Dell today announced that they have a definitive agreement to acquire Quest Software. Quest Software then would form the core of the software division of Dell, which until now was pretty small. There were some business units like Dell Boomi (www.boomi.com), but no real software business.

The decision to acquire Quest Software is an interesting move which, from my perspective, makes a lot of sense. Quest’s strengths are in the areas of Identity and Access Management/Governance with their Quest One Identity portfolio and around Systems Management, particularly Windows Management, Performance Management, and Database Management. That fits the needs of the market and a company which until now has been mainly a hardware vendor. Aspects like Security (until now Dell SecureWorks and SonicWALL), Data Protection, Systems Management (Dell KACE), and Application “Modernization” (to use the Dell term) will be moved to a much higher level.

In addition, Quest Software as a company with close to 900 Mill. US$ of revenue in 2011 and nearly 4,000 employees is big enough to become a starting point for a quick growth in the software business. For Quest Software, this probably is more an opportunity than a risk – the same is true for Quest customers. The biggest risk is that companies (like Dell) without a history in the software business sometimes struggle with understanding the differences in business models, compared to their existing business. By not only acquiring small vendors and trying to build such an organization from scratch but hunting for a bigger vendor like Quest Software, Dell took another approach. They now have a big enough nucleus to further grow their software division.

On the subject of integrating acquisitions, especially software acquisitions, if Dell can keep Quest's product management folks they have more experience at integrating acquisitions than anyone, except possibly Oracle. If they can't keep them, and if hardware people are put in charge, then risks will increase massively. So Quest itself probably is best in integrating themselves into Dell – and potential future acquisitions into the Dell software division.

From our perspective, this acquisition is an important, strategic, and valid move of Dell and it is of little risk for existing Quest Software customers – on the contrary, we expect that Quest will be able to grow faster than before and that there is a good chance of Quest as part of Dell making its way towards a strategic software vendor for larger customers.


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