Has Dell Unleashed an 800-Pound Gorilla?

By Sean Gallagher  |  Posted 07-19-2007

Dell's acquisition of managed services technology provider SilverBack Technologies gives the company another major piece of infrastructure to build its business services offerings. It could also become a major part of Dell's promised channel strategy—or put the company even more in conflict with the channel.

SilverBack's technology allows service providers to remotely monitor, manage and configure parts of a customer's IT infrastructure across the Internet. The acquisition fits directly into Dell's "Dell 2.0" revamp of its services and customer technical support launched last September. By expanding its services capabilities to allow for remote management of customer infrastructure such as servers, storage and networking hardware, Dell is poised to take a leap into a role as not just a hardware purveyor but the virtual IT department of small and midsize businesses.

"Services are a key part of Dell's strategy for long-term growth, and this will be added to Dell's capabilities for delivering those," said Dell spokesman David Graves. The acquisition, he said, "rounds out that overall services strategy."

John Spooner, analyst with Technology Business Research, sees the acquisition as a continuation of the trend Dell started with its acquisition of United Kingdom-based services provider ACS last November. ACS's technology packages software and software upgrades for delivery, allowing Dell to provide desktop management services to its customers.

Click here to read more about Dell's acquisition of SilverBack.

"This acquisition is very much in the spirit of [the ACS acquisition]. It's really low-risk—if this doesn't pan out, it's not a huge detriment to a $60 billion company," Spooner said. "Dell is investing in technology that it can apply broadly to its services group and leverage to serve as many customers as possible."

But the SilverBack acquisition does more than give Dell access to services technology. SilverBack is already in use by many managed service providers and other partners to provide a variety of IT infrastructure management services. The acquisition is seen by some in the MSP (managed services provider) market as a validation of their business and potentially a boon to service providers.

"I can't think of it being anything but good," said Bill Hood, president of Network Partners, a Dallas-based systems integrator and managed services provider. "It's exciting because SilverBack is one of those examples of a really good product that could be sold in a broader way. Whatever Silverback can do to drive up sales will help me immensely."

Hood's company has built a managed security service on top of SilverBack's technology, remotely managing firewalls for hundreds of customers. Because of the nature of SilverBack's technology, he believes Dell will have to rely on partners like him to provide the integration services required to get business customers plugged into managed services.

"MSP is different from hardware, and has to be sold in a different manner," Hood said. "You can't just throw people at it, send a thousand people out to sell it. We've been as successful at selling MSP as anyone."

Just how SilverBack's partners will factor into Dell's emerging channel strategy isn't yet clear. Hood is confident that Dell executives will see the value of SilverBack's channel partners and won't just move to make it an exclusively internal technology. "I think they will recognize a lot of the success of the technology is from how SilverBack managed their channel. It's the most effective channel relationship I've ever seen, with only 40 or 50 partners, not a thousand. And the product has evolved quickly because of that."

But there's also uncertainty, and in some cases trepidation, about what Dell will do with a company that has already built its own fairly successful partner base.

"Dell could make this a very, very good thing," said Charles Weaver, president of MSPAlliance, a professional association of managed service providers. "Or they could completely decimate it."

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