Dell becomes key software player with Quest purchase

Dell wins a bidding war that will help it expand into virtualization, cloud, database, and identity management

We've watched the IT industry transform itself in the last few decades, moving from the idea of having everything fully integrated to a more best-of-breed "a la carte" style of computing solutions. But now the pendulum is swinging back toward a highly integrated, proprietary stack of hardware and software solutions. At least, that seems to be the direction hardware vendors are trying to take us.

As an example, Dell has made no secret of its desire to become much more than a hardware vendor. To further that goal, the company recently announced it has entered into a definitive agreement to acquire Quest Software after concluding a bidding war with Insight Venture Partners. Quest originally received a $23 per share bid or a $2 billion offer from Insight Venture back on March 9. Dell's winning price tag was announced at $28 per share, or $2.4 billion.

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Why did Dell pay a 44 percent premium for Quest, based on the company's closing price on March 8? And what exactly does Dell hope to get for its money? Dell may be the No. 3 computer manufacturer in the world, but the company knows that to keep up with the changing marketplace, it needs to expand beyond PC and server sales. One way to do that is to expand into a growing and profitable software business, which will also allow the company to move into new markets. With this acquisition and the other moves recently made, Dell is off to a good start.

It's important to note that the Quest acquisition isn't Dell's first venture into the software market. The company has completed a number of valuable software acquisitions, most notably AppAssure, Boomi, Kace, Scalant, SonicWall, and Wyse Technology. To tie all of this together, back in February Dell announced the hiring of John Swainson, a 26-year IBM veteran and former CEO of CA, to serve as president of its newly created software group.

The Quest acquisition brings to this new software group a portfolio of cost-effective system management products designed to simplify the management of IT.I ts key areas include database management utilities, Windows Server management, application performance monitoring, data protection, identity and access management, and user workspace management. Within these categories, Quest brings solutions for the physical, cloud, and virtual environments, which could immediately pole vault Dell to the front of the line as a major virtualization and cloud software leader, thanks to technologies Quest gained through acquisitions of Vizioncore, Surgient, and most recently VKernel.

Dave Bartoletti, a senior analyst at Forrester Research told InfoWorld that he thinks the Quest acquisition is a bold move, putting Dell into the big leagues for application performance management in particular, and virtual infrastructure management overall. "Quest has pulled together an impressive range of visibility, performance, and optimization tools, and does a great job of innovating across the portfolio," Bartoletti added.

On a conference call discussing the acquisition, Swainson told press and analysts, "From an industry perspective, there are three key trends that are driving an increased need for a dynamic, yet easier-to-manage, software solution. Firstly, the exponential growth of data; second, the rapid growth of cloud-based solutions; and thirdly, the increased presence of consumer devices being brought into the enterprise. All of these trends are creating significant business risks and businesses are looking for ways to increase their ability to deal with them."

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