The news that software giant Microsoft (NASDAQ: MSFT ) may come to the aid of PC-maker Dell (NASDAQ: DELL ) in its efforts to go private has rocked the tech world, leaving many to wonder if the synergy makes sense to either company. While much of the focus has been on the consumer side of the partnership -- the help Dell could provide Microsoft in rolling out consumer devices -- the impact the partnership could have on both companies' enterprise business should not be overlooked. Ultimately, the deal makes a lot of sense to each of these players.
A better mousetrap
The news that Microsoft was bringing its own tablet to market in the form of the Surface and Surface Pro -- the latter due out of Feb. 9 -- was not welcome news for PC makers. While the device has met with a lukewarm reception in its efforts to go head-to-head with the industry-leading Apple iPad, the move represents an important step for Microsoft. IDC analyst Al Hilwa said, "I think Microsoft has identified this is an issue and is trying to have more say in its destiny. It's clear that Microsoft wants to be more aggressive in controlling and directing the hardware ecosystem for PCs."
The model of controlling both the software and hardware levels of the ecosystem has obviously been a winning strategy for Apple, one it employs in each device it sells. Even so, the deal has been widely compared to Google's acquisition of Motorola. The immediate concern after that acquisition was that the version of Android that was available on Motorola devices would be far superior to that available from other manufacturers. The dominance of the Samsung Galaxy line in the Android world should all but silence the concern. Still, as Microsoft potentially looks to adopt a more Apple-like model of vertical integration, the partnership should allow for some great devices that can leverage the strength of both companies and benefit consumers.
The enterprise argument
While the consumer piece of a Microsoft-Dell partnership is perhaps more evident at first look, the impact the alliance could have on the enterprise segment of each business is significant. Both Microsoft and Dell have significant reach into the business world, making the union a powerful entrant into one area in particular: the cloud. While VMware is largely considered the leader in cloud solutions, the ability of "MicroDell" to address hardware and software issues could make for formidable competition.
David Johnson, senior analyst at Forrester, said: "In the face of VMware and others with respect to software-defined datacenters, converged infrastructures that unify not just different hardware domains like compute, network and storage -- but also the software to provision, operate and monitor it -- will be critical. A Microsoft investment in Dell could really shake this up in short order." Johnson sees the ability of the new team to quickly deploy "private clouds" that offer a more straightforward solution as possibly the "most important" result of the investment.
In an enterprise environment, cloud solutions allow companies to offload huge amounts of data from internal servers to a more easily managed structure. The ability to control not only the hardware on which the private cloud information is stored, but the software needed to operate it, could rapidly insert the alliance into an important part of the conversation. Microsoft is particularly reliant on the enterprise part of its business, so this option could invigorate new growth.
The other significant inroad that MicroDell may have into the business world is in terms of an integrated sales force. As businesses are shifting to what is being called the "bring your own device" model , Dell's established sales experience may allow Microsoft an important entree that was previously missing. Under BYOD, an increasing number of individuals are being asked to buy their own device -- often subsidized by the employer -- and then integrate it into his or her corporate workflow.
Techaisle analyst Anurag Agrawal said: "Microsoft could in all possibility be able to partner with and leverage this direct sales force and Dell's channel partner community to sell its own virtualization solutions for the data center, [along with] its tablet devices that are easily integrated with the business mobility solutions, to enterprises." This could prove to be a critical distribution channel for Microsoft while providing Dell with arguably more solid tablet solutions than those currently available. Agrawal notes that while Dell's devices are solid, they are not on par with either the Surface or the iPad.
Whether your prefer "MicroDell" or "DellCrosoft," the alliance makes sense for both partners as they look to take on Apple, Google, and even VMware. The integrated solutions that you should see developed by the pair, if the deal moves ahead, has the potential to aid Microsoft in its continued effort to shakes things up and return to the limelight. Overall, I am a believer in the company and this is another catalyst to buy shares.
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