Dell Closes Book on a Less-than-Successful Software Acquisition

Tony Redmond

by Tony Redmond on 6/29/2016

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Aelita, Dell, Dell buys Quest, Dell sells software unit, Dell Technologies, Elliott Management Corporation, EMC, Francisco Partners Management, MessageStats, Quest Technologies, Toad, Unified Communications Analytics, Veeam Software

Dell announced the sale of its software unit in June 2016, in its effort to dispose of non-core assets before its merger with EMC to create Dell Technologies. Due to its origins at Quest Technologies, some of the software now being sold is well known to Exchange and Office 365 customers. Just how well those products do with their new owners is open to debate.

The news that Dell was clearing decks by selling its software unit to Francisco Partners Management LLC and the Elliott Management Corporation hedge fund didn’t really come as a surprise.

Dell acquired both Quest Technologies and Sonic Wall in 2012, paying $2.4 billion for Quest and an undisclosed amount for Sonic Wall. The acquisitions were part of a drive to make Dell more of a full-court enterprise player rather than simply being a hardware play. Since then Dell has reversed course, gone private, and is focusing more on hardware than ever before through its $67 billion merger with EMC to create Dell Technologies. Selling the software unit for slightly more than $2 billion is a loss for Dell, but it does allow the company to focus on what it’s good at rather than being a “me too” in software.

When it bought Quest, Dell made a real case for moving into software, saying:

“Quest worldwide brings more than 100,000 customers, 5,000 channel partners, 1,500 software sales and marketing experts, and 1,300 software developers to the Dell Software Group, and is the foundation of a $1 billion-plus annual revenue software business.”

What the statement didn’t say is that Quest was a company built through copious acquisitions that had resulted in an eclectic and sprawling portfolio maintained by engineering groups distributed around the world. A discussion with Quest management at their “The Experts Conference” (TEC) in San Diego in May 2012 revealed that there was work needed to rationalize development processes and tool sets within the company, which is something that is often seen in companies that grow through acquisition. What was stranger was the tolerance that seemed to exist for individual fiefdoms within Quest.

What was interesting about Dell buying Quest was the fact that a lot of the success and revenue growth enjoyed by Quest came from products that really had nothing to do with the Windows-centric world of Dell (the splendidly named Toad suite for database management springs to mind). Natural alignment came about through Quest’s Microsoft platform management tools, which handle tasks such as migration to Office 365, backup and recovery, and monitoring. Many of the tools that helped to manage Active Directory originated through the Aelita acquisition in 2004 (Ratmir Timashev, who sold Aelita to Quest, is now the CEO of Veeam Software).

I don’t think that everything has been smooth sailing since Dell closed the acquisition of Quest in September 2012. People have moved on, offices have been closed down, and product portfolios have been trimmed, all of which is pretty much the playbook followed by large corporations after they acquire companies. The result is that not much progress has been made in Dell’s Windows software suite since the acquisition. I struggle to think of a single Dell software product that I consider to be a leading contender in either the Office 365 or on-premises Exchange market.

MessageStats, which always did a good job for Exchange, was a leading and well-respected product in its time. The new “go-forward” variant, Unified Communications Analytics is less tried and trusted in the reporting and monitoring space for Office 365, where new competitors and a common source of truth (the Office 365 reporting data mart) make it harder to succeed.

I thought that the Quest acquisition was bad for Dell in 2012 and I see no reason to change that opinion now. The reasons why the deal seemed a poor match that I advanced when Dell first nibbled at Quest still exist, even with the benefit of hindsight. All in all, it’s probably best for the folks who are still at Dell Software to escape from the constraints that a hardware-centric company naturally places on their software brethren. It will be interesting to see how this story pans out.

Follow Tony on Twitter @12Knocksinna.

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  • Interesting article Tony. Like you, I was a big fan of MessageStats and quite a few of Quest's other tools - not all of them mind.

    This point amused me somewhat, having seen this first hand - "What was stranger was the tolerance that seemed to exist for individual fiefdoms within Quest." :-)
  • Interesting articlae