Dell looks to increase focus on midmarket

Dell is increasing focus on the midmarket as the company looks to offer new cloud computing, security and data management services to customers.

Midmarket companies -- enterprises with up to 5,000 employees -- are taking up a larger share of the worldwide IT market, especially in emerging markets, said Michael Dell, at a speech during an analyst conference in Austin, Texas.

Once known as a direct-sales consumer PC provider, Dell has been building its software and hardware portfolio to become a competitive enterprise services provider. In addition to offering cloud and security services, the company is looking to increase focus on managing data movement between the cloud and storage systems, Dell said.

Dell has acquired 11 companies in the last two years to help address midmarket needs, and is looking to further acquire companies to build its intellectual property and product portfolio. Some key acquisitions over the last few years include services company Perot Systems, storage companies EqualLogic and Compellent, cloud company Boomi and security company SecureWorks. The company is also building data centers and cloud-computing research centers to create reference architectures for cloud applications and help midmarket customers more easily take advantage of the cloud model.

The needs of midmarket companies are often less complicated, and technology implementations are usually prepackaged, simple to implement and cost-effective, Dell said. The company is trying to provide products based on an open architecture that helps midmarket companies quickly scale operations.

Smaller businesses with up to 500 employees in many cases are early adopters of technology that ultimately is migrated to IT implementations in large-scale enterprises, Dell said.

Many companies that Dell acquired in recent years built products for smaller IT deployments that are now being implemented in larger enterprises. Dell executives highlighted system management tool vendor Kace as being one of those successes.

Dell acquired Kace around 18 months ago, and at the time customers with over 10,000 employees didn't want to take a risk on Kace system management products, said Rob Meinhardt, general manager of Dell Kace during a round table at the analyst conference.

"They didn't have the confidence of buying from a startup," Meinhardt said.

But Dell is now helping push Kace technology into larger enterprises such as Suzuki and NASA.

By focusing on the midmarket, Dell also hopes to carve out a niche from larger service providers such as IBM and Hewlett-Packard.

Dell would rather take multiple $50 million services contracts as opposed to a $5 billion contracts, said Steve Schuckenbrock, president of Dell's services group at the conference. The smaller contracts would help drive innovation without being accountable to an "old dinosaur model," Schuckenbrock said.

Analysts have said that Dell's services offerings are more hardware agnostic compared to Hewlett-Packard and IBM. However, HP and IBM are much larger in services and offer more complete consulting services, service delivery and outsourcing capabilities. HP's services revenue in the most recent quarter was $8.98 billion, while Dell's services revenue in the entire fiscal 2011, which ended on Jan. 28, was $7.7 billion.

Dell's product portfolio includes EqualLogic and Compellent for storage and Boomi to deliver cloud services. The company also hopes to provide devices such as smartphones, tablets and PCs to enterprises. The company's XPS Streak 10 Pro -- targeted at businesses -- initially will be launched in China, which is one of the fastest growing markets for Dell.

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