The news that software giant Microsoft Corporation (NASDAQ:MSFT) may come to the aid of PC-maker Dell Inc (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 Inc (NASDAQ: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 Corporation (NASDAQ:MSFT) 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 Inc. (NASDAQ:AAPL) 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 Corporation (NASDAQ:MSFT) 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 Inc (NASDAQ:GOOG)'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 Corporation (NASDAQ:MSFT) 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 Corporation (NASDAQ:MSFT) and Dell have significant reach into the business world, making the union a powerful entrant into one area in particular: the cloud. While VMware, Inc. (NYSE:VMW) 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 Corporation (NASDAQ:MSFT) 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.