HP(en!s) Envy: Dell Buys SecureWorks
Well, it didn’t take long to see the bankers and lawyers stayed busy over the holidays. Dell announced they are acquiring SecureWorks, the MSSP, for an undisclosed sum. Yeah, you are probably thinking the same thing I did initially. Dell? WTF?
Now I can certainly rationalize the need for Big IT to expand their services capabilities. IBM started the trend (and got into security directly) with the ISS deal, and HP bought EDS to keep pace. Dell bought Perot as well because that was the me-too thing to do. Dell also tried to buy their way into the storage market, but was foiled by HP’s 3Par deal. Kind of makes you wonder if Dell spent stupid money on this deal (thus the undisclosed sum) because HP was bidding also.
But I’ll leave the speculation on bidding wars to others, and focus on the merits of the deal. For SecureWorks, it’s pretty straightforward. Let me list the ways this deal makes sense for them:
- Tons of sales people
- Global distribution
- Balance sheet (for expansion and more deals)
And I figure it was a lot of cash, because there was nothing forcing SecureWorks to sell now. Besides a big pile of money. Though there was always trepidation inside SecureWorks about doing a deal because of the likelihood of screwing up the corporate culture built by Mike Cote and his team. I guess the bags of money Michael Dell hauled down to Atlanta must have been pretty compelling.
SecureWorks started by focusing on smaller companies. Dell sells computer equipment to a lot of small companies. So there is a clear upside here. Just to give you an idea of scale, I have a buddy who sells for Dell in GA. He has half the state, and his patch is about 5,000 companies. And about 2,500 have done business with Dell over the past two years. That’s half of a relatively small state. But we’ve seen countless deals flounder, and this one will too unless SecureWorks can 1) educate Dell’s field on why security services are a good thing (even if they don’t get bolted into racks), and 2) package and provision the services efficiently and at scale to hit a broader market target.
Dell is also global, and that is a key focus for SecureWorks in 2011. They bought a small player in the UK last year, and this gives them a business operations platform to scale globally a lot more quickly than they could do themselves. So there is a lot of upside, assuming reasonable deal integration. No, that’s not a good assumption. I know that.
If you are currently a SecureWorks customer, it’s unlikely you’ll notice any difference. The early indications are that Dell won’t be messing with the operations of how security services are delivered. In fact, Dell plans to bring every single SecureWorks employee on board when the deal closes. That is good news for customers (and rather unique, considering today’s cut costs above all else mentality). Optimistically, as the business scales, Dell has plenty of compute horsepower (and global operations centers) to facilitate building out new data centers.
If you are a Dell customer, call your Dell rep right now and ask them about the new SecureWorks services. Odds are you’ll hear crickets on the line. It’s not like you are buying a lot of security from Dell now anyway, so does having SecureWorks on board change that? Will you take Dell seriously as a security player now? Yeah, me neither. Though I should be open-minded here, so if this does change your perception, drop a comment below. It would be interesting to hear if that’s true. But I guess every company has to start somewhere as they enter new markets.
Little Competitive Impact
It’s hard to see how this deal either helps or hinders SecureWorks’ ability to compete. Some competitors were on Twitter today, hoping this puts a crimp in SWRX’s momentum and provides them with an opportunity to gain share. There will inevitably be some integration hiccups, which may slow the move to a new services platform (integrating the heritage SecureWorks and the acquired VeriSign technologies), but Dell would be stupid to mess with it much at all. They’ve got nothing to speak of in security now, and the obvious strategy is to use SecureWorks as the linchpin of a security practice.
SecureWorks will see more deals if they can leverage Dell’s global channels, and having Dell behind them can’t hurt in enterprise deals, but candidly it didn’t seem like SWRX was losing deals because they weren’t IBM or Verizon – so it’s not clear how important a change this is. Although Dell may get some benefit from being able to package security into some of their bigger IT operations product and services deals.
Yet I’m still perplexed that Dell was the buyer. They do very little with security. They do even less with security services. Although I guess you could see Dell’s partnership with SecureWorks, announced back in July, as a harbinger of things to come. The joint offering hasn’t even hit the market yet. You still have to wonder why they’d buy the cow, when they don’t even know what the milk tastes like. It’s not like the $120 million in revenue SecureWorks brings is going to move Dell’s needle. Even if they triple it over the next 2 years, that would still be about 1% of Dell’s business. Unless SWRX was in play and Dell needed to pull the trigger.
Buying SecureWorks certainly won’t hurt Dell, but it’s not clear how it helps much, either. I guess every big IT shop needs some real estate in security, as they try to become a solutions provider, but the fit seems off. You can clearly see how SWRX would fit better with an HP or a Cisco or even a MFE/Intel. But Dell? It seems like the obvious motivation is envy of its bigger competition. Which isn’t a good reason to do a deal, but you do need to tip your hat to SecureWorks. They built a shop of scale, and got the deal done.