The world’s number two-server maker is gambling its core business on cloud sales and services in a deal with NetSuite.
Dell has become a global reseller of the latter’s hosted enterprise resource planning (ERP) software suite and will also implement NetSuite for customers.
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The deal will see sales people from the recently private Dell selling NetSuite’s online business apps to customers.
Also, Dell – which is trying to diversify out of the shrinking PC market – will integrate customers’ existing systems and apps with the non-prem NetSuite.
The agreement expands an existing relationship between the pair, which saw Dell provide cloud integration services for NetSuite customers via Boomi, bought by Dell in November 2010.
NetSuite chief executive Zach Nelson said in a statement that Dell married industry experience in consulting and systems integration with his company’s capabilities in customisation and business process workflows.
The companies’ deal “provides the perfect solutions for CIOs looking to migrate their ERP solutions to the cloud,” Nelson claimed.
Dell echoed this point, saying it would help “fast-track” customers’ cloud transformation.
The deal is good for NetSuite and a potential boon for Dell’s services business, but the agreement is a rough jab in the eye of Dell’s bigger business of servers.
ERP is a relatively niche activity. NetSuite is a Software-as-a-Service provider (SaaS) just like Salesforce, whose sales predominantly come from CRM. But while both firms are growing a steady 30-per-cent-ish per quarter, it is Salesforce that is bigger overall – in terms of revenue, numbers of customers and also publicity.
CRM is an easier sell while NetSuite's core biz of ERP takes longer because it’s critical to the operations of a business, so businesses move more slowly when migrating to new ERP systems.
NetSuite’s growth figures demonstrate potential growth opportunity for Dell, while Dell’s global channel means more outlets for NetSuite.
NetSuite offers partners up to 100 per cent margins and re-occurring revenues from subscriptions for those signing up under its SP 100 Program.
Some have written that NetSuite’s deal with Dell is akin to Dell partnering with Microsoft to resell Redmond's own Dynamics business suite.
But the key the difference is that Dynamics is on-premises software – selling more Dynamics will help sales of Dell’s servers in the long run.
That includes servers that run the server-side of the Dynamics kit and all related server-side Microsoft software, such as SQL Server and SharePoint.
By contrast, NetSuite software is available only as a service, and only from two data centres: one in California and one in Massachusetts in the US.
There’s no server opportunity for Dell on NetSuite, except if NetSuite buys Dell servers for its data centres - and even that’s a relatively small opportunity.
NetSuite claims to be the world’s largest cloud ERP vendor, with more than 16,000 organisations using its 16-year-old service.
Dell is the world’s number two server market by units – second to Hewlett-Packard, according to Gartner’s view of the fourth-quarter of 2013.
Of the tech giant trio of HP, IBM and Dell, only HP is doing well – increasing both its market share and revenue. IBM’s revenue went down while Dell grew slightly and HP grew the most. Both Dell and IBM lost ground on market share while HP, again, grew – albeit just slightly.
Overall, according to Gartner, the money is draining out of the market: shipments up but revenue down year on year.
Dell, it seems, is planning something else. It has calculated that reselling hosted ERP will mean more in services and subscriptions of NetSuite to its business than perhaps selling servers might do in the future. ®