Why VMware, Pivotal Will Replace Quest as Dell Software

ANALYSIS: Dell and VMware aren’t admitting it, but VMware and Pivotal are now, in effect, the new Dell Software

When Dell bought Quest Software in July 2012 for $2.36 billion—its largest acquisition ever—and anointed it as the new crown jewel of the company, Michael Dell told eWEEK: “Dell is now an international-class software company.”

Fast forward four years: On June 20 of this year, after basically renting Quest for 16 fiscal quarters, Dell changed its mind about the value of its acquisition and announced it was selling it to a private equity firm for $2 billion and change.

Turns out that Quest, which makes popular — though older and very targeted — developer tools that make Oracle, SAP and other databases much easier to use — among many other products — wasn’t exactly the right kind of software company for Dell’s tastes after all.

Dell Had Tough Decisions to Make

Michael-DellIn October 2015, two years after Michael Dell took his company private for $25 billion, he engineered the largest IT acquisition in history, buying the EMC empire that includes VMware, RSA Software, Pivotal and several others, for a whopping $67 billion.

After the deal was announced, Dell discovered that he had some tough reality-related decisions to make. It had collected a lot of good, solid intellectual property, but much of it overlapped and some, it turns out, wasn’t a good match after all for the new Dell that was being created.

Several smaller divestitures were made, and then last June, Dell sold off Dell Software, which is already busy redesigning its logo and preparing to return its old Quest Software self.

Quest/Dell, however, is not a trival business entity. It has a worldwide presence, with more than 60 offices in 23 countries with a customer base of more than 100,000. At the time of its acquisition in 2012, Quest had 3,900 full-time employees worldwide and annual revenues of $857 million.

But it’s now out of the picture. In its place comes VMware, which will in effect — if not in name — become the new Dell Software.

It’s All About Software for Cloud Infrastructure

People at Dell and VMware will dispute this, but it’s very clear what’s going to happen. With Quest leaving the Dell corral, VMware and its young cousin, Pivotal, are the new players providing the software, cloud infrastructure and services that Quest could not provide and that Dell requires to become the cloud juggernaut its founder/CEO envisions.

dell-xps-18-portable-all_in_one-desktop-logo-macro-800x600The company messaging says that Dell is going to keep VMware as an independent but wholly owned subsidiary, continuing to let it do its own thing under mercurial CEO Pat Gelsinger. Businesswise, that is a fact; in practice, things are bound to be different.

Nobody questions VMware’s vast reach and customer list; it’s been estimated that 95 percent of all IT systems around the globe have something of VMware’s running in them. But Dell as a corporation cannot hope to become a cloud infrastructure titan and compete with the Amazons, IBMs, Microsofts, Googles, and Oracles of the world without VMware and Pivotal supplying the technical know-how.

Gelsinger and Dell, at least at this early stage, are saying all the right things — for their investors, reporters, analysts and customers.

Dell Committed to Bringing VMware Products to Market

“Dell is committed to the continued independence of VMware,” Gelsinger said at a press conference Aug. 29 at VMworld. “It’s more customers for us as an independent company, but more importantly, more ecosystem.

“Nowhere is the vibrance of that ecosystem more visible than here at VMworld. Two hundred fifty companies and the exhibition floor, 400 tracks, 23,000 people — we have all those things going on here. We’re innovating and everybody is adding their value to it.

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Originally published on eWeek