Dell Software 1.0

Dell has been in the press a lot lately with its privatization and push to transform its business toward software and services. It has been a rocky ride for them over the last few years. Long gone is the high flying company of the 1990s that was a juggernaut in technology. In its place is a large and sometimes disoriented company that is slowly finding its way back to technology relevance. I hope for the best in Dell’s journey to reinvent itself. It is a great American company, and for all his controversy, Michael Dell is a great American entrepreneur. But success or failure, there is one story that will likely be lost in the history of Dell: the story of Dell Software 1.0.

From 2007-2010, Dell embarked on a journey to inorganically grow a software / services business. The business started with a small team from Dell IT and Services, and grew to a several hundred person organization. Over those years, several software companies were acquired, and the organization stretched from the Silicon Valley to Bangalore. While the cost of this experiment never appeared in a public filing, it was at least in the hundreds of millions of dollars, including acquisition costs.

The Acquisition

My involvement in Dell Software 1.0 began in July of 2007 after the acquisition of SilverBack Technologies, a Boston startup focused on enabling remote IT management. Michael Dell had rejoined the company as CEO in January of that year, and our acquisition was part of a publicly discussed strategy to shift the company toward software and services. I will confess to having been a bit of a Dell fanboy in the 1990s, and continued to hold the company in high esteem at acquisition, even though its shine had been diminished substantially with the rise of Apple, Google and Amazon in the 2000s.

Software vs. Enterprise IT

On my first trip to Austin, I was impressed at the size and scale of Dell. I toured the last U.S. Dell factory, which unbeknownst to me would be closed nine months later. I also drove through the sprawling Round Rock campus, and came to understand the potential of a re-energized and redirected Dell. But I also recall my first “not in Kansas anymore” moment during a meeting with IT managers that were befuddled by my use of the word “product” to describe my company’s software (apparently the term “product” was somehow reserved in Dell IT for hardware, e.g. laptops, servers, desktops).

Little did I know, I had inadvertently tripped into a theme that would pervade my next three years: the difference between the high tech software culture in which I had spent my professional career, and the culture of enterprise IT.

The head of our new organization was a Dell IT executive who was on his second tour of duty with the company. For all his intellectual capacity, he seemed to never sense the importance of driving the organization like a software company instead of enterprise IT, and continued to heavily recruit from his former Dell IT colleagues during his tenure.

More Acquisitions

After the acquisition of SilverBack, the next eight months were a whirlwind of more acquisitions: ASAP in Chicago ($340M, August 2007), EverDream in the Silicon Valley (price not disclosed, November 2007), and MessageOne in Austin ($155M, February 2008). These acquisitions were augmented with the addition of internal organizations and a previous acquisition (ACS). As the organization grew larger, so too did the divergent directions of the acquired products. ASAP brought with it technology for managing software licenses; MessageOne email archiving; SilverBack remote IT management, and EverDream desktop management.

The approach to these early acquisition was intentionally disruptive, often breaking apart the functional groups within the acquired companies to fill out the scaffolding of the new organization. With SilverBack for example, each of the five executives from the company were reporting into different departments within 30 days. We soon found our objectives increasingly divergent, and lost the cohesion and sense of mission that had made us a team.

Software Culture

While software was required to run the factories and internal systems at Dell, it was the hardware and supply chain management that drove the financial success. Software at Dell in those days consisted of primarily internal IT applications and hardware diagnostics - not revenue driving products. With no established software division, software was implicitly relegated to a second class citizen, managed across multiple organizations by a culture very unlike a product organization at Google or Amazon.

I also remember at this time being amazed with the fluidity of roles in Dell. People moved into roles entirely different from the ones in which they had left. A marketing manager could move into software development, a IT business analyst could head software product management, and so on. There seemed a general sense that a manager was a manager in Dell, independent of the specific function, and there was a strong predisposition toward valuing managers over engineers.

Re-Organizations

At one point I met an executive from a 2006 acquisition for a beer after work and asked what I could expect. He said (paraphrased): “You’re going to be given a role that you won’t entirely know how to perform. You’re then going to work really hard for six months until you’re just beginning to become good at it. Just when you think you understand the role, there will be a reorganization, and you will be given a new role, where you’ll then start over again, until the next reorganization six months later.”

This turned out to be the story of my first two years. In addition to the chaos caused by twice a year reorganizations, the head of our organization also was prone to issuing top down mandates that sometimes bordered on the messianic. For example, he once issued a mandate for “follow the sun development”, where we would develop code in the U.S., before handing it off to a team in India in the evening, that would then hand it back to the U.S. team the following morning. This “labor arbitrage” push resulted in an enormous expenditure in time, expense, and lost innovation in several of product lines.

The People

The majority of people I worked with were smart and capable, with some of the talent from the acquired companies being particularly strong (as can be seen by the companies they started or joined after leaving Dell). But the organization never seemed to fully realize the potential of this talent, as more time was spent fighting internal than external battles. There was also an ever present divide between the acquired companies and the existing Dell employees that varied in intensity by acquired company. In its worst cases, there was open resentment at the enterprise IT culture that drove the organization; in its best cases, there was assimilation into the Dell way.

New Management

With the end of 2009 came a management change: out went our former Dell IT executive, and in came a former VP from EDS, who had come up through the ranks as a programmer. I had never heard the backstory behind the management change, but I am certain it was a recognition of the lack of success of the organization. The new executive though was a breath of fresh air, who instinctively understood the importance of driving the organization as a software company. Unfortunately for him, his arrival came just as we were seeing a steady exodus of acquired talent.

Leaving Dell

But by 2010, I knew it was time to go back to my startup roots. I sensed Dell had lost interest with its investment in Dell Software 1.0 as future acquisitions - KACE and Exanet in February 2010, Scalent and Ocarina Networks in July 2010, Boomi in November 2010 - were all made outside of both Dell Services, and were done with a much greater commitment to maintaining the operations/ cohesion of the acquired companies. So in December 2010, I left Dell for the cloud archiving startup Sonian.

While the organization I left continued forward, several of the products never achieved their expected revenue potential, were end of lifed, or were re-purposed over the following years. Left behind was a fragmented organization, a lost opportunity, a lot of lessons learned that Dell would apply with greater success to subsequent acquisitions.

As I look at Dell today, I can see the story of Dell Software 2.0 being written. Whether it will succeed or fail, I cannot say. But regardless of its outcome, I will always remember the words of one departing employee in the Silicon Valley, who asked: “But what if things had been different (in 2007)?”