John Swainson has one of the more challenging jobs in the tech industry right now. As president of Dell's software division, he's charged with sorting through all the software Dell has acquired and organising it into coherent offerings that can further its effort to become a more profitable, software- and services-driven company.
After Dell announced some product packages for mobile device management, we sat down with Swainson to discuss the challenges of selling hosted applications, the tough job of consolidating Quest's software catalogue from 200 products down to about 40 and the state of innovation in enterprise software.
First, the elephant in the room. What impact has Michael Dell's battle to take the company private had on your efforts to build its software business?
None. Every indication I've had from Michael and the potential investors is that they're as interested in building a bigger, more diverse software business in the future as they ever were in the past, so it's full speed ahead.
People credit Michael Dell with making some smart software acquisitions and having good technology, yet Dell's transformation isn't happening as quickly as people would like. Why is that?
I think it's going about as fast as any transformation of any business I've ever seen. That doesn't mean every product people have talked about has been successful. The whole notion of the converged infrastructure for Dell has taken a little longer than we would have thought, we did a reset on Dell's first virtualisation products and started some other initiatives that we talked about last autumn. But if you step back and look at where Dell is today from where it was three years ago, there's a lot of progress.
There's still a perception of Dell being a PC company. How much of an issue is that when you're trying to sell complex systems that include software and services?
It's a perception you have to address in the marketplace. We've shipped and integrated servers and software and done outsourcing for some of the most complex companies in the world. A couple of weeks ago we announced a supercomputer with the Texas Advanced Computing Center and that's as big and complicated a system as anyone is doing in the world. Our challenge from a branding perspective is getting people to think of us more how we aspire to be and less how we were. Where it hurts you is when customers don't know you offer something so they don't think to ask, that's why you have to gain critical mass and tell your story in a visible way.
What's Dell's applications strategy?
It's an area we haven't figured out yet, quite honestly. We made one change between then and now: we decided it was more of a services play than a software play, so we moved the hosted business I had over to the services division. The hosted applications market looks like it has a lot of potential but it's taking a long time to take off. What I decided to do after a year of experimentation was to focus on the three other businesses I had that were growing faster. So Dell is still thinking about hosted applications, but I'm not.
It just seems like such a good fit with your focus on small and mid-sized businesses.
The challenge is that it's a different customer, it's a different selling cycle, it's quite heavily fragmented, and the only real way to make money out of it I think is to own your own intellectual property, and the IP is very expensive. Those were the conundrums we faced as we tried to figure out how to make money from this.
People have talked about Quest as the glue that binds your other software acquisitions together. How do you view Quest? There seems to be technologies you can apply across all the other different areas.
That's what makes it so attractive for us. I sometimes described Dell's software business as not really a company, it was more like a VC company masquerading as a business. You had all these acquired businesses sitting there more or less unconsolidated. They had consolidated their IT systems and things like that, but the development teams and the product teams were still sort of sitting there in virginal form, and that provided us with an enormous base to build on. They had a data protection business and we put that together with ours and now we have a $200 million data protection business. They had a relatively small endpoint management business, we had quite a big one and we put those together and now we have a $150 million endpoint management business.
Having that many products is a blessing and a curse. Have you done much paring back? You have a few different data protection products, a few virtualisation platforms.
We had four data protection products, several virtualisation, a bunch of performance management. The first time we did the count we decided we had something like 200 products in Quest alone, and after we went through in gruesome detail and eliminated the obvious overlaps. We've got about 40 or 50 products.
That's a big paring back.
A lot of this was features that were masquerading as products. So things that should never have been products, like utilities, we'd merge back into the performance management product and have a suite instead of trying to sell it separately. Some of it was straight overlap. In storage management, we really did have four data protection products, so now we're going through the technical process of taking the best of each product and putting it together, on a common framework. That's the long hard way to do it but sometimes it's worth it because there's a $200 million revenue stream and it's worth protecting.
Which one wins, the one with the most customers?
The one that's the best architected and the most flexible and modern and that has the most features usually wins, because it's the one you can take back to that customer set and make it the upgrade. And you can usually modify it enough so that the upgrade is seamless.
So then you end-of-life those products?
Only maybe five of them have been literally end-of-lifed. You converge them, you sell them as packages. They're not discrete products any more, that's the big difference. The reason you don't want to end them is because in the software industry, all the profitability comes from the tail. You're better off putting it on maintenance. Even though it'll attrition away over time, it'll still be profitable. Exhibit A on this are people like Oracle.
The software industry went through tremendous consolidation recently, what's the state of the ISV market today? Is there a lot of startups and innovation?
There are a lot of startups. For a while there weren't. After 2001 there was a real wall, obviously, then there was a bit of a plateau, and then people got distracted and a lot of startup money went to green tech and other things. Now people are coming back, because of cloud and mobile and some of these other areas. There's a lot of VC money going in and a lot of corporate money being spent too. So there's a lot of innovation in the enterprise software space.