Dell's Acquisition Plans, Increased Services Strategy Worry Solution Providers

Dell Computer

But some were just as inclined to believe the Round Rock-based direct computer company would stay out of their line of fire, at least for the time being.

The thoughts came in light of Dell's takeover of New York-based integrator Plural, which the company plans to fold into its fledgling professional services organization.

"We have a good working relationship with [Dell," said Kevin McGlaughlin, CEO of Information Technology Services, a Fairfield, N.J.-based solution provider. "They've got to do what they've got to do, and we've got to do what we've got to do."

McGlaughlin said he didn't think Dell's services organization would target his company's areas of focus: financial, educational and government markets.

Dell said as recently as April that buying other companies was a strategy that was on the table. In its annual report with the Securities and Exchange Commission, Dell noted that it had more than $8 billion in cash and suggested it wasn't afraid to use it.

"The Company (Dell) currently anticipates that it will continue to utilize its strong liquidity and cash flows to repurchase its common stock, make a limited number of strategic equity investments, consider--and possibly make--acquisitions and invest in systems and processes," Dell said in the report.

One month later, Dell confirmed it would buy Plural, an integrator with a core competency in Microsoft-based platforms including .Net. Plural also has a client list including the Nasdaq Stock Market, Nabisco, Deutsche Bank, AT&T and Ernst and Young, among others.

"I think Dell is trying to get into the service end of it more," said one North American reseller, who resells Dell hardware but requested anonymity. "If Dell dropped me, I'd go right to IBM. We'll go with whomever."

The reseller said he would also consider white-box solutions as a counter to any aggressive Dell incursions into his service and integration client base.

Dell's acquisition of Plural is the latest in a round of service provider mergers and consolidations going back to last year.

After being wooed by Compaq Computer last year, integrator Proxicom accepted a buyout offer from Dimension Data. Compaq eventually bought a smaller integrator, Rainier Technology, before Hewlett-Packard bought Compaq.

When Dell hired Jeff Lynn away from Compaq last year to become its vice president of professional services, it also signaled that it would make a stronger attempt to grow that organization both organically and via acquisition.

But Information Technology Services' McGlaughlin suggested that the brand of hardware that his company uses in client accounts is not a primary issue.

"We're a solutions provider," McGlaughlin said. "What kind of hardware we use, it's up to the customer or it's up to us. We're driven by what the customer needs are."