Dell, SilverBack Deal Sparks Commoditization Worries

The SilverBack acquisition builds on Dell's stable of remote diagnostic and break-fix offerings -- including the IP-based Dell Connect remote service solution for consumers and business, said a Dell spokesman. But by buying SilverBack, Dell will add remote IT service solutions, including monitoring, architecture, reporting and management technologies that make up SilverBack's proprietary platform. The company said it would continue to make R&D investments in the platform.

But if Dell has done one thing in the past that it is committed to doing in the future, it's driving price out of the IT equation - - leaving it open to criticism by some of commoditization. Add to that the fact that SilverBack itself had gained a reputation for bloody pricing moves in the past year with its own technology platform, and fears of a new round of commoditization in managed services could develop.

In one case last November, SilverBack slashed entry-level pricing on its entry-level remote IT monitoring and management product from $75,000 to $2,999.

"Dell has huge call centers with tons of technicians in cheap places like India, and one of things that makes managed services great for solution providers is that it's done from anywhere, so you don't have to go to a client to fix things," said Jeffrey Sherman, president of Warever Computer, a Los Angeles-based managed service provider. "There is nothing preventing a big company like Dell from doing it from India. They could very easily charge $10 bucks a machine, or $120 a year, very easily. How are the rest of us do that and be profitable?"

In an interview with CRN in May, Michael Dell addressed his company's developing remote services strategy and hinted it would be aggressive in this segment. But he also said he believed that could offer up new opportunities for Dell channel partners.

"So what we're trying to do is look at all these dollars that are spent on [IT management and services] and say, 'Can we really simplify these architectures and push some of that into the product and make it easier to deploy, easier to use, easier to deploy a new solution on top of?,'" Dell said in the interview. "And then [we can] begin to turn this equation around where more of [the customer's] budget is actually going to new functionality, new applications, new innovation, which is what people want anyway."

The move gained positive notice from one firm. The brokerage firm Raymond James issued a note Thursday to investors that was largely upbeat about the Dell-SilverBack deal, and said it accomplished key objectives in Dell's ongoing strategy to re-invent itself.

"Recall Michael Dell, CEO, announced in an internal memo in April that the direct model was not 'a religion,' and the company would pursue new routes to market, more partnerships and potentially engage in more acquisitions to expand the company's service capabilities," the firm said. "This acquisition, in our view, accomplishes these objectives, as it expands upon Dell's service offering to SMB customers while adding VAR and MSP customers who can potentially leverage Dell's core hardware offering.

"Dell will offer the Silverback platform to new and existing partners, and it will minimize channel conflict by retaining the vendor agnostic capabilities of the platform," the firm said.

Shelley Solheim contributed to this report.