Dell issued a dismal earnings report last week but hopes its Gale Technologies acquisition points to a more lucrative future.
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Dell announced Friday that it is buying Gale Technologies, a Santa Clara, Calif.-based maker of IT management, automation and orchestration tools. Financial terms were not disclosed.
The acquisition announcement came less than 24 hours after the Texas IT giant announced that revenue was down 11% in the most recent fiscal quarter. The Gale deal is a possible silver lining amidst the glum news, as the purchase should bring improvements to Active System, the company's converged infrastructure platform.
Dell's stock slid in after-hours trading Thursday after it revealed that third-quarter net income declined 47%. The company was quick to point out, however, that its server and networking business grew 11% -- and it's fair to see the qualification as more than PR spin.
The losses were driven largely by depressed PC demand, which stemmed not only from tablets and phones eating into the market but also slowdowns related to the Windows 8 launch. PCs, though, are a cornerstone of Dell's heritage -- but not of its future.
Dell still plans to contend in the personal computing space, but networking and storage will be among its most important foundations going forward. Even before trumpeting its Q3 gains, the company had enjoyed success in both the server and storage markets, and its October announcement of the Active System platform attested to company's commitment to converged infrastructure offerings.
Dell's press release promised that Gale's technology would expand Active System Manager, a template-based provisioning tool designed to simplify and automate many routine server configuration and administration duties. Gale's infrastructure automation software allows organizations to streamline the deployment of both on-premises and hybrid clouds, and to turn individual compute, network and storage components into an optimized virtual infrastructure.
In an interview, Jeff Timbs, an enterprise strategist with Dell, said that the template-based interface is a possible point of differentiation that allows a given topology to be re-used by multiple parties. He stated that Gale's method for creating these network-connection geographies allows required resources to be described in terms of the server, storage and networking layers -- a reach that he said not only exceeds many competing approaches but also gives administrators flexibility and simplicity in defining the domains they want to automate.
"We're not restricting anything," he remarked. He pointed out that a given policy can still be developed by a subject matter expert, but said that after the template is finalized, any administrator can automatically harness it as part of a single dashboard that aggregates all domains under unified control. "We're trying to enable that information from each domain that is already captured to be instantiated by this [software] layer," he stated.
Timbs also said that Gale will help Dell offer customers a modular approach to building or upgrading data centers. He explained that the technology supports more than 130 resource adaptors. This means that customers can add new pieces without needing to replace entire systems and without locking themselves into a set of proprietary products sold by a single provider. "It gives you an offering that takes advantage of the infrastructure you already have in addition to the latest and greatest," he said.
In this way, the Gale acquisition helps Dell facilitate a pair of sometimes separate, sometimes intertwined revenue streams: one based on hardware with management software pre-installed, and one based on management controls themselves, with a more agnostic approach to the components used. "We're building that flexibility to address the customer's specific needs," Timbs said. "There's sometimes interest in a pre-integrated solution, sometimes in the reference architecture."
The deal came a day after Cisco announced it would purchase Cloupia for $125 million. That pact is expected to expand the networking titan's Unified Computing System platform in ways that are broadly similar to what Dell is attempting to bring to Active System with Gale; both companies are now ostensibly better equipped to manage both physical and virtual resources, particularly clouds, in a heterogeneous environment.
The pair of purchases should mean more customer choice and more competition, with each company under pressure to more persuasively execute its take on the common capabilities. But according to Dell spokesman David Graves, one shouldn't read too much into the timing. "This has been in the works for a long time," he said in a phone interview. "It's a coincidence two companies happened to announce similar capabilities within 24 hours."
In an email, IDC Research VP Mary Johnston Turner wrote that "Dell definitely needed to be able to provide integrated workload and infrastructure automation and self-service provisioning to stay competitive with other converged system offerings." She noted that these tools were not covered by Dell's Quest acquisition, which has been a foundation for many of its software developments. She stated that both Dell and Cisco have "strengthened their offerings."
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