Dell, with $10 billion for M&A, to offer open source

PC maker apparently wants to buy a bunch of proprietary software companies, even as its field starts to sell open-source applications. Is there a disconnect here?

According to BusinessWeek, Dell has amassed a $10 billion war chest with which it intends to buy BMC Software, Symantec, or another big technology company to expand into new markets--and particularly software markets--in a bid to boost profitability.

Yet even as Dell ponders where to spend its cash, it is reportedly rolling out a program to provide free, open-source applications to small and midsize businesses. The reason is simple, according to Amit Midha, president of Dell's Asia-Pacific and Japan region for the SMB business:

The more advanced the customers, the more likely they will adopt open source, because they are likely to ask why they should spend money on something they can get free.

Why indeed?

The signs are everywhere that chief information officers are increasingly looking to open source to cut costs and boost productivity. And they're not just looking: Forrester Research survey data suggests that 87 percent of enterprises that try open source actually realize cost savings from its adoption.

This sounds like a perfect message for Dell, the low-cost hardware company, to be selling.

So why is Dell talking about buying up bloated, proprietary software companies out of one side of its mouth, even as it acknowledges that open source does the job for less money out of the other side of its mouth?

Dell could very well be envisioning offering open source to seed new customer accounts and then upselling proprietary software, similar to IBM's model. But I suspect that the company's software strategy is nowhere near as nuanced as IBM's. I think that this is simply an example of a top-down strategy (buy big software companies!) conflicting with bottom-up demand (our customers want open source!).

Maybe Dell should straighten out its story by buying Red Hat?


Follow me on Twitter @mjasay.

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