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Q&A: Dell Software president on the journey from hardware

Dell has made progress in establishing its own software brand, but Dell Software Chief John Swainson says it still has a ways to go.

As president of the Dell Software Group, John Swainson plays a critical role in evolving Dell from primarily a low-cost hardware supplier to a company equally focused on software and services. Swainson previously served as vice president of worldwide sales for IBM Software Group, when IBM successfully established its own corporate software division.

But Swainson's software agenda at Dell comes at a different time with very different challenges. Swainson sat down with at this month's Dell World conference to discuss his progress phasing out the Quest Software brand and more.

When you came to Dell three years ago, what was your vision for creating a software business here?

John Swainson: Michael [Dell] called and said he needed someone who knows how to do software inside a hardware business. Most people I have talked to in the software space don't know hardware. But coming from IBM, I did. He needed someone who understands the difference and can make them work together.

What was your strategy for implementing that vision?

John Swainson

Swainson: [Michael Dell] saw the world moving more towards software anyway, but we needed to remix the business with our own intellectual property; we needed more control over it. The first thing I asked [was], "What kind of software business do we want to have?" [This is] because enterprise software is a $370 billion business. So I said, "Let's put the apps aside for now." We needed domain expertise, but the problem was if you acquire one company that has it, then you make enemies out of all the rest. The other problem was who is going to take Dell seriously in this space? It had to be in a market area where everyone would at least open the door to us.

So how did you choose the markets to target?

Swainson: Yet another problem was the markets had to be big enough to suit our scale. We are a $60 billion company, so we had to choose markets that made it worth our while. We ended up picking security, systems management and information management. We looked for those assets and decided on AppAssure and SonicWall in the summer of 2012. Quest [Software] then came on the market because it was going private, and I liked the fit of those assets as well as their customer set. They were all Microsoft-centered.

What kind of progress have you made in changing some of the culture here?

Swainson: It's a different business model. With the traditional hardware model, you invest upfront, and if you do a good job designing it, you can sell millions of units. And when it comes out, it is finished. The software business is the opposite: You invest money upfront, but it is never finished. By version 3.0, the product matures, and then you have something that can be sustained for a long time. Getting people to understand software's upfront, high-expense model versus hardware's lower operating expense takes time.

What is going on with Quest now? It seemed to be much more visible before the acquisition.

Swainson: Quest Software's brand is on its way out. Quest was a rollup of different brands, and we didn't think some of them had brand equity. We are gradually diminishing the Quest brand and turning some of those products into its own brand, such as SonicWall. In the midst of doing all this, Dell decided to go private, so brand building in the third and fourth quarter last year didn't make sense.

How important are acquisitions as part of your overall software strategy?

Swainson: Well the question is what do you acquire? There are only 30 companies generating more than $1 billion today. It's hard to buy scale, and if you do buy someone smaller, you have to pay a premium.

So what keeps you up at night?

Swainson: Part of the game here is to stay relevant, to stay ahead of the curve. We have to be right about the timing of how technology will evolve, because we can overshoot it. People develop technology [looking for a market]. We have the right team in place, but being an early leader in any space is important.

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What do you think of Dell Software's plans? Is the company's strategy sound?
I think so. The great thing about this is Dell realized that it needed to make a change and that's where its software strategy comes in. But time will tell if this will work out in the future.