Perot Sale Appears Imminent; Dell Partners Hail Potential Services Windfall

Dell appears to be on the verge of selling its Perot Systems IT outsourcing business and partners said they expect the sale to clear the way for new opportunities to drive services sales growth.

Stephen Monteros, vice president of sales at Ontario, Calif.-based Dell partner Sigmanet, said he sees the Perot sale driving more services business for his company and the channel.

Sigmanet, he said, has partnered with Dell on services for the past two or three years and has pulled in $4 million to $5 million in revenue annually as a result. "We expect that to double easily this year," Monteros said.

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"Once you figure out how to engage with them on the services side, it becomes a big part of the business," Monteros said. "You do good work, and they start to bring you into more deals."

Dan Serpico, president of San Francisco-based Dell partner FusionStorm, said Dell's divesting itself of Perot creates an enormous opportunity for partners with the engineering expertise to take on that work.

"The notion that Dell is leveraging the expertise and capabilities of Perot, and is now going to divest itself of that asset, seems to me that it would create an enormous opportunity for partners to step into the void," Serpico said.

"We're talking about complicated, sophisticated technology," Serpico said, "and the partners that have that capability will rise to the top. This takes away [Dell's] ability to support customers in the way they did before, and as a VAR, we want both. We want the product business and the services business."

Bezons, France-based Atos, an IT outsourcing firm, is now the front-runner in the bidding for Perot, and is offering $4.2 billion to $4.3 billion for the business, Re/code is reporting.

Mumbai, India-based conglomerate Tata Consultancy Services was said to have re-entered the battle to acquire Perot last week, but again pulled out of talks Monday, the report said.

Atos has about 15 U.S. offices, including its Purchase, N.Y., North American headquarters. A spokesperson said the company would not comment on market rumors.

Dell expects a huge opportunity for partners as a result of the Perot sale, as the company leans on partners to become go-to resources for customers that want to maintain tight control of core workloads, sources said.

The company intends to use partners to make an aggressive push in enterprise solutions as customers' infrastructure ecosystems and consumption models evolve and move away from the "manage my mess for less" model, said one source close to Dell.

Customers, the source said, "want partners to take care of them when something happens. They want to know who to call."

That'll require partners to take on a broader set of capabilities, but those that step up will have access to yet-to-be-determined incentives and enablement, sources said.

Dell Services, which includes Perot sales, ranked No. 9 on the CRN 2015 Solution Provider 500. In Dell's fiscal year 2012, ended Feb. 1, 2013, Dell Services accounted for $8.4 billion in annual sales.

Privately held Dell was hoping to get more than $5 billion for Perot, but may be ready to concede that Perot's value is in fact closer to the $3.9 billion Dell plunked down for the firm about six years ago, analysts said.

Part of the problem is that Perot's value has declined along with the IT outsourcing market, said Geoff Woollacott, principal analyst at Technology Business Research Inc. "Those five- and 10-year deals are drying up," Woollacott said.

Perot was started in 1988 by Texas billionaire and two-time presidential candidate H. Ross Perot. The company specializes in providing IT services to government agencies and health-care organizations.

Dell is seeking to unload Perot -- as well as its Quest Software and SonicWall security businesses -- for about $4 billion each as it prepares to acquire EMC in a $67 billion deal announced in October. Dell will take on about $50 billion in debt to close the EMC deal, and intended to raise about $10 billion through asset sales in order to offset the borrowing.

The EMC acquisition is expected to close between May and October, and Dell CEO Michael Dell has said he and company co-owner Silver Lake Partners intend to aggressively pay down debt in the first 18 months after the closing.

PUBLISHED JAN. 5, 2016