John Swainson has been president of Dell Software for the past 16 months, since he was hired by founder Michael...
Dell in 2012 to start the software business.
As Dell attempts to privatise the computer company, Swainson, who was previously CEO of CA and headed up IBM's software division, is on a mission.
“My division loses money today due to the accounting for M&A [mergers and acquisitions]. But to be relevant in Dell we need to become a $5bn software business in terms of revenue, and that is the path I am focused on,” he says.
It is a path that Swainson admits will not be travelled quickly enough if left solely to organic growth. His goal is for Dell Software to make up 8% of the company's revenue and contribute roughly 25% of its operational income, given the high margins associated with a software business compared with hardware and services.
He is not prepared to estimate how long this journey will take, as it depends on Dell's M&A activity.
That journey is underway, thanks to Swainson acquiring a number of major companies for Dell, including Quest Software and SonicWall, along with a few smaller ones.
Dell's software business employs 6,500 people and contributes $1.5bn (2.6%) to Dell's $57bn annual revenue.
We can grow organically and inorganically in the software business, with double-digit growth
John Swainson, Dell Software
Seeking sizeable rewards in software
In a fast-changing market where demand for PC refreshes is plummeting, the business recognised that it needed to integrate products and solutions and move away from hardware in favour of software and services, he says.
Swainson believes the market will eventually figure out where PCs fit against tablet computers, so Dell's end user computing business will see modest growth.
He expects the enterprise business to grow by 10%. The services business is expected to grow in single digits, since it represents a people-heavy division and will be limited by how quickly Dell can hire.
For Swainson, software represents the golden ticket for Dell. "We think we can grow organically and inorganically in the software business, with double-digit growth,” he adds.
The challenge for Swainson and Michael Dell is that software acquisitions are not attractive to investors. Public companies have to take a big cut on deferred revenue, which makes it difficult to make a software acquisition profitable in the short term.
But Swainson's track record, particularly at IBM where he oversaw the Eclipse open source project, adds credibility and experience to Dell's turnaround plans.
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He says there are no immediate plans to boost the Dell software business in the short term: “Our M&A activities are on hold, because I have just spent $5bn of shareholders' money. We must get it all to work properly.”
Dell's software offerings
Dell's software portfolio currently comprises: datacentre and cloud management; data protection; information management, which represents the biggest overall market; mobile workforce management, which includes bring your own device (BYOD); and security, the the fastest growing part of the business.
“Network security is anchored through SonicWall," says Swainson. His ambition is to hook together the various products – firewalls, SSL, VPNs and access management – to support context-aware security and virtual domains.
Cloud computing is part of Dell's software story, but Swainson says it will not offer a public cloud.
"We did experiment with a Dell public cloud, but from that experiment [we discovered] the economics are not favourable," he says. Dell is in the process of migrating people off its cloud, he adds, although companies that do not wish to migrate will be able to stay until the end of their contract.
Dell's cloud strategy is as a supplier. “We are a supplier to cloud providers offering hardware and software to people who want to build private and public clouds and hosting services,” says Swainson.
Recent revelations around the Prism surveillance programme raise questions about the integrity of the public cloud when privacy is a top priority. “Who's going to do cloud? Highly sensitive businesses will be less likely to use cloud services,” he says.