Why Dell Won't Buy Red Hat

Matt Asay, author of The Open Road — a popular blog on CNet — suggests two reasons why Dell should acquire Red Hat. Alas, The VAR Guy strongly disagrees with Mr. Asay. Here are seven reasons why Dell will never acquire Red Hat.

First, some full disclosure: The VAR Guy spends far too much time admiring Asay’s blog and he generally agrees with Asay’s views on software and open source. Also, nobody is suggesting Dell has actually picked up the phone and called Red Hat about getting hitched.

Those details aside, here are seven reasons Dell will never buy Red Hat:

1. Mass Server Hardware Exodus: Red Hat is strong because it has OEM relationships with all of the major server companies. If Dell acquired Red Hat, every other major server vendor (HP, IBM, Sun) would reconsider their Linux strategies. Suddenly, Novell SUSE would become the de facto vendor-neutral Linux, leaving Red Hat as a Dell-centric server distribution.

2. Dead on the Desktop: Major PC companies are finally starting to pre-load Linux on a few selected systems. By acquiring Red Hat, Dell would eliminate Red Hat’s already slim chance to become a mainstream desktop for PCs and workstations. Rival PC, notebook and netbook (hello Psion lawyers) makers would accelerate their current moves toward Canonical’s Ubuntu and Novell SUSE.

3. Dealing with Microsoft: Dell has incredible leverage when it negotiates Windows licenses with Microsoft. Indeed, Dell’s high-volume sales business — coupled with Dell’s relationships with Canonical, Novell and Red Hat — allows Dell to push Microsoft hard on pricing. By aligning with a single Linux vendor, Dell actually loses some leverage against Microsoft.

4. Dell’s Primary Software Strategy: Rather than getting into the operating system game, Dell is getting into managed services software market. By acquiring Everdream and SilverBack Technologies, Dell has a portfolio of software for remotely managing desktops and servers.

The result: Dell or its channel partners can charge customers a monthly fee to remotely service and support Dell’s installed base of hardware. Customers are willing to pay a premium for pro-active remote support and managed services. (Just ask The State of Georgia.) Those same customers — many of them small businesses — are not willing to pay a premium for open source.

5. Dell’s Secondary Software Strategy: Dell also acquired MessageOne, which offers enterprise email via  software as a service (SaaS). Similar to the managed services stategy, Dell’s MessageOne acquisition will generate recurring monthly revenue — like a cable company. Dell will ultimately evolve into a big hosting company powered by Dell server farms and SaaS applications. Instead of betting on a single operating system for those server centers, Dell will let customers mix and match operating systems.

6. Virtualization: By acquiring Red Hat, Dell would essentially hitch its virtualization strategy to Red Hat. Not smart. The far wiser strategy for Dell: Stay vendor-neutral and work with all of the major virtualization players — from EMC/VMware to Microsoft to Citrix and so on.

7. Technology History: Other than Apple, can you think of a single major PC or server company that thrives by controlling both the hardware and software? And is anybody willing to suggest that Dell-Red Hat could be the next Apple? Certainly not.

The VAR Guy will need to eat a healthy serving of crow if Dell ever acquires Red Hat. But in the meantime, our resident blogger will continue speaking his mind (anonymously).

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