Dell’s Swainson: $5 Billion in Software Sales by 2016

The next step in Dell’s (NASDAQ: DELL) metamorphosis from box maker to solutions builder is a real doozie: How about $5 billion in software sales by 2016, more than double the company’s current run rate, including the expected bump from recently acquired Quest Software (NASDAQ: QSFT)?

The lofty goal is the handiwork of John Swainson, president of Dell Software Group, after but five months on the job. “You have this huge PC business,” said Swainson, in a published report. “To have an impact on Dell’s bottom line, you have to have a meaningful software business.”

Swainson, in outlining Dell’s software strategy to a roundtable of analysts and media, detailed the vendor’s blueprint to focus on four core software segments: security, systems management, business intelligence and applications. The lineup looks like this:

Chief among Swainson’s talking points was that Dell, fresh off its $2.4 billion Quest acquisition, is likely to tone down its hunt for more mega-purchases in the near term. With Quest in tow, Dell’s software revenue will jump north of $2 billion so, it’s really not too difficult to envision a sales apex of $5 billion in four years, given Swainson’s strategy for organic growth, a wider solutions portfolio and, correspondingly, different types of sales opportunities.

Still, for Dell to jump to $5 billion in software sales in four years’ time, Swainson hinted, might be a bit overly ambitious, especially considering he expects the vendor’s software group to post some $1.5 billion in sales in the next 12 months. “My real target is more like three in the [20]16 time frame,” Swainson told one news outlet.

While it’s tempting to compare Dell’s ongoing transition to IBM’s of the mid-2000’s — the connection may owe in part to Swainson’s 26 years at IBM, most prominently as IBM Software vice president of Worldwide Sales — the two companies’ dance cards aren’t all that similar.

For one, to kick off its business transformation, IBM jettisoned its PC hardware business, while Dell retains the full power of its manufacturing capabilities at the desktop and notebook level. But more importantly, IBM grew its channel noticeably as it morphed toward higher-end hardware, software and services, while Dell isn’t quite there.

Dell’s software plans are unlikely to come to fruition in the absence of a large, highly-trained and specialized fleet of channel partners zeroed in on selling software-led solutions. Some channel fortification already has arrived with SonicWall and more is on the way with Quest, but Dell will have much enablement, training, certification, marketing and joint sales work to do to advance the software fortunes of its channel partners.

Nonetheless, the haze may be evaporating from Dell’s message to the channel: Move toward software-led converged solutions, and be sure to pay attention to security, systems management, BI and apps.