Dell decided to go in for this acquisition to move beyond the hardware space, into providing services.
Most large technology companies have been expanding into higher margin IT services to secure stable and recurring revenue as computer hardware is becoming cheaper. With this deal Perot Systems agreed to be acquired by Dell for $3.9 billion to help Dell expand beyond hardware and into the higher-value services market
The acquisition vaults Dell into the health-care information-technology business, giving the company access to customers such as hospitals and insurance companies .
Dell is now ready to compete more actively with HP and squeeze margins further. Dell is likely to benefit as companies enter the next round of upgrades to personal computers.
The acquisition will help fortify Dell's pursuit of new customers in the healthcare industry, a sector that's been getting a lot of attention from IT in recent months. The economic stimulus will drive adoption of health IT, demand will be considerable.
Perot's 23,000 employees represent a formidable integration challenge for Dell .
Financial Integration- Dell's key challenge will be to prevent its operating expenses from ballooning as revenues recover in 2010, Additional burden of integrating a large services asset will add risks here.
Cultural Integration- The deal's benefits will only be realized if Dell can manage thorny integration challenges bound to arise as it looks to absorb an organization known for its rigid, by-the-book culture and reliance on a market—healthcare—where the PC manufacturer has little experience. These are two very different kinds of companies so the integration issues are not going to be trivial
The inevitable result of this kind of deal is not that jobs are gained, but that they’re lost . Solutions become more standardized, sales cycles speed up and cost less, customization costs more as a percentage of the total deal, and the sector is absorbed into the computing mainstream.
Dell is abandoning their legacy of direct marketing company to being outsourced
By buying Perot Systems, Dell is following in the footsteps of HP's acquisition of EDS in an attempt to match the IT outsourcing & services capabilities of IBM and that the equation would lead to disaster with a labor-intensive business, like Perot Systems, with a product-centric company, like Dell.
Adaptability in terms of manpower and how they scale up from product to solution to service will be a challenge. If they do not adapt to it, they will not only have to close down Perot by taking their capabilities, but also suffer losses at their end.
Third of Perot Systems' employees are located out of India, : over 23,000 people This is a major plus for the combined services organization
The Indian market is becoming key for any company wanting to deliver services globally.
Competition is likely to heat up more: Dell's $3.9 billion purchase of Perot Systems , which has 1/3 of its workers in India, means the Indians will have another large competitor- India Outsourcing: Pay Is Down, Competition Is Up
"Dell's move is in line with its competitors" – Diptarup Chakraborti, Principal Research Analyst, Gartner "The integration is going to be challenging, as Dell itself is on an internal restructuring exercise globally“ - Kapil Dev Singh, Country Manager, IDC "The top three Indian IT vendors will have to contend with another strong player when they want to increase revenues from those verticals“ -Sabyasachi Satpathy, Director, Mindplex Consulting "Dell will take Perot to new geographies where Indian service providers may face more competition“ - Scandra Mouli C S, Director of Advisory services, Zinnov "There will not be an immediate impact on India, as such deals take a lot of time to integrate“ - Alok Shende, Principal Analyst, Ascentius Consulting