Why did Dell buy Force 10? The analysis so far shows Dell ‘s strategy to build data centers based upon a stack that integrates servers, networking, storage and is powered by virtualization.

Here are four reasons that show what Dell gets out of the acquisition and what we can expect going forward.

Force 10 is an Equipment Vendor: The Force 10 was a bit of a surprise to some. Market analysts had been speculating that Dell would seek an ethernet or fiber channel networking vendor. Instead, they turned to Force 10 for its network equipment strengths and strategic focus on orchestration and automation.

Mike Fratto of Network Computing writes:

The important part of the deal is that Dell gets Force 10’s technology, which includes both high capacity, low latency switching and Force 10’s Open Automation features such as on-switch perl and python scripting and Force 10’s virtualization framework, which provides the underlying framework for cloud services, including service separation and management, traffic analysis, and high availability.

Image: Dell gets a lot of credibility with Force 10, a long time, established player in the networking market. Force 10 gets Dell’s brand strength.

Hits a Sweet Spot: Dell has a track record of buying mid-sized companies. For example, it could have pursued Brocade, a much larger company but opted instead for the smaller Force 10.

Wikibon’s Stuart Miniman wrote today:

My early take on this is that Juniper will have negligible impact from the move and that Brocade will be more affected. Dell will continue to use Brocade for FC, but on the Ethernet side, will favor internal products to Brocade/Foundry or Cisco (which most server vendors are already pushing out of the rack). Foundry’s top-of-rack switches do support FCoE (uses the Broadcom ASIC that is also used by Juniper and others).

Buying Brocade would have been out of character, compared to its previous acquisitions over the past two years.

As Information Week points out, Dell has acquired EqualLogic, a storage provider; Scalent, which specializes in virtualization management, Perot Systems, a consulting company; SecureWorks, a security services provider and Boomi, which offers software as a service integration.

These are all mid-sized companies. Force 10 fits right in. The company has $200 million in annual revenues and 750 employees. That’s not too big, which Dell sees as important. The last thing it wants to do is disrupt its business.

An Integrated Stack: The Force 10 deal fills out Dells vision of a cloud stack with its servers, storage and networking stack that is powered by virtualization. This is just what HP and Cisco are seeking to do as well.

Information Week:

Dell sees how servers, storage, and networking are converging, driven largely by virtualization. Companies are trying to create data centers that act more as a single pooled resource– a cloud — so that they can shift workloads across infrastructure for efficiency’s sake, and thus build and run smaller and cheaper data centers. Jason Maynard, Wells Fargo equity analyst, said he believes Dell can increase Force10’s revenue by leveraging Dell’s greater global reach and by piggybacking on Dell’s server sales relationships, “as networking has a high attach rate to server units.”

Services Angle

Does Dell need to make another acquisition to help with the integrations required to build customer data centers? Dell, through its acquisition of Perot, can do a good bit of the work but there are questions if this will be enough, thus opening the door for an acquisition of a mid-sized firm in the services/solutions space.