Dell Wins Big SaaS Contract, Care of IBM

Includes: DELL, IBM
by: Joe Panettieri

At first glance, IBM (NYSE:IBM) has won a massive $873 million outsourcing contract with the State of Georgia. But I took a closer look and discovered Dell Managed Services will also cash in on the engagement. A trusted source says the contract ranks as one of Dell's (DELL) largest managed services and Software as a Service (SaaS) deals to date.

The State of Georgia win represents a critical step in Dell's transformation from a PC supplier to more of a service provider that generates recurring monthly revenue by managing customer networks and applications.

According to an IBM press release:

The State of Georgia has awarded IBM a contract, valued by the State at $873 million, for information technology (IT) outsourcing services over eight years. The contract also includes two additional one-year optional extensions

Dell Managed Services

Now, for the Dell twist: IBM says Dell is a sub-contractor on the deal. And a trusted source -- a former neighbor, in fact -- tells me the State of Georgia will use Dell Managed Services. Dell has acquired a series of companies -- Silverback Technologies, Everdream and MessageOne -- to build out its managed services and SaaS efforts.

Dell is walking a fine line in the managed services market. On the one hand, the company has signed up more than 150 technology consulting firms to offer Dell Managed Services to small businesses across the United States. But on the other hand, Dell has been testing direct managed services sales with customers in New York and Texas. Now, the State of Georgia -- with an assist from IBM -- will take the Dell Managed Services plunge as well.

So far, so good for Dell. But things aren't all peachy for the PC giant. During a separate conversation today, another source told me Dell's Silverback sales have been mostly flat since Dell acquired Silverback. Meanwhile, the managed services market has been growing. And growing.

Perhaps Dell is finally shifting its SaaS strategy into overdrive.

 Disclosure: no positions