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Software support: Microsoft's loan to Dell is a protective move to secure big business

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Following rumors of a Microsoft multi-billion dollar investment in Dell, the software giant has confirmed its moves to help take Dell private. Microsoft will invest around $2 billion in the form of a loan to Dell, a deal that was supervised by Silver Lake — the same private equity firm that helped Microsoft acquire Skype for $8.5 billion back in 2011. The loan may seem puzzling initially, given Microsoft's own Surface hardware strategy, but if you look a little deeper it's clear this is all about protection.

Attacks on Windows' dominance have made Microsoft defensive

Microsoft faces a number of attacks on its enterprise dominance in the form of startups, technology trends, and — most importantly — competitors like Google and Salesforce. A war of words and ecosystems has erupted over the past couple of years between Microsoft and Google, and a closer look reveals it all follows protective moves by Microsoft to keep businesses on side. The latest example is Dell, but a recent acquisition of Yammer for $1.2 billion is designed to strengthen Microsoft's position in the emerging "social enterprise" trend.

Dell, HP, and Lenovo are an increasingly important part of Microsoft's ecosystem and its offering to big corporations and businesses. In my own previous experience working for a large number of investment banks, HP and Dell dominate in the desktop PC space while Lenovo rules the roost for notebooks. Surface is off to a slow start and Microsoft can't afford to let Google muscle in with its low-cost Chrome OS machines and Google Apps offering. Big businesses have lucrative contracts with resellers of OEM hardware; Microsoft might not want to influence those directly, but it clearly wants to influence the direction Dell takes for its future plans.

Windows 8 is really aimed at business tablet users

Windows RT is an early attempt at ARM-based hardware that's not business friendly just yet, but Microsoft's Surface Pro tablet, and even Windows 8 itself, are aimed at those who need to work on a keyboard as well as use touch as an optional extra. With recent estimates that 200 million information workers want Windows on their next tablet, there's a suggestion of pent up demand for a good business tablet. With Dell one of only a few OEMs that have opted for Windows RT tablets, having reportedly urged Steve Ballmer to drop the RT naming, it demonstrates a close relationship between the firms.

A large number of big businesses rely on Outlook, Office, Exchange, and Windows to power their daily workforce. That all comes at a cost that generates large revenues for Microsoft, but alternatives like Google Apps offer a cheaper option for some types of businesses — something that hasn't been the norm previously. A trend towards cloud adoption by consumers and businesses puts Dell in a strong position to help assist Microsoft with its battle for tablets and cloud services in the enterprise. It wasn't long ago that Microsoft was poking fun at VMware with its "VMlimited man" video, aimed directly at its cloud services. The cloud is a huge threat to Microsoft's enterprise sales and Dell's infrastructure expertise is a valuable one for Redmond.

And then there's patents. Dell acquired Wyse last year, a leader in desktop virtualization and cloud computing, that pushed it past HP in the push towards thin clients. Wyse owns nearly 200 patents, including a patent on thin client systems. Combined with over 2,000 other patents, it makes Dell an important player in cloud computing and one that Microsoft would very much want to keep on the Windows side of the fence.

Microsoft is supporting a close partner to protect its own business

Ultimately, Microsoft might not be winning big in the consumer market for the emerging mobile, cloud, and tablet sectors, but it can't afford to lose the enterprise market as PC sales continue to decline. An enterprise push with Dell Windows 8 tablets would make a lot of sense, and today's move brings Microsoft and Dell even closer to that possible reality. Microsoft describes the move as support for a partner that is committed to "devices and services built on the Microsoft platform," but while the support is true, today is just another part of Microsoft's strategy to secure big business.

The Verge
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