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Dell saves their investment in MessageOne at the best possible moment

This is the first of a multi-part seres on hosted archiving challenges in light of data virtualization through information management and search solutions.

Last week Dell, Inc. (NASDAQ:DELL) announced the acquisition of MessageOne, a small but well known Software as a Service (SaaS) business continuity provider in Austin, TX.  Originally founded by Adam Dell, Michael Dell’s brother, the company set out to support a much needed feature in many F1000 firms, call-tree notification during emergencies.

A call-tree is setup to manage calling people in an orderly fashion during emergencies, such as regional disasters, facility problems and individual system failures.  The call-tree is built from an ERP database, such as Oracle Peoplesoft (NASDAQ:ORCL), SAP (NYSE:SAP), Microsoft Dynamics ™ (NASDAQ:MSFT), etc.  Once the call-tree is established, during times of emergency people in the line-up can be notified for relief or aid purposes that MessageOne initially delivered.  Then, in 2006 after the email archiving market went white-hot; it started to move into archiving.

In the last few years MessageOne has seen its fair share of competition.  MessageOne has gone from a vendor in a sea of likely contenders to the lone vendor in a space that is crowded by heavy weights. In particular, MessageOne goes head-to-head with Google (NASDAQ:GOOG) which bought Postini in 2007 for a class leading $625M.  Earlier in the same month, Autonomy acquired Zantaz for $325M.  Zantaz has relationship with IBM, where IBM resells the hosted archiving service, DigitalSafe.  In just a few short weeks MessageOne went from a level playing field to competing with Google and Autonomy.

In order to compete with Google’s new SaaS email management services, MessageOne was forced to reduce prices. While MessageOne dropped its annual fee to $12, Google’s annual price tag of $25 is still preferable to most enterprises given Google’s market superiority. Google will gladly support this service as a loss leader in its attempt to seize enterprise content. Further, since Google did not acquire MessageOne, it seemed clear that MessageOne’s future success would be dictated by its partnership with Microsoft or Iron Mountain, rather than by Google’s Postini.

Considering competitive forces from Google, Autonomy and a fleeting partnership with Iron Mountain (NYSE:IRM), it was in Michael Dell’s best interest to save his investment and reel in MessageOne.  Moreover, with all the storage activity going on at Dell, the acquisition could propel the MessageOne services to equal footing in the enterprise with Google, making the $12 annual fee for MessageOne a bargain for Dell related technologies.

There was another obvious choice for Dell Computer Corporation to consider, if there goal was class leading SaaS based archiving.  Speaking strictly on business issues, nearly 10% of the buyout price was paid out to the Dell family, with a significant amount (roughly $12 million) going to Michael Dell and his family, according to the press release and commentary by Dave Raffo on the Storage Soup blog.  However, trailing the press release was a note that all proceeds to the trust for Michael and Susan would go to charity.  No matter how you slice it, the timing is perfect for MessageOne.  For Dell Computer Corporation, there are positive tax and financial consequences for all parties.  Apparently, the technical merits of another more obvious choice couldn’t out weigh the financial and geographical options presented with MessageOne.

Continuation in part 2 of our analysis regarding the better choice for acquisition, if technical merit for hosted archiving was the driver.

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