Dell’s acquisition of Perot Systems can be seen as a move by a recession-hit company that largely sells hardware to use the cash on its books to buy a services firm. Profit margins in the services business are, after all, much higher than those in the products business.
The acquisition also highlights an interesting trend in the technology business: the convergence of technologies, or of products and services (and products or services) in the minds of the customer resulting in a convergence (merger) in the marketplace.
Users of technology have long stopped viewing purchases as discrete products or services. They now buy solutions. That makes life difficult for companies that operate in a particular part of the technology business, even if it is one as broad and generic as hardware. In recent years, this has prompted a rash of acquisitions and seemingly unrelated diversifications.
Dell is actually late to this party. Its rivals IBM and HP already have thriving services businesses.