Editor’s note: Joseph Walent is an analyst with Technology Business Research. He offers his insight into Dell (Nasdaq: DELL) based on its latest earnings report last week and the continuing battle by founder and CEO Michael Dell to take the company private.

HAMPTON, N.H. – Growth in Dell Services’ support, deployment, infrastructure, cloud and security units offset contraction in the Application & Business Process Optimization (AB) business segment to generate year-to-year growth of 1.9% in 2Q13.

The restructuring of the client and solutions portfolio and the 4Q12 sale of the Revenue Cycle Solutions business unit continue to inhibit AB’s growth. Conversely, new solutions like the ProSupport Plus Enterprise Suite, coupled with good services attach rates linked to hardware delivered growth for the support business. Additional solutions drove 19% growth in Dell Services’ security group, augmenting the expansion in the firm’s infrastructure and cloud businesses.

TBR believes Dell Services’ 2013 growth will hinge on continued traction with innovations in security, cloud and data center offerings, though the possible privatization of Dell could derail steady expansion in 2H13.

Expansion Plans

Dell Services will rely on its partners in cloud and leverage its security and storage capabilities to expand into Asia-Pacific and the energy sector.

Dell Services overhauled its approach to the cloud computing market in 2Q13 by discontinuing public cloud direct sales and will instead rely on partners’ experience and offerings to fulfill clients’ needs. Dell announced in May that it will continue to supply private OpenStack cloud solutions, but enlisted partners Joyent (IaaS solutions), ScaleMatrix (cloud hosting platforms) and ZeroLag (VMware-based cloud infrastructure and services) as part of the Dell Cloud Partner Program for all public cloud engagements. TBR believes that Dell will continue to enroll partners into its cloud partnership program to give customers a wider selection of providers and platforms. Furthermore, Dell will expand into other regions with the Cloud Partner Program to gain local resources and access in foreign cloud markets.

Dell Services recently deployed a local SecureWorks team to Australia and New Zealand, marking the second team deployment in APAC following SecureWorks placement in Japan in February 2013.

Dell Services also signed on to implement a scalable, self-optimizing data storage solution for German offshore wind operator BARD Engineering in 2Q13. While the deal highlights Dell’s ability to serve the energy market with innovative data solutions, TBR believes Dell lacks similar penetration into the energy industry enjoyed by several competitors. IBM, HP and CSC are all offering solutions that include data management, compliance, infrastructure modernization, Smart Grid solutions, data analytics and system optimization. For major service providers, the energy industry is one of high growth opportunities.

More Innovation

Dell Services added service centers in the U.S. and APAC despite uncertainty about the firm’s post-privatization organizational and leadership structure

At its new Evergreen Innovation Center in Texas, Dell will collaborate with eBay to develop ways of maximizing the efficiency of data center operations for clients. TBR believes Dell will initially roll out the innovations at the center, showcasing their use in its own operations to attract prospective clients. TBR does not expect the center will add many employees to Dell’s workforce in Texas, which stands at about 14,000.

Dell’s new SecureWorks center in Australia will initially employ about 15 to 25 workers, some with specialized skills in security and others with a more broad and comprehensive skill-set.

Dell’s new operations site in Chengdu, China will initially employ 1,500 workers in customer service and sales roles. Other employees at the facility will manufacture desktop computers for Dell customers in China, Europe and the U.S. The center will be located in the Chengdu High-Tech Zone and will initially span about 30,000 square meters (~323,000 square feet).

(C) TBR