Novell’s on a New Course, Once Again

Novell signed an agreement to acquire SuSE Linux, the second largest selling
commercial Linux brand worldwide. The deal promises to boost the fortunes of
SuSE and increase competitive pressure on Red Hat, which is the leader in the
commercial Linux segment and give Novell a new lease of life.

Novell has been readying itself for the Linux foray in a planned manner
through 2003. First it announced Linux-compliance of all its services in April,
closely followed by the rollout of the Novell Certifed Linux Engineer (CLE)
program. In August, Novell completed the acquisition of Ximian, the leading
provider of desktop and server solutions that enable enterprise Linux adoption.
With this Novell’s commitment to the open-source movement got affirmed,
especially because two key initiatives—GNOME, a project to provide
full-featured Linux desktop and Mono, an open-source initiative to allow
applications developed in .NET to run on Linux, Unix, Windows and other
platforms. Netware 7.0 was also made available on two kernels–the native
Netware and on Linux.

With the Ximian acquisition, Novell’s commitment to the open-source movement was affirmed

Then in September, the company rolled out Nterprise Linux Services that helps
existing Netware users the option to maintain their investments in Netware, move
to Linux, or run business applications on both Netware and Linux. in November,
this was capped with the announcement of the SuSE acquisition. Adds Harish Mehta,
managing director, Onward Novell, "In 2005, Netware 7.0 will be ported on
Linux completely."

What does this line-up mean to corporate customers? Primarily, it offers them
a plethora of choices. Current Netware customers can choose to migrate to Linux.
Those who have both Linux and Netware can integrate the heterogenous
environments, and those who are currently using Linux for peripheral
applications but Netware at the core can move Linux to the core. Older Netware
users can migrate directly to Linux.

Says Prakash Advani, Sr VP, Netcore Solutions, an open-source solutions
vendor, "Novell is definitely more pervasive in the market than an IBM.
Therefore Novell can create a base of Linux users in the mid-market segment that
possibly IBM might not have been able to because of its focus on large
accounts".

Adds Mehta, "Of course, there is whole new base of new Linux users
migrating from other environments. The bottomline is the array of choices
available and the value that comes in from the services and support associated
with it".

Clearly, Novell’s Linux push and support for open-source would alter the
landscape of the Linux market and the open-source movement in the country. Says
Mehta, "Novell is the only $1-billion-company that offers the full range of
Linux distribution and services around it across the layers of the enterprise
and a worldwide ecosystem to support it. Now that’s a legitimate claim to a
market that exists and is addressable by a company of our size."

As for competition with Red Hat, open-source proponents don’t believe that
Novell’s focus would be to compete with Red Hat. For one, it is against the
open source religion and then SuSE has drawn heavily from Red Hat by way of
open-source development. Says Advani, " Together they would look at growing
the pie and compete with Unix, Solaris and Windows, rather than compete with
each other."

For India, Onward Novell asserts that the company has a sizeable base of
Netware users that presents an addressable market for migration to Linux, but
does not put a number to it. It would definitely require some effort in
addressing the existing user base. Not all, especially amongst Indian public
sector banks, which form a large chunk of Novell’s business, would migrate
easily to Linux. Says V Chandrashekhar, general manager-IT, Bank of Baroda,
"We are Netware users but would eventually migrate to core-banking system
which are mostly Unix-based. Linux as an alternative is there but it may not get
to the core-banking area. Even now, we use Linux for intranet and e-mail but the
core-banking software vendors would influence what we base our applications
on."

But with 15000 CNEs (certified Netware engineer) getting re-skilled and
retrained in Linux along with a base of 5000 resellers, Onward Novell sure has
the market reach and the developer base to make a dent into the market.

As a good open-source proponent, Novell has also announced NForge, a
technology collaboration website similar to SourceForge, that allows incremental
involvement in open-source development community along with a review board.

With all this going in their favor, will Novell be able to deliver? If
history is proof, then Novell’s chances are not much. Novell is not new to
acquisitions, sell-offs, and re-arrangement of portfolios; it is a veteran at it
having done it for over ten years now.

The reality is that the company has not been able to make much out those
acquisitions. After having exited the Unix market, Novell tried going after
Microsoft (except on the desktop OS front which it had done earlier with DR DOS)
but corporate buyers could not clearly place Netware rightly in their scheme of
things.

But the SuSE acquisition surely gives Novell another chance to make it big in
enterprise software. Look at it this way. After many years now, Novell is in
sync with a leading trend in the market–the increasing influence of Linux.
There is therefore, at least technically, a chance that the company might be
able to make it.

Says G Balakrishnan, director, Ontrack Solutions, a long time Novell
reseller, "Definitely the Linux space is something that every solutions
company now aspires to be in thanks to its popularity. It gives us an
opportunity to look at the prospects of selling Linux to the market."

The other significant point is that IBM, which is the most vocal proponent of
Linux amongst server vendors, has announced that it will make a $50-million
investment in Novell.

Novell, with the backing of a company like IBM, would find it easier to make
SuSE Linux a success in the enterprise market. Reportedly, IBM and Novell are
planning an extension to SuSE’s agreement to support all families of IBM
servers and are planning a joint marketing and support relationship.
Relationships with other server vendors with whom SuSE had relationships are
also being reactivated, company sources say.

Relationships are going to matter more than ever to Novell now. These
relationships have to be articulated well in the market place and translate into
go-to-market strategies. And this includes application software vendors too,
like what V Chandrashekhar said earlier–Novell will have to get its act
together in the area of marketing. A Novell reseller who did not wish to be
named confirms, "Novell’s weak point has been its marketing and its
ability to execute at speed."

The company was never short of good products or technology. The Achilles heel
was strategy and positioning. If the company has to leverage its current gains,
then executing well on the strategy and positioning front has become all the
more critical.

That is, it all finally depends on how Novell positions itself for the
enterprise market. If the company continues to straddle both the horses (Netware
and Linux) for too long, then the sum would get lesser than the parts.

All it now calls for is some agility, smart and high impact marketing, and
leveraging on partnerships. Or else, history would be repeated.

Iishwar Daas Nair in Mumbai