Will Novell, Dell turn to open-source M&A to grow?
Novell was recently rumored to be shopping itself around for a buyer. The new rumors? That it's doing some shopping of its own. In this, Novell isn't alone, with Dell also looking to pick up companies that can expand its product lines, as both look to grow despite CIOs' decreasing willingness to spend. Open source may factor into both companies' M&A strategies.
As reported in Daily News & Analysis, Novell CFO Dana Russell has said the company is "interested in making acquisition in the high-growth businesses like identity security and compliance management software, data centre tools and open source software." With over $1 billion in the bank, Novell is in a prime position to buy companies on the cheap.
However, Novell should avoid its SiteScape error, viz., buying into a trendy but not yet profitable market. Identity security and compliance management are probably safe, because they're precisely the sort of "boring" markets that CIOs will pay money for in a recession.
Open source is much the same, but it depends on which open-source products it picks up. A Zenoss, Reductive Labs (Puppet), or some other company in IT management/configuration might be a smart bet.
Novell isn't alone in its interest in acquisitions to spur growth. Dell has been widely reported to have a $10 billion war chest set aside for acquisitions and, according to The 451 Group, Dell may be looking to make some significant acquisitions in the storage market:
With existing partners such as Cisco and Oracle...now priming themselves to become players in the server hardware market, Dell clearly needs to build up its portfolio to do battle with these new entrants along with its traditional rivals Hewlett-Packard and IBM. One clear way to do this would be to expand its storage software and hardware lineups since these offerings are complementary to its core server and PC business.
One way to get into the market would be to buy EMC, a current partner, but as The 451 Group notes, Dell has rarely ventured into big acquisitions--its $1.4 billion acquisition of iSCSI storage systems vendor EqualLogic in November 2007 the exception to the rule. I'd expect Dell to buy midrange players along the lines of 3PAR, Exanet, and so on rather than NetApp or EMC. Buying big would be distracting to Dell and take too long to digest and commoditize, Dell-style.
It's possible that Dell might even delve into the open-source storage market. An Infoworld reports identifies the best of the bunch, with vendors/projects like Zmanda, FreeNAS, and StorageIM in the mix.
It's doubtful, however, that any of the vendors in the open-source storage space are big enough to move the revenue needle for Dell. So, while it's SMB strategy may involve a healthy dose of open source, I wouldn't expect its storage strategy to do so...at least, not yet.
Open source could be a boon for both Novell and Dell, but each would need to be pragmatic about what to expect from open source. Currently, the most revenue either can expect from an open-source buy would be in the $50 million range, with most open-source vendors offering much less than that.
However, the one thing that open source can offer both right now is a ready supply of leads, plus branding and relevance in markets where Novell and Dell may not yet have much of either.
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
Equilogic is still somewhat shaky as well - I remember the reps for them in our area being somewhat too enamoured of their product to give solid and comparative answers as to why their non-standard (damned brilliant, but non-standard) SAN solutions would/should replace our existing gear.
Dell aside, Novell could do good with a few acquisitions - this I can definitely agree on. They could stand to bolster their datacenter creds, and maybe shake off the schizophrenia that once gripped (and in some cases still cripples) most commercial Linux distros ( "desktop or server? - what do we concentrate our image on?")
OTOH, they could do with a more aggressive sales team as well. RedHat has the luxury of word-of-mouth and partner relationships. Ubuntu has the buzz, the cred, and most sysadmins nowadays can do the selling for them. Novell? Well, you don't really see Novell during an RFQ round unless you're at a Fortune 500 corp. Maybe that's just a Pacific Northwest thing, but it's disturbing.
One more gripe - why can't Novell seem to take the good bits of their catalog (ZenWorks, OpenXchange, etc), integrate it into SuSE, open-source as much as they can of it, and pimp the crap out of it? They have solid products - with just OpenXchange, if they would just get off their butts and _market_ the damned thing, they could make a solid dent in Microsoft's Exchange biz in very little time (especially since MS Exchange 2k7 released - which is a resource-sucking and expensive mess, even if you know what you're doing...)
Heh. Anyhoo, I think that in short, Novell needs to acquire a few solid companies, yes... but they need to fix some fundamentals internally as well. (and bring BrainShare back! Sure, Salt Lake City is boring, but damn...)
My apologies.
- by rafbuff June 27, 2009 7:18 AM PDT
- SUSE had a product called SUSE Linux Openexchange Server between 2002 and 2004. Novell discontinued selling it. It was based on SLES and Open-Xchange, which was and is made by an is an independent company. http://www.open-xchange.com/en/company for more.
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- by mbenedict June 27, 2009 8:30 AM PDT
- OpenExchange (SLOX) was an exciting product to many, but it was never successful and in fact might have been a money loser. There were many problems with it:
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(8 Comments)From the fact that Novell discontinued selling this very successful product makes your point, too.
Rafael
1. Poor support for desktop clients. OpenExchange had to be accessed through its web UI to enable most of its functionality. If you used something like Outlook then you can't do much more than basic mail (and in that case, why not just get a mail server). Problem was, back in 2002, we didn't have slick AJAX interfaces nor fast scripting engines... most companies still ran IE 5 for Pete's sake... and people HATED using a crappy Web UI all day long.
2. SLOX wasn't open, didn't even run on Linux... by that I mean, it was only supported on it's OWN special version of SUSE. If you're a RedHat shop, too bad for you. If you have Debian, tough luck, not supported. Solaris? Haha. Ironic for a system called "OpenExchange". Many shops already had a hard time justifying running RedHat alongside Sun or Windows, now they're forced to run a special version of SUSE too? Not a chance.
3. OpenExchange was composed a bunch of open source projects "bundled" together... some might say not very well. For example its email server was just postfix. The spam filter was spamassassin. Then there's samba and CUPS for printing. You had to tune & configure EACH of these manually, from the command line. The people who knew how would just download the separate packages from the 'net. The people who didn't know how, preferred MS Exchange administration.
4. On top of that, SLOX documentation was poorly put together. You pretty much had to figure out its component pieces and find documents for them on the 'net.
5. No anti-virus. An enterprise messaging system with no integrated anti-virus solution? Marketing fail.
6. Price. For a large department, SLOX costs about $2k let say. MS Exchange about $10k list. But, departments tend to buy other products... say their users want Office Suite, and/or they have an MS SQL Server app... so the MS sales guy can price Exchange as part of a package... say $7k effectively. Still $5k advantage to SLOX. But for a department that's spending $250k+ a year just on a few admins' salary (not counting infrastructure costs, etc) the $5k difference didn't really matter. Even $10k difference didn't really matter if they can run all the same OS (say Solaris) instead of supporting a one-off SUSE box.
7. CIO says no. This was one of their biggest problems. The CIO or VP Tech looks at the product, decides it's not "mature", not part of the company's architectural "strategic" direction (which meant Sun or Microsoft), or insists on having Outlook instead of a Web UI. At the CIO's office, SLOX was dead on arrival.
8. It competed with Novell's Groupwise. Internal politics meant a lot of people within Novell wanted to kill SLOX after the SUSE acquisition. It made NO SENSE for Novell to have two collaborative platforms which competed against each other. The writing was on the wall and they killed SLOX (well, spun it out as a separate concern, but the effect was pretty much the same.)