Novell's big opportunity

A friend called me on Friday to ask what I thought about Novell. "Does it have a chance?" he asked?

The answer is increasingly, "Yes."

I never would have thought I'd be saying that, but whatever the cause of Novell's resurgence, it feels like the company is making a serious comeback. I've seen it with my own company, where an increasing number of our customers are requesting SUSE Linux Enterprise Server (SLES).

Yes, it has yet to displace its competition: Ubuntu has more momentum but still lacks a winning revenue model that may hamper its transition from community standard to enterprise standard, while Red Hat continues to barrel forward yet doesn't feel as invincible as before.

But Novell's progress in its Linux business is nothing to sneeze at, with 65 percent growth in its last quarter. That progress is a direct result of its interoperability agreement with Microsoft, a relationship it has been extending of late.

I've harshly criticized this agreement because of the patent cloud it has placed over Linux, but after talking with a range of Novell SUSE/Microsoft customers about it, I'm increasingly convinced that the only company that is sold on the important of patent protection in the deal is Microsoft. As one recent customer noted to me, "The patent coverage for SUSE had exactly zero relevance to us in making our decision to go with SUSE."

Customers may be indifferent to the patent pact, but Novell's alignment with Microsoft has been very good so far for its business. Were that the only thing it was doing, however, it might not be much to cheer. Novell has been very busy on a range of different fronts:

• HP is helping its customers move from its identity management solution to Novell's.
• Novell has become smarter about managing its channel, and of giving value to its channel. This may well result in greater productivity from the channel.
• Even Novell's participation in Google's Summer of Code (and its new non-executive chairman, Richard Crandall) bode well for the company's savvy and credibility.

Yes, the company still has some businesses that need serious work (or better yet, to be sold), but its core Linux-plus-identity management story is selling well. Novell has a ways to go, but this is the first time I've felt that it's actually making progress.

Novell could still crater. But it's looking increasingly unlikely that its SUSE Linux or Identity Management businesses will. These can provide the backbone for growth across the board. I still wish the company would dump the patent agreement as it fouls the water for other open-source companies and projects, but I'm comfortable that Novell isn't selling patents as the reason to buy from it, though Microsoft may continue to do so.

[jtdb2008]

I think for Novell the MS agreement for Linux is their survival, until they can survive on their own, even though the products they sell are the more stable then MS's. Of all the changes they have made I can't believe that have not looked at the marketing department. This is where they are getting their lunch handed to them.

They are slow to change, which can be good or bad, but the marketplace (i.e. marketing dept) is where they could make up for it. But that's assuming they have direction and understand who they are selling too, not only the tech but the CFO/CEO.

[ian.waring]

It looks like Novell have wrapped all their core Netware and OES revenue under the title of "Linux platform products" line - so it's difficult to see actual Linux progress in that 65% growth number (the fact OES ships with Netware and Linux versions on the distribution does not in itself reflect actual use). Nor indeed is it clear how much Platespin contributed to this growth number.

What proportion of that income related to Microsoft voucher purchases feeding into their P&L?

I'd be delighted if SUSE started to take off here with paying customers, but no sign yet...

[douglasdooley]

I don't know Matt, this seems like potentially the biggest stretch in enterprise software, and can think of no comparable scenario where a company has succeeded independently in the same position that Novell faces. They are orders of magnitude behind Red Hat in their core business, and do not have JBoss or anything remotely close in the middleware market. Their identity management is facing serious competitive viability threats from Oracle and others. Virtualization is a non-starter, as is systems management at this point in their efforts to expand beyond legacy installed base...

Their SCO-like shoot-the-moon strategy with MSFT on patents is highly disagreeable to developers and probably IT managers, and unless the market significantly shifts to an even more conservative patent model where customers have to seek cover with innovation-stopping agreements like those offered by Redmond, Novell will maybe string out some court-imposed payments, but will not win the support of enterprise IT...

I am not going to claim to be an expert on their options, but they need to demonstrate something that is marketable before Novell marketing can do something to position the company effectively, and although I hate to be a negative perspective, i just don't see anything outside of an HP acquisition that comes close to providing a possible exit strategy that is not a fire-sale; even that, would be suspect from HP's standpoint...

I don't know, i wish them the best, but when u play by Microsoft's rules, u lose support and alternatives to fight on, I would think that Red Hat would have to make some cataclysmic mistake for SUSE to be relevant, and everything else is not growing, tell me again why u r optimistic ab/ their prospects...

[tristanbob]

"I'm increasingly convinced that the only company that is sold on the important of patent protection in the deal is Microsoft. As one recent customer noted to me, "The patent coverage for SUSE had exactly zero relevance to us in making our decision to go with SUSE."

---- Here is an example that refutes your statement:
"rPath to OEM Novell?s SUSE Linux to reduce legal worries" -
http://blogs.zdnet.com/open-source/?p=2321

[Matt Asay]

But that's rPath, and rPath has a historical aversion to Red Hat. I don't read the rPath announcement as anything more than Billy stiffing his former employer.