The next time you feel tempted to laud the power of the open-source business model, take a look at Novell.
Novell has been struggling for over 10 years, yet it still manages to crank out nearly $1 billion in sales each year, most of which derives from the licensing of proprietary software.
Novell reported its fourth-quarter earnings on Thursday, along with results from its full fiscal year. They're not pretty, but they do suggest a path forward for the erstwhile software leader.
Novell saw its sales slump over 12 percent from its year-ago quarter to $216 million. For the full fiscal year, Novell stumbled to a $257 million net loss, versus a $5 million profit in 2008, on net revenue of $862 million and a net loss from operations of $206 million.
Perhaps not for long.
Much of that annual deficit came in the fourth quarter, which included a $279 million noncash impairment charge that sent Novell's quarter into the red by $259 million.
Not pretty.
Unless you look at Novell's Linux numbers. Linux remains Novell's most appealing business and was up 21 percent year over year to $149 million--and up 14 percent at $39 in in its fourth quarter over the year-ago period. While a far cry from Red Hat's booming Linux business, Novell's results suggest that there's life in its Linux business yet.
Life that Microsoft continues to seem content to grant.
Make no mistake, without Microsoft, Novell's Linux business would struggle, at least in the short term. Microsoft, after all, has been funding Novell's Linux business since 2006, when the two companies entered into an interoperability and Suse Linux subsidy pact.
And without its Linux business, all of the rest of Novell's business would be in jeopardy, as Suse Linux makes Novell's other products a palatable choice. Even so Novell's Identity and Security Management, Systems and Resource Management, and Workgroup businesses all dropped significantly (down 10 percent, 6 percent, and 13 percent, respectively).
Novell's needs
Clearly, Novell needs Linux. Equally clearly, it needs Microsoft to grow that Linux business. Microsoft has already plowed $247.5 million into Suse Linux Enterprise Server (SLES) subscription coupons, and Novell CEO Ron Hovsepian has indicated he's now dipping into the additional $100 million in coupons the companies negotiated.
But how can Novell accelerate its Linux business at a pace that will be comfortable for Microsoft, which has made no secret of its animus to Linux and desire to quash it? Microsoft partners with Novell to show a good interoperability face to its customers who use Linux and to prop up the No. 2 vendor against Red Hat, the dominant Linux vendor.
The day that Novell's Suse Linux business threatens Microsoft, and not merely undermines Red Hat, is the day Microsoft will pull its extensive financial support from Novell's Linux business. That same day Novell's Linux business will crumble, perhaps irreparably.
Unless.
Unless Novell can deliver a coherent strategy centered on Linux rather than merely friendly to Linux. For years Novell has packaged and repackaged a set of mostly stale offerings (e.g., Workgroup), pretending that they were part of a coherent strategy.
They weren't. The company was simply milking maintenance revenues as it sought to find a way forward. (I was in those meetings back in 2002 when the company discussed how to stanch the bleeding from maintenance declines. Those same conversations continue today, I'm sure.)
Then, as now, Novell's various product lines, and particularly Workgroup, offered little synergy, either in sales or engineering (i.e., the buyer of GroupWise is not the same as the buyer of Suse is generally not the same as the buyer of Identity Management).
Ongoing makeover
Novell is now entering a new phase of its repackaging makeover, but this one actually makes some sense. The company is calling it Intelligent Workload Management, arguing that a "new market [exists] for solutions that address the risks and challenges for computing securely across multiple environments."
Not surprisingly, Hovsepian argues that such an Intelligent Workload Management market "plays to the strengths of Novell--identity and security, systems and resource management, and our new Suse Appliance program."
Surprisingly, he may be right.
First of all, its wonderful to see Workgroup dropped from the discussion. Yes, it's Novell's biggest product by revenue, but no, it has almost no relevance for the rest of its business. Sell it off. Move on. The company has already offloaded much of its Workgroup development to India, anyway.
Second, Novell really does have a great deal of expertise in this area, with some assets that could go a long way toward helping it compete with the vendors that compete aggressively in the market: VMware, Microsoft, and increasingly Red Hat.
The key will be for Novell to really put Linux at the heart of its story, rather than simply using it as a conversation starter and loss-leader.
And yet, more is needed. Novell has the burden of a stale brand that it must shed. A few select acquisitions could help it to establish technology and brand leadership in the market. Companies like Reductive Labs (Puppet project for data center infrastructure management), VMOps or Eucalyptus (for building and managing private clouds), and/or Cloudera (for designing and analyzing large-scale data assets) could put Novell in the driver's seat on this market.
For the first time in years, the market seems to have moved in a direction that corresponds with Novell's rich technology assets. If Novell can make Linux the centerpiece of this campaign, bolstered by relevant, innovative technology, it will finally get its Linux business out of Microsoft's shadow and its overall business back on track.
The technology pieces are in place. It's now a question of brand and execution.
Cisco Systems, EMC, and VMware announced Tuesday a joint venture to sell a new integrated data center product.
The venture will sell and provide maintenance and service support for the product, which is called V-Block. It will combine EMC's storage equipment, Cisco's virtualized servers and networking equipment, and VMware's virtualization technology.
The deal had been rumored since September, when the Wall Street Journal reported the companies were working on a collaborative effort code-named Alpine. Talk of the deal heated up late last week and early this week.
The joint venture will market and provide maintenance for the product. But the cloud infrastructure will be built by all three companies.
Cisco and EMC already have a partnership to collaborate around Cisco's new data center platform, which the company calls Unified Computing. And EMC owns nearly 85 percent of VMware.
The companies will provide more details about the joint venture during a press call scheduled for 8:30 a.m. PT.
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Cisco Systems, EMC, and VMware are expected to announce this week a new joint venture to sell data center products and services using virtualization technology, according to report in the Wall Street Journal.
The new products called "V-Block" combine EMC's storage equipment with Cisco's new virtualized services and networking equipment along with VMware's virtualization technology.
In September, The Wall Street Journal reported that Cisco and EMC were in talks to form a new services venture code-named Alpine. V-Block may be this same service.
The products will either be sold as an end-to-end solution that companies can install in their own data centers, or customers will have the option of subscribing to a virtualized service, according to reports.
Cisco has been reselling EMC storage gear for years. It also owns a stake in virtualization software company VMware, which operates as a unit of EMC. So it makes sense that the companies would team up on a new services venture.
Earlier this year, Cisco announced a new data center architecture it calls Unified Computing, which includes new virtualized servers. It also includes coordinated support and software integration from partners such as Intel, Microsoft, EMC, and VMware.
Cisco sees the data center market as a multibillion-dollar opportunity. The company anticipates a greater need for storage and high-speed networking within data centers as more services and content come online. Cisco's corporate customers have also begun to virtualize their data centers to make those operations more efficient.
The joint venture will have its own CEO, according to the Journal.
Representatives from Cisco, EMC, and VMware have declined to comment.
The new joint venture is expected to be announced Wednesday before Cisco releases its fiscal first-quarter results.
Networking giant Cisco Systems and storage area networking company EMC may be teaming up to form a new joint venture to provide technology services to big companies, the Wall Street Journal reported Thursday.
Citing unnamed sources who have been briefed on the plans, the Journal story said the new joint venture, code-named Alpine, would target large businesses and would focus on installing Cisco server and networking gear and EMC storage equipment into data centers.
It's unclear when the joint venture might be announced, according to the newspaper. So far, Cisco has declined to comment on the speculation. And an EMC spokesperson provided a statement to the WSJ reiterating that the companies have always been close partners and will continue to be in the future.
Indeed, Cisco has been reselling EMC storage gear for years. Cisco also owns a stake in virtualization software company VMware, which operates as a unit of EMC. So it makes sense that the companies would team up on a new services venture.
What's more, Cisco has been making a big push into the data center market. Earlier this year Cisco announced a new data center architecture it calls Unified Computing. This new architecture includes new hardware from Cisco, namely blade servers, an interconnection "fabric," a chassis for the blade servers, fabric extenders and network adapters. It also includes coordinated support and software integration from partners such as Intel, Microsoft, EMC, and VMware.
Cisco sees the data center market as a multibillion-dollar opportunity. The company anticipates a greater need for storage and high-speed networking within data centers as more services and content come online. At the same companies are starting to virtualize their data centers to make those operations more efficient.
Cisco and EMC each already have service businesses of their own. EMC generated about $4.8 billion in revenue in 2008 from its services business, according to the Wall Street Journal. This was about 32 percent of the company's overall revenue.
The Journal also said that Cisco's services business generated about $7 billion to the company's coffers in fiscal 2009, which was about 19 percent of total revenue.
Most of the services that Cisco provides are for products that have already been sold. But the new joint venture would be different because it would entail designing and implementing products to fit into a data center. And as data centers become more complex, it makes sense that Cisco and EMC would want to develop a service to help customers design a data center that would use their products.
Traditionally, Cisco has relied on partners such as Hewlett-Packard and IBM to provide these services and help sell its gear to customers. But with the introduction of Cisco's new data center server products, Cisco's partners are looking more like competitors.
The move to create a services business looks to be part of Cisco's overall strategy to diversify its business. The company's bread and butter remains providing routers and switches to large companies and service providers to power the Internet. But over the past couple of years the company has begun to move aggressively into new areas like IP telephony, videoconferencing, and consumer electronics and home networking gear.
Cisco has also dipped its toe into other services markets. For example, with the acquisition of WebEx, the company now offers corporate users a hosted collaboration service. It has also recently launched a hosted Web service it calls Eos that allows media and entertainment companies to create, manage, and grow online communities by providing tools to create Web sites.
IBM is adding a new chapter to the high-tech industry's long history of "coopetition."
Big Blue is expected to announce on Tuesday that it plans to resell Ethernet switching equipment from Brocade, a much smaller rival to Cisco Systems. Under the agreement, IBM will rebrand and sell Brocade's enterprise IP networking equipment as its own through IBM's global sales force and authorized IBM Business Partners.
IBM's move is interesting for two reasons. One, it clearly pits IBM against one of its biggest partners, Cisco. And two, it puts IBM back in a market it exited 10 years ago. In a somewhat ironic twist, IBM will now be competing against the company it sold its networking business to in 1999. Cisco paid $2 billion for all of IBMs networking patents, products and customers. As part of the agreement, the two companies formed a strategic alliance that allowed IBM Global Services to resell Cisco's products.
No one knows for sure how much business Cisco has gotten from the deal. But IBM is the world's largest systems integrator, and analysts say that Cisco could get about $400 million to $500 million from IBM's sales each year.
When IBM sold its networking business to Cisco, it said it did so because the investment that was necessary to compete effectively in the changing networking market was too high. But now it looks like IBM sees opportunity in networking, or perhaps the company is feeling threatened as it sees its close partner edge into its market.
For years, Cisco has been expanding into adjacent businesses, which sometimes overlap with markets its partners are already in. For example, Cisco competes directly with Microsoft in unified communications.
But Cisco's most recent move to build and sell its own data center servers along with an entire solution for the data center that includes networking equipment has likely stirred the coopetition pot even further for partners, IBM and Hewlett-Packard, which also sell products designed for the data center.
"The relationship between Cisco and its partners IBM and HP has changed significantly," said Zeus Kerravala, a senior vice president at the analyst firm Yankee Group."Now when you hear Cisco talking about their big partners they are talking about Oracle and SAP, but not so much about IBM, HP and Microsoft."
Cisco's strategy in the data center, which it unveiled about a month ago, is to provide a total solution from soup to nuts that includes high-performance networking equipment as well as servers and virtual server solutions. Kerravala said that Cisco's new strategy has likely set a fire under its close partners to come up with a total solution of their own.
"I don't think the Brocade/IBM deal is a total reaction to Cisco's Unified Computing strategy," he said. "But I'm sure it contributed to it."
Brocade's CEO Michael Klayko admitted Cisco's aggressive moves in the data center market have opened some doors for the company from customers and other technology partners looking for options other than Cisco.
But he said the deal with IBM had been in the works long before Cisco announced the Unified Computing strategy.
"We started talking with IBM well over a year ago about this," Klayko said. "So I think part of IBM's willingness to work with us was part offensive. This is a $20 billion to $30 billion market we are talking about here. As for the timing of everything, we can't control when our competitors are going to bring new ideas to the market, but I can say that it has facilitated some good things for us."
IBM's choice of Brocade as a partner shouldn't come as much of a surprise either. The companies already have a similar agreement in which IBM rebrands and resells Brocade's storage area networking equipment. While rebranding and reselling products in the storage market is common place, it isn't in the networking market. And until now, Cisco has largely gone unchallenged in its core business.
For most of the past decade, Cisco has primarily competed against much smaller rivals in the networking and switching business. While these smaller competitors have been able to win some business, none have made a big dent in Cisco's market share. Even large competitors, such as Nortel Networks, have failed at taking on Cisco, which currently wields 90 percent market share in networking equipment.
But over the past few years, another partner-turned-competitor has also challenged Cisco's dominance. And for the past four or five years, HP has been building up its Ethernet switching business. And now the company's ProCurve products account for 10 percent of the Ethernet switching market and the company is No. 2 in terms of market share, Kerravala said.
He explained that the deal with Brocade finally brings a formidable competitor to Cisco in the high-end switching market. HP's ProCurve products can address the low-end of the market. And IBM will address the high end of the market with products Brocade bought from a longtime Cisco competitor Foundry Networks.
Even though companies, such as Foundry have been competing with Cisco for more than 10 years, they have lacked the sales force and marketing power to provide a real threat to the company.
But Cisco's new competitors, who also happen to be partners, could take a significant chunk of Cisco's business.
"Fighting against HP, Microsoft, and IBM is totally different from competing against small startups and smaller companies that have been around forever," Kerravala said. "The bigger companies can spend just as much as Cisco can on marketing and they also have the sales force to outrun Cisco."
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Waste heat from a new data center being built in London Docklands will power nearby homes and businesses, the company behind the project says.
The Telehouse West facility, which is due for completion in 2010, is being built by Telehouse Europe alongside the WSP Group, a sustainability consultancy. Work has started on the new data center, which will be nine stories high and provide 19,000 square meters of floor space.
In its announcement on Wednesday, Telehouse Europe said the $91 million data center would provide up to 9 megawatts of power for the local community by exporting the heat from the building's cooling systems. Green-energy systems and high-efficiency chillers are also being used to reduce carbon emissions.
An artist's rendition of the planned Telehouse West facility in London Docklands
(Credit: Telehouse Europe)"We recognize that any attempt to address the lack of space within the data center industry has to be undertaken with a level of environmental awareness," Bob Harris, Telehouse Europe's technical services director, said in the statement. "By making good use of the waste heat from the facility, we can minimize the environmental impact of Telehouse West and provide a valuable resource to the local community."
The Telehouse West heat-export strategy follows on from The Mayor's Energy Strategy, introduced in London in 2004 by the then-mayor, Ken Livingstone. That document called for large-scale planning applications to "include combined heat and power and community heating where feasible."
While the idea of combined heat and power was considered unfeasible for Telehouse West--data centers do not require extra heating--the heat-export element of the mayor's requirements was worked out in consultation with the Greater London Authority during the planning assessment stage.
The viability of this scheme was enhanced by the fact that a new housing development is also planned for the vacant site next to where Telehouse West will be built, according to Telehouse Europe and WSP's energy strategy report.
Telehouse Europe already has two data centers in Docklands. Its co-location facilities are used by many major ISPs and large companies.
David Meyer of ZDNet UK reported from London.
This was originally posted at ZDNet's Between the Lines.
Citrix said Tuesday it will add Web 2.0 push technology to its NetScaler traffic management and content delivery lineup.
Why? Because Web 2.0 apps are gobbling up more and more server computing power.
As rich Internet applications proliferate, data centers are becoming less efficient because they must stay connected to servers 24/7 to be useful. Those connections gobble up computing power.
Indeed, all of those widgets and Web 2.0 apps may translate in new racks of servers that need to be purchased.
Citrix said it will add a feature to NetScaler to push data to users so that software doesn't have to go to a server to get it. This is designed to offload the strain on servers.
Citrix said in a statement:
While Web 2.0 applications are ushering in a new era of enhanced functionality and responsiveness for end users, they are highly inefficient when it comes to server computing resources. In order to create a rich interactive experience, Web 2.0 applications need to maintain a one-to-one user connection to backend servers for extended periods, which severely taxes data center resources and adversely impacts performance and scalability.
That's an interesting point considering a lot of people probably haven't pondered how Web 2.0 apps can drain servers. Citrix said its aiming to lower server costs by 5 to 10 times the current levels by proactively pushing data to "create the illusion of real-time interaction."
Cisco Systems is picking up another data center start-up as it makes a push to diversify its business.
On Thursday the company announced that it plans to buy privately held Tidal Software for $150 million in cash. Tidal, located right in Cisco's back yard in San Jose, Calif., develops management software that automates business processes.
Specifically, the company automates routine tasks that often span multiple servers and operate independently. Traditionally, IT managers have had to manually schedule jobs that these servers undertake, which costs time and money. Tidal's software helps streamline this process.
Tidal counts Citibank and Microsoft as its customers, among others.
The acquisition fits into Cisco's strategy to expand its presence in the corporate data center. Cisco, which has long dominated the IP router and switch market, is looking to diversify its business to grow the company. Recently, the company moved from offering networking equipment in the data center to actually selling computer servers. The move squarely puts Cisco in competition with companies such as Hewlett-Packard and IBM. The company also plans to offer software to help companies better manage traffic to their data centers.
Cisco expects to close the acquisition of Tidal Software in the quarter that ends in July.
Judging by the heavy interest in last week's look at Google's previously secret server and data center design, I thought it would be useful to note that Google has now put much of the information on YouTube.
The disclosures came at a Google-sponsored conference on data center efficiency, which boils down to getting the most computing done with the least electrical power. The idea is core to Google's operations: the company operates at tremendous scale, tries to minimize its harm to the environment, and has a strong financial incentive to keep its costs low.
There are a number of videos from the conference online, starting with the tour of a Google data center. Google's servers, which the company itself designs, are packed 1,160 at a time into shipping containers that form a basic, modular unit of computing.
Also worth a look is the tour of Google's water treatment facility. Google uses water to cool the hot air the servers produce. Most Google data centers use chillers to cool the water by refrigeration, but one data center in Belgium is experimenting with the use only of the less power-hungry evaporative cooling.
Finally, Google published the proceedings of the conference itself--part one, part two, and part three.
... Read more
New servers and workstation from Dell.
(Credit: Dell)Dell is attempting to gain some ground in the server market, which is dominated by Hewlett-Packard and IBM. In order to grab a larger piece of the data center pie, the company has shoveled everything together into one announcement. And it's a big one.
There are 14 new products altogether: new Dell M-series blade servers, 11th-generation PowerEdge servers, Precision workstations, EqualLogic PS6000 storage arrays, and a host of revamped services.
The fact that they have joined competitors in taking on the needs of enterprise IT departments holistically--instead of piecemeal--marks good progress, according to Frank Gillett, principal analyst at Forrester Research.
"They're getting much more competent at engineering things together; they're not thinking about storage and servers by themselves anymore," he said.
It's all part of the "new Dell," according to Brad Anderson, Dell's senior vice president in charge of enterprise products. Five years ago, Dell was primarily concerned with cost-efficient supply chains. Now, he says, that same company sees "cost isn't just hardware and services, but the personnel around it."
To that end, Dell is stressing the services part of its new suite of products that are designed to save time and money. There's the decision to extend its ImageDirect offering to servers. A server can come with the image preconfigured, nullifying the need for a company's in-house IT people to install each image manually.
It's a service that Dell has previously offered for desktop and notebook PCs, but it's "an interesting twist" to offer it on servers, said Charles King, principal analyst at Pund-IT. It's something that will likely resonate with very large businesses.
"If you're buying a few dozen servers, it's not a big deal. If you're buying hundreds or thousands, that's where something like this can really make sense," said King.
Playing catchup
But the real question is whether any of this will help Dell move ahead of competition. There's a lot of ground to make up. According to IDC's most recent tally of the x86 server landscape, HP has just over 58 percent of the blade market, compared to IBM's 22 percent and Dell's 9.8 percent. Dell is slightly closer in its race in rack-mounted servers, with 27.1 percent of the market, just behind the leader, HP, who has 39.6 percent.
And just last week, networking giant Cisco Systems launched its own server push.
Anderson says there's still time to catch up. While Dell is starting to gain some ground in Europe and Asia, he said, there's much more to do. "It's a multiyear endeavor to catch up to HP in servers in Europe. It won't happen overnight."
In the meantime, Gillett of Forrester says that Dell is at least keeping pace with its competitors. "They're keeping up, but it's not clear that they're pulling ahead," he said. To be fair, however, for this new generation of servers, Dell is the first to lay its cards on the table. Not until IBM, HP, and Sun show their hands, likely after Intel unveils the Nehalem-based Xeon processors for servers, can a full assessment be made.
The timing of the product introduction does appear to be less than ideal. IT spending is expected to grow just 2.6 percent this year, according to IDC. But Dell is counting on customers that don't have a choice but to increase their data center capacity or replace broken and outdated equipment. As Anderson noted, employees need to be able to send e-mail, and a company's compliance obligations can't be neglected just because the stock market is down.
But is there ever a right or wrong time to introduce updated servers? asks Gillett of Forrester.
"One of our own clients said every year is a recession in IT. They said, 'This (economy) is nothing different for us. We always have to do a lot more with less.'"
The storage arrays and workstations are available starting Wednesday, while the servers won't be until next week.
