Inside the new Novell

This is a scenario Novell cannot afford. But here is where Linux could play a crucial role. Enterprise networking customers may be more likely to consider offerings from Novell if the buy-in cost doesn’t include supporting a niche OS such as NetWare. More importantly, the technologies acquired from Ximian and SuSE put Novell in a position to go after an entirely new market: the desktop.

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Capturing new markets

“We are in the desktop Linux business; there’s no two ways around it,” says Novell’s Nugent. Whereas there may not be much profit in selling Linux desktops to the home-enthusiast market, Nugent sees real potential in the corporate sector.

“That chunk of the market is speaking very loudly,” Nugent says. “And what they’re saying is, if Linux can get to the point where it is a viable, lower-cost alternative and roughly equivalent in terms of capabilities — [for example,] a word processor that behaves a lot like Microsoft Word or WordPerfect or whatever — then they’re happy with that.”

Unfortunately, Novell’s chief competition on both the server and the desktop is Microsoft. Convincing IT shops to switch from Windows to Linux is a hard sell, especially given that open source office suites are available for Windows and that hard figures about switching to Linux desktops — including training and systems management costs — are elusive. At the end of the day, those costs could easily outstrip any savings on the OS software itself.

So, although it seems clear that a market for Linux and open source in the enterprise exists, Novell must find a way to capitalize on it. SuSE and Ximian were good choices, but Novell has acquired companies before. It bought rights to the Unix operating system from AT&T in 1993, only to sell them two years later. It picked up WordPerfect and Quattro Pro in the mid-90s but never made a splash in desktop applications. And although it acquired Web services vendor SilverStream in 2002, it still hasn’t emerged as a serious contender in that market.

The greatest beneficiaries of Novell’s recent moves may be its open source acquisitions themselves. “I’m a happy employee,” says Ximian CTO Miguel de Icaza. “Novell already has a massive distribution channel, not only in the [United States] but also in the world. All of a sudden going from getting one big customer to having a list of 20 people who want to deploy — that’s a big change.” Whether it’s a change that translates to profits for Novell, however, remains to be seen.

It’s all about execution

Despite the challenges facing Novell, Burton’s Hein is optimistic. “I’m glad to see that they’ve consolidated their desktop strategy under [Ximian’s] Nat Friedman,” he says. “That, to me, is a positive sign. Now, it’s one thing to have your reporting structure on paper; it’s another thing to see how this thing actually pans out.”

Indeed, Novell faces the daunting task of integrating its new open source divisions with its core business practice. So far, despite SuSE and Ximian press releases issued under Novell letterhead, there’s been little to indicate a comprehensive and coherent strategy that unifies the open source culture with Novell’s corporate one.

The Yankee Group’s DiDio fears that, rather than solidifying its product direction, Novell has devoted too much energy to side issues, including a costly legal battle with The SCO Group over ownership of intellectual property related to the Unix OS.

Time may be running out. The latest research from The Yankee Group suggests that eight out of 10 businesses will undergo a major systems upgrade in the 2004-2005 time frame. If Novell doesn’t produce a full-fledged strategy soon, it could mean countless missed opportunities.

“Even stalwart MIS departments, which would love to go from NetWare to SuSE Linux, are not going to be able to convince their CxOs to commit to the Novell platform until there is a fully fleshed-out product road map, both tactical and strategic direction, and a full list of what everything is going to cost,” DiDio says. “Is this Novell’s best chance in a while? Yeah, but I’ve seen them blow so many good chances. It looks good on paper, but they have to execute.”