Five Reasons VMware May Buy Novell SUSE Linux
If the rumors are correct, Novell will soon be sold off in two parts. The alleged buyers are VMware and Attachmate, which has private equity backing. The big question: Does VMware really intend to acquire Novell’s SUSE Linux business? The VAR Guy doubted it a few months ago. But now, The VAR Guy has come around to the idea, assuming pricing and terms can be worked out. Here are five reasons VMware would pursue such a deal.
First, a note of caution: The VAR Guy has not confirmed Novell‘s alleged breakup and sale to VMware and Attachmate. The Wall Street Journal reported the speculation earlier this evening, and Novell essentially has been in play ever since the company declined an unsolicited takeover bid from Elliott Associates in March 2010.
Five Reasons VMware May Buy SUSE Linux
But let’s assume VMware is seriously interested in SUSE Linux. What’s the potential upside for all parties involved? Here are some educated guesses from The VAR Guy:
1. Fending off Red Hat: No doubt, Red Hat CEO Jim Whitehurst plans to attack VMware. The strategy involves Red Hat Enterprise Linux (RHEL) and Red Hat Enterprise Virtualization (RHEV). Within the halls of VMware, there is some concern about RHEV, which is based on the open source Kernel-based Virtual Machine (KVM). Whitehurst believes RHEL and RHEV can eventually topple VMware the way Linux toppled the traditional Unix market. But it’s going to take time for Red Hat to strengthen RHEV with management tools that match VMware.
Instead of allowing RHEV to gain some momentum, VMware could use SUSE Linux to launch a preemptive strike and attack Red Hat’s core Linux business.
2. Ganging Up Against Microsoft: On the one hand, Microsoft’s Hyper-V is attacking VMware’s core virtualization business. But VMware is returning the favor by positioning Zimbra — an open source email system — against Microsoft Exchange. Longer term, a SUSE Linux-Zimbra combo could become a compelling alternative to Windows Server running Exchange.
VMware acquired Zimbra from Yahoo earlier this year. And starting in August 2010, VMware started pumping Zimbra through the VMware channel. If VMware acquires SUSE Linux, it’s safe to expect VMware to train its resellers on the Linux distribution.
3. Gaining More ISVs: After a slow start, Novell gained considerable ISV momentum with SUSE Linux in the past 18 months or so. True believers include EnterpriseDB and GroundWork Open Source. With some aggressive management, VMware could rally those upstart open source companies against entrenched closed-source application providers like Oracle and Microsoft.
4. Gaining Application Development Tools: Have you heard of Novell SUSE Studio? If not, take a look. The tool is a hit with developers that want to write application appliances. And you can bet VMware would like to inject some virtualization into all those software appliances.
5. Gaining the Upper Hand in the Data Center: Microsoft and Novell have spent recent years integrating Windows Server and Novell SUSE Linux for the data center. Lots of CIOs have embraced the joint Microsoft-Novell pitch. Now, imagine VMware gaining a hold of that joint customer list and virtualizing all of those Windows-SUSE Linux deployments on top of VMware.
Simply put, Novell’s Intelligent Workload Management (IWM) strategy and WorkloadIQ align well with VMware.
Starting to get the picture?
Assuming the price is right, The VAR Guy understands why VMware allegedly is at the negotiating table with Novell. The VAR Guy will continue to track this story closely.
Plus, The VAR Guy will be back soon with Five Reasons Why Attachmate May Buy Novell’s management business.
Sign up for The VAR Guy’s Weekly Newsletter; Webcasts and Resource Center; and via RSS; Facebook; Identi.ca; Twitter and VARtweet.
UPDATE: GigaOm and Canonical COO Matt Asay say Novell’s patent portfolio may provide clues as to why the Novell sale process is taking so long.
I don’t agree with number 1. KVM is going to become as widely popular as Linux is today, simply because it’s a part of it. I don’t see how VMware swallowing a Linux supplier and trying to take on Red Hat will stop that. The only way is to make sure they have better virtualisation tools than Red Hat, but I can’t see that Suse or Novell has those.
As I’ve said before on multiple sites and in multiple places, the only way Red Hat will be toppled and Microsoft fended off is if a vendor grabs the open source software out there by the scruff of the neck and creates a Windows Server competitor out of it, without cutting off its traditional ‘Unix’ past.
VMware will get nowhere pumping uncoordinated and unintegrated products though its channel.
Big mistake for Novell if the break the company up into pieces. I will quite supporting and selling there products the second that happens. The will never have the market share they had in the beginning of the company, but as a whole they offer very good solution stack. If the break the company up, you will see the remaing vars drop support and quit trying to offer alternative solutions to Microsoft. Why do Linux people think Red Hat is so great? What do they besides the OS, and JBoss. Where is the management stack(Zenworks)? Where is the enterprise email system(Groupwise)? Where is the enterprise directory and identity managment(Edirectory IDM)? Where is the other Enterprise Linux manufacturers that provide a full stack of Microsoft Competing Products? Not one.
This is a very bad mistake if they do this.
Segedunum@2: The VAR Guy agrees – KVM and RHEV are going to gain considerable momentum. But let’s not forget: Even when Linux took off on servers, Windows Server also expanded its market share. So if KVM/RHEV succeed, there’s still an opportunity for VMware to grow revenues as well.
wcsdfw@2: The VAR Guy will reserve judgment until Novell announces potential sale strategy/strategies. Neither GroupWise nor eDirectory are big revenue growth opportunities going forward. Keep an eye on Novell Intelligent Workload Management strategy, Novell Cloud Security Service, Novell Cloud Manager, and other emerging organic growth efforts…
-TVG
Segedunum Says:”As I’ve said before on multiple sites and in multiple places, the only way Red Hat will be toppled and Microsoft fended off is if a vendor grabs the open source software out there by the scruff of the neck and creates a Windows Server competitor out of it, without cutting off its traditional ‘Unix’ past.”
Segedunum what do you think OES is? I love it when people who have never really looked at Novell in the past 7 years and make comments like this.
OES runs on linux. Can host a Microsoft Active Directoy Domain, many other features. But people still say the RedHat is a better buy. Novell has Enterprise email, Enterprise Desktop and Server Management(Linux and Windows), Access Manager, IDM, on and on.
This reminds me when one of the major developers for XEN Project who worked for Novell left Novell because of the Microsoft/Novell deal and went to work for Citrix. Like Citrix and Microsoft don’t partner together.
Get a clue.
“Segedunum what do you think OES is?”
If you think that’s a drop-in Windows Server replacement for the sorts of functionality that Windows Server has, with the tools to match, then you perfectly illustrate why Novell has effectively gone bust and is being bought out. That must be why Novell has leaked existing Netware users to Windows Server, Active Directory and Exchange.
I laugh when people talk about Novell like this, conveniently painting over the fact that this takeover is confirmation of their failure to replace Netware and fend off Windows Server.
“Like Citrix and Microsoft don’t partner together.”
So what? Microsoft is, or was, Novell’s direct competitor who was taking customers off them. Signing some deal with your closest competitor effectively asking them to be a bit nicer to you was never going to be a winning strategy.
Novell has effectively gone bust. Get a clue.
Segedunum: The VAR Guy agree and disagrees. On the one hand, OES isn’t really a big revenue opportunity for Novell. But on the other hand it’s unfair to say Novell has “effectively gone bust” after the company just announced quarterly revenues of $199 million and quarterly net income of $16 million. The results were slightly below Wall Street’s expectations but not a “bust.”
-TVG
Well, strictly speaking no, they haven’t gone bust, but given how their revenues are continuing to decline quarter after quarter (and that’s gone on for many years now) and profit is hard to come by they had obviously completely run out of ideas. There’s no way that kind of revenue fall and loss making was sustainable. That’s what would have happened, as with Sun.
OES should have been *the* biggest opportunity for Novell because that’s what was replacing Netware, and despite the Linux market with Suse Netware money still made up the biggest share of their revenue. Keeping Netware customers from jumping to Microsoft with something new and shiny was a top priority and they failed so badly it was painful to watch. It wasn’t unexpected because Novell failed before the Suse takeover, but you felt around that time that either they transitioned their Netware OS to a Linux based one, made all their software open source as with Red Hat and made a really first rate job of it or they were going to die.
Segedunum: You raise some legitimate points about Novell’s missed opportunities with the NetWare-to-something transition. The VAR Guy had a discussion with Jamie Lewis from The Burton Group (a consultancy) in 1993, at which time Lewis said the early 1990s were about file servers, but the late 1990s would be about application servers. He was right on the mark. NT won because it had a strong ISV/application server story, and because Novell was so late with the basics (like something as simply as TCP/IP)…
Still, that’s water under the bridge. Current Novell management is NOT responsible for management errors from the 1990s. Instead of continuing to market NetWare’s slow decline, Novell has gained some good momentum with SUSE Linux and the appliance strategy. Plus, Novell has managed to launch some intriguing products lately (Novell Cloud Security Service, for one).
The real head scratcher: Why hasn’t Novell’s identity and security management business boomed as more and more companies made security and information management top IT priorities?
-TVG
Some people do like to dwell on Novell’s past marketing and technology missteps without bothering to consider what Novell has actually been doing for the past 5 years. That said, let’s fast forward to the present.
Novell just released the flagship piece of their intelligent workload management initiative last week. Novell Cloud Manager provides a vendor agnostic “cloud-like” layer that sits on top of a virtualized enterprise data center. It does things like workload management, self-provisioning and reporting on resources, compliance logging, etc. VMware, which has historically only been interested in managing its own wonderful and expensive stuff is now re-casting itself as the “king” of private clouds in virtualized enterprise data centers. And in order to be convincing, VMware has to embrace what other vendors like Microsoft and Citrix are doing in the virtualization market. Novell Cloud Manager could give VMware an additional edge in this market. And since VMware and Novell have had a good working relationship over the years, why not think about cutting a deal with Novell to get some virtualized, cloud-like management tools you can sell to the virtualized data center customer?
The SUSE part of this is less certain, but it should not go unmentioned that Novell’s SLES distro has about 32% of the commercial data center grade Linux market and Red Hat RHEL has 60%. Novell’s share of this market has grown faster in recent years than Red Hat’s. When Novell acquired SUSE in early 2004 it was well-known in Europe but relatively unknown in the US. However, when it comes to choosing a well-supported, commercial data center grade Linux distro there is only RHEL and SLES. Ubuntu Server is a distant third in that competition.
Finally, VMware may be suffering from OS stack envy because Oracle and Microsoft both have their own OS stacks and their own cloud offerings. Remember too that Paul Maritz who runs VMware used to be a big shot at Microsoft, so he understands what it means to have an OS to call your own. We shall see.
That’s all very nice Tim, but unfortunately that reads a bit like a bit of a Novell marketing call.
The bottom line is that revenues are declining, the older ‘legacy’ software such as Netware still makes up most of their revenue but is steadily falling and Novell have done nothing over the past seven years to arrest that slide. Certainly, Suse’s separate Linux revenue of a few tens of millions is not going to replace the larger Netware market that Novell is still relying on to keep itself afloat.
Whatever happens, whoever takes Novell over is going to have to bolster that side of the business against Windows Server and create the first direct competitor to it – graphical tools, programming infrastructure and all. I see no evidence that anyone has the first clue where to start on that. VMware, like Suse, looks as if it is going to get crushed between Red Hat on one side and Microsoft on the other so pethaps they are reasonable bedfellows.
Today’s Novell is not about NetWare or competing with Microsoft for “drop in” replacement of Windows servers. That business is over and done with. NetWare had a great 20-year run (1983-2003) and Novell has moved beyond it now. Novell’s 5-year marketing, technical and licensing agreement with Microsoft that began in November of 2006 ended the acrimony that used to exist between the two companies. Today it is about “cooperative competition” and how well Microsoft and Novell support their mutual customers.
I think the survival of Novell depends on how well they execute on their cloud computing strategy. Novell has been modifying and developing the tools needed to manage identity and workloads in the cloud. Premises servers are an “endangered species” in the era of cloud computing. Even Mr. Ballmer at Microsoft announced last March that the company was “all in” when it comes to cloud computing. And Microsoft’s most recent world partner conference drove that message home in no uncertain terms to its thousands of partners.
I hope Novell can become a successful supplier of identity and workload management services in the race to the cloud. They have experience and the products but that alone may not guarantee their success. And with Novell’s BOD under pressure to do something positive about shareholder value, it is possible that Novell may cease to exist as an independent company. If that day comes, then we will have witnessed one of the pioneering companies in the networking industry leave the stage.
You are all missing something!. VMware has the potential to cane Microsoft and Citrix on their own, let alone with the help of a Novell acquistion or a Red Hat broadside. VMware have brought innovations to the market faster even than Apple or Google. Whilst I agree the cloud is the future, also is the demise of the desktop which has kept Microsoft and Citrix alive and defeated Novell. This is no more, VMware will command the datacentre with the help of EMC, Cisco, Dell and HP.
Everything will return to the mainframe / terminal days but in a virtual appliance manner where 3rd party companies will market ready packaged software appliances made up of new vendor manufactured software JEOS and open source flavorings in contrast to FATware and heavy licensing cost products. Servers, desktops, networking all virtualised in a very secure environment is the future delivering to portable iPad type devices, smartphones and small laptops.
The downturn and recession is not over, and the green agenda will rule. It will all be about cost savings in this uncertain world.
I would not be so bullish on VMware. While it is true that VMware has had a virtual monopoly on premises-based server virtualization. Success in that market does not guarantee their future success in trying to turn virtualized enterprise data centers into so-called private clouds. Microsoft and Citrix are allied against VMware in the VDI market and are driving their lower cost alternative into the reseller channel. Citrix will also release their bare metal Type 1 client hypervisor this week, while VMware’s alternative may not ship until next year. And Virtual Computer has already been shipping their bare metal Type 1 client hypervisor for over a year. Note that Citrix is also an investor in Virtual Computer. The virtual desktop market is clearly in play and VMware’s success there is by no means guaranteed.
I do agree that the “fat” desktop client we’ve been used to for decades is gradually losing out to smaller and “lighter” clients in netbooks, tablets and smartphones. Apple is a dominant player in this market today. Google is gaining ground on Apple and the release this year of Chrome OS on a Google netbook or tablet could be something for the rest of us who take issue with Apple’s interference in how their devices are used by their customers.
If VMware can turn their customers’ virtualized data centers into “cloud-like” environments they could have continued success by delaying the movement of enterprise data centers to public clouds. This may be why they are interested in what Novell can do to provide a “cloud-like” layer on existing virtualized data centers and not just those running VMware.
I think VMware’s objective is to build a complete “stack” of services, including the OS, to go up against both Microsoft and Oracle. Each of them has strengths and weaknesses. Oracle is a “street fighter” and works overtime to keep their customers locked into paying high licenses renewals. Microsoft is ubiquitous across organizations of all sizes and is plowing billions of dollars into building out their cloud data centers, while focusing over 70 percent of their development effort on the cloud. VMware has been making acquisitions outside their traditional focus, like Zimbra, and is looking at Novell to acquire SUSE and possibly Novell’s identity and workload management technology. I would not discount anyone’s chances for success at this point. And no calculation of this sort is complete without considering Google.
Tim, Segedunam, Appliance Man: The VAR Guy appreciates the fact that you’re offering up some educated opinions rather than starting a flame war.
Bottom line: The VAR Guy is VERY curious to see who (if anyone…) acquires Novell. The Oracle-Sun and Intel-McAfee deals suggest that it’s no impossible to predict IT Mamp;A buyers…
-TVG
@Tim “Today’s Novell is not about NetWare or competing with Microsoft for “drop in” replacement of Windows servers. That business is over and done with.”
Tim, you’re very, very deluded if you think that’s the case. Microsoft and Windows Server is still Novell’s primary competitor, because as I’ve pointed out, the business you think is over and done with still makes up the majority of their declining revenue.
The Linux business you think is the future is still a small drop in the ocean when compared with total revenue, and it is a market completely dominated by Red Hat. They need to make something that stands out one way or the other, and Linux distributors still delude themselves that competing with Windows Server isn’t important and replacing Unix systems is the future.
Novell have tried for years to back themselves into a niche where they don’t need to compete with anyone, and this proposed takeover is the result of that strategy.
[…] a quot;for surequot; deal. I found this article that was written on Sep 16th, 2010 called quot;Five Reasons VMware May Buy Novell SUSE Linuxquot;… after reading this I think it might be a really good thing for SUSE Linux but I still […]
Orange just adopted vBlock for Cloud Services. VMware/Cisco/EMC. I rest my case.
“The VAR Guy appreciates the fact that you’re offering up some educated opinions rather than starting a flame war.”
Trying not to. 😉
The point I’m making is that Novell has to really put the effort in and shore up its core operating system business in a way that simply hasn’t been done since Suse was taken over. They needed to stop leaking Netware customers because that’s where most of their revenue still is, and handle a move to a Linux base ‘Netware’ system gracefully. OES and its takeup tells us it is a long way short.
A lot of people, and Novell, seem to believe that they can simply let their Netware market die and move on to cool new stuff like being a pure Linux distributor (the revenue is still a small part of the whole) and cloud platforms. That’s nice, but throwing out all of your existing revenue and trying to replace it completely with something you’re not yet strong in is a massive risk that is doomed to failure. Despite the cool buzz words, people still need strong operating system support.
The proposed takeover tells us that Novell have simply got it all wrong over the past seven years.
Appliance Man@18: VBlock is certainly an initiative worth watching…
Segedunum@19:
Agreed: Novell has to make sure old NetWare customers don’t defect. But did the company really get it “all wrong” over the past 7 years? Or was CEO Ron Hovsepian handed a really, really tall challenge?
-TVG