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 Channel Futures

Open Source


Novell Executives: Judge Us By Our Progress

  • Written by The VAR Guy 1
  • March 22, 2010
After rejecting an unsolicited takeover bid on March 20, Novell had to communicate some quantifiable business progress during the Novell BrainShare conference this week in Salt Lake City, Utah. With that reality in mind, CEO Ron Hovsepian (pictured) and Chief Marketing Officer/Channel Chief John Dragoon offered The VAR Guy a financial and channel partner progress report on March 22. Here's a recap.

After rejecting an unsolicited takeover bid on March 20, Novell had to communicate some quantifiable business progress during the Novell BrainShare conference this week in Salt Lake City, Utah. With that reality in mind, CEO Ron Hovsepian (pictured) and Chief Marketing Officer/Channel Chief John Dragoon offered The VAR Guy a financial and channel partner progress report on March 22. Here’s a recap.

Alas, this is longer than a simple recap. It’s more of a book chapter, written while The VAR Guy sat fireside in a Marriott hotel.

By now, you likely know the back story: Elliott Associates, a hedge fund, recently launched an unsolicited $2 billion takeover bid for Novell — claiming the company wasn’t living up to its full shareholder promise. Novell rejected the bid on March 20, saying that offer didn’t fully recognize Novell’s inherent value.

The crux of the matter: Some pundits — including The VAR Guy — have openly wondered if Novell’s individual product pieces (SUSE Linux, Identity and Security Management, Collaboration Software, etc.) can really fit together to form a single, coherent company, growth-centric company.

The CEO Responds

Hovsepian pointed to Intelligent Workload Management (IWM) as a singular strategy that will drive Novell’s future growth. IWN, he said, plays to Novell’s strengths as an infrastructure software company.

Hovsepian also highlighted his record as CEO, noting that:

  • Non-GAAP operating margin increased to 16% in 2009, up from 10% in 2008, 5% in 2007 and a negative figure in 2006.
  • For Q1 2010, invoicing for Novell’s SUSE Linux business was up 75%, and invoicing for Novell’s Identity and Security Management business was up 36%.

Impressive. But The VAR Guy pressed Hovsepian on the topic of top-line revenue growth and overall net income growth — two areas of weakness for Novell.

Some pundits have called for Novell to more quickly exit legacy businesses to become a pure growth company. But Hovsepian says abandoning Novell customers running the company’s legacy products isn’t a sensible option.

Instead, Novell is preparing new products to energize established customer bases. A prime example: Novell Pulse is an enterprise social network and collaboration platform that will work with Novell GroupWise, Microsoft Exchange and Lotus Notes infrastructures. In beta now, Novell will promote Pulse to hosting providers by mid-2010, other Novell executives add.

Partner Progress

Meanwhile, Hovsepian says Novell has been busy rebuilding its partner program. In Q1 2010, more than 3,300 partner representatives completed Novell training, up from 1,900 partner representatives in Q1 2009. “I essentially shut down our own consulting business to ensure we didn’t have partner conflicts,” added Hovsepian.

At the same time, Novell has grown its SUSE Linux ISV base to more than 5,000 partners — up from about 400 ISVs three years ago, Hovsepian said.

In recent years, Novell has mostly promoted IBM, Microsoft as SAP as its key partners. One key stat worth noting: 70 percent of SAP customers running Linux choose Novell SUSE over other Linux distributions.

But during this year’s BrainShare, Novell has managed to move the conversation toward smaller, up-and-coming software companies like Groundwork Open Source, Ingres and Zmanda. All three of those companies recently embraced Novell’s SUSE Linux appliance strategy. And it’s a safe bet larger partners — IBM and SAP in particular — will be rolling out more SUSE Linux appliances. And Novell claims partners have built more than 280,000 software appliances so far.

Capitalizing on Controversy

During our discussion, CEO Hovsepian was careful not to say too much about the recent Elliott Associates bid for Novell. His standard statement: Novell will continue to fulfill its fiduciary responsibilities to shareholders.

Meanwhile, Dragoon shifts the Elliott Associates discussion from a financial matter to a marketing opportunity. “Elliott Associates has given us a tremendous opportunity from a marketing perspective,” said Dragoon. “Lots of eyes are on Novell following the Elliott Associates [bid for Novell]. Lots of things are being written. The world is paying attention to us right now. That’s a tremendous opportunity to share our marketing messages.”

Research and Development

Some of that marketing will involve new software developments. Over the past 18 months or so, Novell has considered more than 250 new technology opportunities. Employees were invited to write a two-page business case describing a new solution, the market opportunity and the planned route to success. That list was gradually narrowed down from 250 to 30 submissions. From there, Novell ultimately choice 2 projects to pursue:

  • Novell Pulse — the social media and collaboration platform for enterprises; it’s designed as a natural extension to traditional email systems like GroupWise, Microsoft Exchange and Lotus Notes. Dragoon notes that Pulse leverages some of Novell’s core strengths (collaboration, identity management) while pushing into new markets (social media).
  • Novell Cloud Security Services. Here again, Dragoon describes how Novell leverages a traditional strength (identity management and security) coupled with a new opportunity (the cloud).

Novell Pulse and Novell Cloud Security Services are “not 3- to 5-year hockey stick opportunities,” said Dragoon. “We’re looking for much more rapid iterations and milestones.” A case in point: Pulse is expected to contribute some revenue to Novell starting later this year, Dragoon added.

Changing Fast Enough?

No doubt, you can see and hear about Novell’s progress at BrainShare. Software partners like Groundwork Open Source praise Novell’s vision for launching the SUSE Linux appliance effort. And the Pulse development team seems intent on changing the world.

Still, Novell CEO Ron Hovsepian remains burdened with multiple legacy businesses that he isn’t ready to completely unplug or abandon. Doing so, he insists, would alienate Novell’s growing customer base.

Ultimately, Novell will be judged by long-term revenue and net income growth. The central question: Do shareholders truly believe in Novell’s progress and future prospects — particularly the Intelligent Workload Management (IWM) strategy? Our will outsiders like Elliott Associates continue to raise the prospect of a potential buyout?

Healthy Obsession?

By now, you likely have a separate question: Why does The VAR Guy spend so much time exploring Novell?

The answer involves a 25-year-old cub reporter who cut his teeth in this industry covering Novell for InformationWeek. The year was 1995. Novell was busy promoting buyouts and new strategies involving Digital Research Inc. (DR-DOS), Unix Systems Labs, AppWare, UnixWare and WordPerfect.

Fast forward 15 years. At some point over the past decade or so, the cub reporter somehow transformed into The VAR Guy. But old habits die hard. Our resident blogger is back at BrainShare. Wondering — once again — what the future holds for Novell.

Sign up for The VAR Guy’s Newsletter; Webcasts and Resource Center; and via RSS; Facebook; Identi.ca; Twitter and VARtweet.


Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Channel Programs Cloud Leadership Open Source

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4 comments

  1. Avatar Ian March 24, 2010 @ 6:28 pm
    Reply

    These new service oriented product are nice and I hope do well for Novell. I work for an organization that uses the legacy products. While I have no problem migrating everything from NetWare to Suse Linux, I do worry about some of the other products.

    The single product I have the most concern about is GroupWise. I have no experience with Notes, so I’m not sure about the extent of its capabilities. However, excluding notes, GroupWise is probably the most capable cross platform groupware suite available. I think Novell has squandered the product for many years. I’m hoping that they put more emphasis into developing GroupWise moving forward. An updated mobile sync server is a badly needed function that while on the way, is still causing them to lose customers because some CxO’s iphone won’t sync with GroupWise. The administration of the system is a 10+ year old design and badly outdated.

    Past that, their tool chain is an absolute mess and there needs to be a unified strategy that doesn’t perform like a sloth running wind sprints. Currently, if you’re not experienced with all of the quirks, multiple tools, multiple pluggins, multiple versions of the tools, you’re going to absolutely hate being new to the environment and having to manage it. Realistically, the people managing the environment don’t often have the final say in choosing a product, but they do generally have the ear of those that do make those decisions.

  2. Avatar The VAR Guy March 24, 2010 @ 6:38 pm
    Reply

    Ian: GroupWise took a few hits during a Qamp;A session between Novell Partners and Novell Executives. Novell promised to do better. But The VAR Guy has to concede… he feels as if Novell is investing “just enough” in GroupWise to keep it viable, while investing more in growth opportunities like SUSE, Intelligent Workload Management, Linux appliances, Identity and Security, etc.

    The VAR Guy thanks you for sharing your perspectives.
    -TVG

  3. Avatar Softwear Download September 1, 2010 @ 4:52 am
    Reply

    Nice progress.

  4. Avatar The VAR Guy September 1, 2010 @ 11:36 am
    Reply

    Softwear Download… Is that sincere or does The VAR Guy sense a touch of sarcasm?
    -TVG

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