Novell signed an agreement to acquire SuSE Linux, the second largest selling commercial Linux brand worldwide. The deal promises to boost the fortunes of SuSE and increase competitive pressure on Red Hat, which is the leader in the commercial Linux segment and give Novell a new lease of life.

Novell has been readying itself for the Linux foray in a planned manner through 2003. First it announced Linux-compliance of all its services in April, closely followed by the rollout of the Novell Certifed Linux Engineer (CLE) program. In August, Novell completed the acquisition of Ximian, the leading provider of desktop and server solutions that enable enterprise Linux adoption. With this Novell’s commitment to the open-source movement got affirmed, especially because two key initiatives–GNOME, a project to provide full-featured Linux desktop and Mono, an open-source initiative to allow applications developed in .NET to run on Linux, Unix, Windows and other platforms. Netware 7.0 was also made available on two kernels—the native Netware and on Linux.

With the Ximian acquisition, Novell’s commitment to the open-source movement was affirmed

Then in September, the company rolled out Nterprise Linux Services that helps existing Netware users the option to maintain their investments in Netware, move to Linux, or run business applications on both Netware and Linux. in November, this was capped with the announcement of the SuSE acquisition. Adds Harish Mehta, managing director, Onward Novell, "In 2005, Netware 7.0 will be ported on Linux completely."

What does this line-up mean to corporate customers? Primarily, it offers them a plethora of choices. Current Netware customers can choose to migrate to Linux. Those who have both Linux and Netware can integrate the heterogenous environments, and those who are currently using Linux for peripheral applications but Netware at the core can move Linux to the core. Older Netware users can migrate directly to Linux.

Says Prakash Advani, Sr VP, Netcore Solutions, an open-source solutions vendor, "Novell is definitely more pervasive in the market than an IBM. Therefore Novell can create a base of Linux users in the mid-market segment that possibly IBM might not have been able to because of its focus on large accounts".

Adds Mehta, "Of course, there is whole new base of new Linux users migrating from other environments. The bottomline is the array of choices available and the value that comes in from the services and support associated with it".

Clearly, Novell’s Linux push and support for open-source would alter the landscape of the Linux market and the open-source movement in the country. Says Mehta, "Novell is the only $1-billion-company that offers the full range of Linux distribution and services around it across the layers of the enterprise and a worldwide ecosystem to support it. Now that’s a legitimate claim to a market that exists and is addressable by a company of our size."

As for competition with Red Hat, open-source proponents don’t believe that Novell’s focus would be to compete with Red Hat. For one, it is against the open source religion and then SuSE has drawn heavily from Red Hat by way of open-source development. Says Advani, " Together they would look at growing the pie and compete with Unix, Solaris and Windows, rather than compete with each other."

For India, Onward Novell asserts that the company has a sizeable base of Netware users that presents an addressable market for migration to Linux, but does not put a number to it. It would definitely require some effort in addressing the existing user base. Not all, especially amongst Indian public sector banks, which form a large chunk of Novell’s business, would migrate easily to Linux. Says V Chandrashekhar, general manager-IT, Bank of Baroda, "We are Netware users but would eventually migrate to core-banking system which are mostly Unix-based. Linux as an alternative is there but it may not get to the core-banking area. Even now, we use Linux for intranet and e-mail but the core-banking software vendors would influence what we base our applications on."

But with 15000 CNEs (certified Netware engineer) getting re-skilled and retrained in Linux along with a base of 5000 resellers, Onward Novell sure has the market reach and the developer base to make a dent into the market.

As a good open-source proponent, Novell has also announced NForge, a technology collaboration website similar to SourceForge, that allows incremental involvement in open-source development community along with a review board.

With all this going in their favor, will Novell be able to deliver? If history is proof, then Novell’s chances are not much. Novell is not new to acquisitions, sell-offs, and re-arrangement of portfolios; it is a veteran at it having done it for over ten years now.

The reality is that the company has not been able to make much out those acquisitions. After having exited the Unix market, Novell tried going after Microsoft (except on the desktop OS front which it had done earlier with DR DOS) but corporate buyers could not clearly place Netware rightly in their scheme of things.

But the SuSE acquisition surely gives Novell another chance to make it big in enterprise software. Look at it this way. After many years now, Novell is in sync with a leading trend in the market—the increasing influence of Linux. There is therefore, at least technically, a chance that the company might be able to make it.

Says G Balakrishnan, director, Ontrack Solutions, a long time Novell reseller, "Definitely the Linux space is something that every solutions company now aspires to be in thanks to its popularity. It gives us an opportunity to look at the prospects of selling Linux to the market."

The other significant point is that IBM, which is the most vocal proponent of Linux amongst server vendors, has announced that it will make a $50-million investment in Novell.

Novell, with the backing of a company like IBM, would find it easier to make SuSE Linux a success in the enterprise market. Reportedly, IBM and Novell are planning an extension to SuSE’s agreement to support all families of IBM servers and are planning a joint marketing and support relationship. Relationships with other server vendors with whom SuSE had relationships are also being reactivated, company sources say.

Relationships are going to matter more than ever to Novell now. These relationships have to be articulated well in the market place and translate into go-to-market strategies. And this includes application software vendors too, like what V Chandrashekhar said earlier—Novell will have to get its act together in the area of marketing. A Novell reseller who did not wish to be named confirms, "Novell’s weak point has been its marketing and its ability to execute at speed."

The company was never short of good products or technology. The Achilles heel was strategy and positioning. If the company has to leverage its current gains, then executing well on the strategy and positioning front has become all the more critical.

That is, it all finally depends on how Novell positions itself for the enterprise market. If the company continues to straddle both the horses (Netware and Linux) for too long, then the sum would get lesser than the parts.

All it now calls for is some agility, smart and high impact marketing, and leveraging on partnerships. Or else, history would be repeated.

Iishwar Daas Nair in Mumbai

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