Novell's Linux makeover

BOSTON--It's been a fast-paced 13 months for Jack Messman.

The Novell CEO began an ambitious Linux overhaul of his company in 2003, acquiring SuSE Linux to provide an alternative to the fading NetWare operating system. Since then, the company has released a major new Linux edition, revamped sales, dropped its No. 2 executive and prepared a new version of NetWare: Open Enterprise Server, which comes with Linux built in.

The Linux transformation is going well but not completely as planned, Messman acknowledged. Among other things, Novell hasn't had the success it wanted in North America, where SuSE Linux trails rival Red Hat.

Messman's assessment of that weakness--and some progress fixing it--is borne out by a recent survey of 440 North American information technology managers published in January by securities firm SG Cowen. In a comparison of the percentage of sites that rely on different versions of Linux, Red Hat slipped from 86 percent in 2003 to 72 percent from November 2003 to January 2005, while Novell gained from 21 percent to 33 percent over the same period.

Messman, 64, has been a Novell board member since 1985--Novell's glory days selling NetWare--and became president and CEO when Novell bought his company, Cambridge Technology Partners, in 2001.

He sat down with CNET News.com's Stephen Shankland after his keynote address at the LinuxWorld Conference and Expo here.

Q: How would you assess the Linuxization of Novell?
A: When we did the merger with Cambridge Technology Partners and Silverstream, the strategy wasn't clear to our employees. They were still in this hunkered-down mode of protecting NetWare against Microsoft. Once we focused on Linux, they started to get it. In less than a year, we educated the entire staff. They embraced it. They saw how they wouldn't have to give up NetWare to get to Linux. They saw Open Enterprise Server as a good move. The morale is up. They see us in an offensive mode rather than a defensive mode.

We got a little bit of DNA from Ximian and SuSE that has permeated our entire company. Now we've started to cross-fertilize. We had a few emotional wars early on with KDE and GNOME (two competing graphical user interfaces). We solved that by putting them both in the Novell desktop and letting the customers decide.

So you think it's been good culturally and technologically. How has it been from the business side?
We used to have trouble (getting noticed). Linux was like a flashlight. It shined light on Linux and Novell. Talking about Linux...got us in the door...to talk about other things we had, like identity management. The common comment was, 'I didn't know you guys did that.' Customers are now understanding better what we're trying to do. The identity management thing was tougher. Initially, we were trying to sell it as a directory. People said, 'What the hell is a directory?' If you talk about identity management, they get it.

But how are you doing on revenue?
The key reason for getting into the Linux business in the first place was figuring out what to do with the decline of NetWare. We won't know whether that strategy is working until we ship the OES (Open Enterprise Server) product at the beginning of next month. We hope that will arrest the decline of NetWare. We're expecting that's going to happen. Even though revenues are up 2 (percent) to 3 percent, embedded that is a 10 (percent) to 15 percent decline last year from NetWare. If you separated out NetWare, the rest of the business grew at 10 percent.

One of the goals of the SuSE acquisition was to combine it with Novell's marketing power in North America to take on Red Hat. How is SuSE doing in North America now?
Red Hat had a seven- or eight-year lead. I don't think people switch that quickly in the infrastructure market. I think the differences we have are just starting to show up in the marketplace. We've only owned SuSE for 13 months.

The best advertising we did last year was the acquisition of SuSE Linux. Now we're in the process of bringing out the differentiators. The SuSE Linux kernel (the heart of Linux) is the same for everybody, so the question is what do you have that makes the difference? We've got

worldwide service, we've got a consulting organization, a software stack with file and print and messaging and directory, we offer indemnity that Red Hat can't offer, because we used to own Unix. And we have a patent portfolio they don't have.

We've been gaining every month. The progress hasn't been as good as I liked. Pricing has come down, so we don't see the growth that we would have. We've signed some (computer maker) partners, and it takes a while for them to get to speed. The number of software partners increased significantly from 46 in 2003 to 531 in 2004. We have 1,100 applications certified on SuSE Linux.

With our sales force, we've reorganized how we go to market. We were focused on maintaining the revenue stream from NetWare. Now we're focused on selling new stuff like Linux and identity management. We're in the middle of a two-year transition in our sales force. And the channel (sales partners) is really interested in Linux. They made a lot of money switching NetWare customers to Windows customers. Now they're interested in switching Windows customers to Linux customers.

You don't seem eager to enter the embedded Linux market (for computing devices such as cell phones or slot machines).
We've got so many opportunities. Do we want to take on another one? I'm not disparaging of the market.

Are you thinking of acquiring an embedded Linux company?
We looked at several companies who had products or tools in that area. Rather than decide yes or no, we decided it wasn't on our priority list.

Did you look at MontaVista?
They and Wind River and a number of others develop Linux for embedded applications. At this point, I'm neutral on it. The only thing that's a repeatable revenue stream (in embedded Linux) is selling the tools that allow (customers) to create the next embedded device.

What happened with the departure of Chris Stone (Novell's former vice chairman and top Linux executive) last year?
If you listen to the press, this was the guy who did everything at Novell and nobody else did anything. We had a difference of opinion about how the strategy would be executed. So it was better that we make a change. I think our organization is very happy with the change.

What was the difference of opinion?
To be fair to Chris--very talented guy, and I like him a lot. His style of operating didn't fit with the company at the time.

Are you looking for a chief operating officer or a replacement for yourself?
No. They're going to have to drag me out with my boots on. I love working for Novell. I helped create it more than 20 years ago. I hope the board will support me.

There are always going to be succession issues. We are always looking. We have some executive capabilities we need; some skills we lack. Novell has never been strong in the marketing area. We saw that and added Bill Hewitt.

We want to remain profitable, so we're not going to go adding helter-skelter new people or expenses. I'm not going to deny we're looking for executives, but I would be lying to say we have a specific thing we're looking to do.