Q&A: Novell Top Execs Sound Off On SUSE Linux Acquisition - InformationWeek

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Q&A: Novell Top Execs Sound Off On SUSE Linux Acquisition

Novell Chairman and CEO Jack Messman along with Novell Vice Chairman Office of the CEO Chris Stone spoke with CRN editors about the completion of the $210 million acquisition of SUSE Linux.

Novell Chairman and CEO Jack Messman along with Novell Vice Chairman Office of the CEO Chris Stone, spoke with CRN editors about the completion of the $210 million acquisition of Suse Linux, solution provider opportunities resulting from the deal, and other issues at Novell's offices in Waltham, Mass. Below are excerpts from the interview.

CRN:You come from a solution provider background. As you go forward how does that community fit in with Novell?

Messman: Suse has very little presence in the United States and we are creating another whole revenue stream for the channel in that they can sell the Suse Linux product. But service is a very important part of that, and technical support. They can provide most of that. That aside, solution providers can take from us and sell. We don't believe that we can reach all of the customers ourselves. We don't believe the channel or the solution providers out there have the ability to develop the solutions like we do. So when you take those two factors, we need them to help sell solutions. And the first big solution that we have right now is identity management. And the accounts that we have done business with so far have given us feedback that says that this is not a one-time engagement. You have to do it in stages, and it takes four or five years. So this is a huge revenue stream that we are creating for channel partners and solution providers. Sometimes [the channel will] have the size and skills necessary to do that all themselves. We will actually provide them our methodologies for how we are going to do secure identity management. Many times what happens is they'll get their foot in the door because they have the local relationships and they'll bring us into support them. I think in terms of the solution providers that is probably more the way it is going to happen.

CRN: Do you have a business partner council.

Messman: We have a partner council. Chris [Stone] and I go to those meetings. We listen to what they say, and [we] try to respond by providing them with the types they need. We have made some fundamental changes in last two years in dealing with the channel. We got started with the channel in the early '80s, it was very much a box fulfillment game. As the fulfillment became less box and more electronic, we didn't change our model and continued to pay them for fulfillment. We ended up doing the selling and they ended up doing the fulfillment. We thought that model was not working for us. So we have cut back on what we pay them on fulfillment since they are not spending any money to do that anyway, and paying them more for demand generation.

CRN: What you offer the channel is available elsewhere. How do you get them to push what you have over someone else?

Messman: Well I think there are things they can't get anywhere else -- and that is Linux. There is some stuff sitting on top of the Linux kernel that we have that comes out of NetWare. The Networking Services that sit on top of NetWare [will now] be in what we call Enterprise Linux Services on top of the Linux kernel. They can't get that anywhere else. And we are going to be developing, in collaboration with them, solutions that build on both the legacy products and the Linux products.

Stone: When the channel was successful with NetWare it wasn't NetWare it was file and print.... Now they can do it all over again but on Linux. The problem with Linux in the past is that you had to piece it together from the Open Source community.

CRN: Are you going to use more open source app servers?

Stone: Yes we are.

CRN: What about a database acquisition?

Stone: We are not going to buy Oracle if that is what you are asking.

CRN: What about mySQL?

Stone: We don't need to compete with our ISVs and our friends. There is a line you draw. We are the Linux value line between where it is infrastructure and services and where it is applications. We need to focus on what we do best.

Messman: We would probably make a few of our yet-to-be-announced partners mad at us.

CRN: Talk about who are the unnamed partners?

Messman: We have announced the IBM deal. Now that we have the [Suse] deal closed, we are going to close the [IBM] investment and close the extension of our deal that they had already with Suse Linux. We'll expand that to include the new things we are going to do. HP was in our press release this morning. They are very supportive. And we have been talking to everybody else that you would think we'd talk to: Dell, Oracle and whoever else is out there. One thing that has really become clear to us is that everybody wants only two Linux distributions. They don't want one -- that gives them the Microsoft problem all over again. And they don't want three because porting your hardware and software to another [Linux] disty costs a lot of money. So there [will] be two. They ought to have relationships with both Red Hat and us. And so we expect that we will have relationships with all the major ISVs [independent software vendors] and IHVs (independent hardware vendors) out there. We just couldn't get them all done by today.

CRN: Are you still in some level of acquisition mode?

Messman: I think the big ones are done. There may be what I would call fill-in deals, a piece of technology. If you look at what was of concern to CIOs, the first thing of concern was support. Heretofore, they saw a small company called Red Hat and a small company called Suse, neither of which had much of a track record. And that gave them some discomfort. We have solved that problem because we have been doing operating systems for 20-some years.

The second most important issue is applications running on Linux. We have a couple of initiatives going on there. You know about our Mono product, which is basically allowing .Net developers to develop on .Net, deploy on Linux. I think that is important. But there is a whole group of companies out there now writing what I would call adapters, connectors and emulators that allow the applications that run on Windows to run on Linux. Some of those have to be part of our strategy. We have to get more software working on Linux to accelerate the adoption of Linux.

CRN: What about moving up the stack in terms of the EAI [enterprise application integration] tools around SilverStream?

Stone: We announced ExteNd 5.0 today, which is a closer and tighter integration with the identity product line. Both engineering teams now work in one organization. We are also investigating one single IDE use, which we have not announced publicly. We keep moving closer and closer to the developer.

Messman: The real thing that I try to get customers to think about is that we learned from Y2K that you don't ever want to rewrite anything. It is too expensive. There are too many risks. This group of products and tools allows you to repurpose everything you've got without having to rewrite it. We think that is a very powerful integration tool that allows you to integrate legacy systems and legacy applications. It also has another tool that allows you to interact outside the firewall. And another tool that allows you to change workflow. And you put those altogether and it allows you to create a Web service. So the basis on which we bought SilverStream was to be in the Web services business. It just so happened that those tools worked for identity management as well. It is a very powerful suite of products and I would hope with ExteNd 5.0 coming out that more solutions providers would recognize the power of that tool allows them to do integration work, more cheaply and quickly. We actually ran across the product when we were looking to see which kind of a tool we could use to make our client work at Cambridge [Technology Partners] go quicker. We found we could write applications in half the time using that set of tools than using conventional tools.

CRN: Do you have a dedicated plan in terms of product pricing underneath IBM and BEA in that space?

Messman: We got SilverStream to get those tools. We happened to get an app server along with it. We didn't go after that app server, but now that we've got it we use it. That set of tools now works with WebSphere and WebLogic.

CRN: Everybody, including IBM and Veritas, is talking about on-demand or some version of utility computing. We don't hear those terms from you.

Messman: It's what we call resource management. That is basically the generic term for all of that. You have autonomic computing, utility-based computing. It is the dynamic allocation of assets among users, whether it be CPU time or storage time or whatever. But when you get down to the very low level of that stack of products that create that ability it is called resource management. This is where Zen Works resides. And we have now Red Carpet that does the Linux side of that. I think anybody who gets into that business is going to want to manage the desktops, manage the patches, manage the inventory of what is out there -- and be able to change it out and move it around. We have a foundation. There have been people who have approached us who are interested in autonomic computing and utility computing who would like to buy that from us.

CRN: What is going to happen to Debian and other Linux distributions?

Messman: They will be niche distys. There is a little bit of a story here. After we announced we were going to do Enterprise Linux Services [last March] and then made the Ximian acquisition, we soon found out that we needed to have a [Linux] distribution. So we said, 'we are as good as those guys are, why don't we go put it together ourselves?' As a matter of fact the SCO thing had surfaced and we said hell we'll call it Kleenex. So we had the name. So Chris [Stone] put together a consortium of people rumored to be the Chicago 7. They liked our idea. They knew we had the capabilities. But after they all agreed that we would be ideal to do that they said 'why don't you guys go buy one, so we don't have three.' Red Hat was out of sight in terms of its valuation. And shortly after that conversation Suse became available. So we bought Suse.

CRN: What people like about Suse is that the architecture is more extensible than what Red Hat offers.

Stone: Yes but to be a little more clear is the way Suse works is that when they build the operating system they actually do it at the very last moment. So that you can build it across nine different architectures in 24 hours, whereas what Red Hat does is they will fork an implementation of the code on a particular chip architecture at different points. So we support nine. They'll support nine, but nine different implementations of Red Hat. That is the difference.

CRN: What is the bottom-line investment you are making in the channel in 2004 compared to last year?

Messman: It is up but I have to go get someone to get me the answer. It is up in terms of energy. In terms of putting the entire solution together I don't think the channel is yet ready for that. I don't think they have the consulting skills necessary to deal with the customer at a very high level on what their requirements are, some of them do but not all of them. That is why we are prepared to make our methodologies available to them. This is unheard of in consulting. You never tell somebody how you do it. Basically the way we do consulting engagements is we go out, we do a job, we come back and look at it and say is that applicable to more than one person. If it is we then create a methodology around it so we can replicate it because you make money when you replicate. You don't make money the first time.

CRN: So the playing field between your consulting guys and the partners will be even?

Messman: We hope to make it more even. Our guys don't like that but we are now educating them that we don't want them calling on the accounts that the channel calls on. We want them calling on a different set of accounts. You have to go back a little bit in history to show we have made some significant changes here. Novell was built on the channel. We built the channel. The problem was our products became very complex and the channel couldn't sell them in large complex situations, some people could but not enough could. So we decided we were going to hire a direct sales force. [But] we made some very key mistakes. We hired the channel's key salesman as our salesman. The very people we said couldn't sell it at the enterprise level, we hired to sell it at the enterprise level. So what did that do? First of all we didn't get the salesman we wanted. Secondly we made the channel partners mad at us, and third Microsoft saw that happen and moved in.

Now what are we doing? We are telling our guys we don't want you selling the small and medium-size business market. We want that turned over to the channel. Now there is always going to be a definitional issue as to what is small and what is not and what is big and what is medium. But within the parameters our guys have set up, they have to turn that business over to these solution providers. And if they want to get some credit for it they better make sure that solution provider gets the training they want and gets the methodologies they need on our solutions to make that happen. So we have people working on that. You ask me how much money is that, I'd have to go through and pick up 50 percent of that consultant's time and 30 percent of that engineer's time to come up with it. But there is nothing more clear in my mind than we need to leverage the channel to be successful. We lost that leverage some years ago. And we are going to get that back.

CRN: Red Hat has said they were going to announce a major channel program by the end of 2003 and did not. What is Novell going to do to attack that vulnerability?

Messman: They haven't been very channel friendly. That is an opportunity for us. We have a history of dealing with the channel and as you heard me say I want to leverage the channel. And Linux gives us the perfect opportunity to reinitiate that program. We believe that Linux is a very good opportunity for the channel. We have increased the demand agent fee, encouraging them to sell [Linux]. And we are prepared to train them on Levels one and Levels two support. It is in our own selfish interest to do that.

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