Trying to tackle Microsoft head on has proved bloody and expensivet will it treat its channel well enough to make the most of its big chance? for Novell. More than two years ago, industry analysts were dusting down their mourning suits and Novell staff were lining up to be pall bearers.
But the company carried on, albeit with a distinct limp. Since then, Novell has grit its teeth, stuck its chin out and assigned its previous misguided strategies to the rubbish tip of networking history.
Novell's wheels of invention are in motion once more as it consolidates its message of repositioning itself as an internet software company. And Novell Directory Services (NDS) is set to be its winning card - to grab back some of the market share that it has, thus far, struggled to regain. But is the Novell message being heard loud and clear in the market? Does its channel feel confident that there really is a new Novell rising?
Admittedly, it's not easy to have been at the top of the software tree, to slide erratically to the middle and then land at the bottom with a resounding thud - for all to see. But Novell has done it and bought the T-shirt. Under the direction of its chairman and chief executive Eric Schmidt, for the past two years the developer has begun the climb all over again. Schmidt has trimmed its expenses, returned it to a modest profit and focused on its traditional strength - networking. He's also bolstered its business by providing software and services for network-centric customers.
The next thing for Novell to do is to make sure it can keep up the momentum. NetWare 5 and NDS technology seems to be giving Novell the confidence to keep up the pace. Schmidt, commenting on first-quarter results for this year - which, compared with the first quarter last year, show a 13 per cent increase in revenue - claimed the revenue rise was mainly down to technology. Novell claims NetWare 5 has outstripped sales of NetWare 4 in just six months from its launch, although take-up in the UK has been sluggish. But while NetWare is still central to Novell's strategy, the focus has shifted to NDS.
As Schmidt says: 'Novell's Directory Services is opening up product opportunities for the company. Looking forward, the stage is set for Novell and its partners to build innovative services for the growing directory market.' It's directory services software that Novell is banking on to redefine its position in the industry.
Those well versed in directory software will know that NDS has been at the heart of Novell's recovery strategy for the past three years or so.
But this year, NDS is all the rage. At Novell's annual Brainshare conference, it revealed a couple of technologies based on NDS that really did take the industry by surprise. They will take NDS as the industry knows it to the next level. Novell is building its evolving directory service as the backbone for extranets, e-commerce and supply-chain software. It is taking things further by offering an extremely powerful directory tool that is able to manage not only information about resources, but also user information and their access rights.
The crowd pleaser has been Novell's Digital Me technology, which pairs NDS with internet applications. A client-side application, it enables individuals to manage their 'digital identities'. Essentially, users can decide what information about themselves is shared with Websites and with other individuals.
Normally, these vaults of personal information would be contained in network directories at work or on Websites where individuals have registered.
The release of version eight of NDS - originally codenamed Scads (Scaleable Directory Services) but now more commonly known as Skads (Scaleable Kick Ass Directory Service) - enables individuals to manage their passwords and network privileges on systems at work or on the Web. It has the capacity to handle one billion entries and is aimed at the ISP market.
Novell's Internet Caching System, a stripped down NetWare kernel in which dwells a high-performance caching object file store, and the caching software from BorderManager will be licensed to hardware suppliers. First takers are Dell and Compaq, which are expected to bring out their server appliances later this month.
As Schmidt states: 'This is the year that Novell regains its market leadership as we deploy systems for more than just file and print.' If that isn't fighting talk, then what is? But Novell can afford to be a bit cocky.
Considering the past month or so, it seems this could be Novell's year, on the product front at least.
For the first time in what seems like an age, Novell has the upper hand against its old rival Microsoft. This is mainly down to the delay of Microsoft Windows 2000 and Active Directory Service (ADS) - Microsoft's alternative to NDS. It was due out in the first quarter of next year, but the delivery date has been shunted back. It could be another nine to 12 months before the market can get its hands on it.
This delay is seen by many industry observers as Novell's golden opportunity to gain some ground in the market with its NDS product and to give it some time to brace itself for when Windows 2000 is finally unleashed.
So is Novell making the best of this timely situation?
Derek Venter, marketing director at Novell, says: 'The take-up of NDS is down to a combination of two facts - we have a great product out now and our rival Microsoft doesn't. But that's not to say we are winning customers by default. We have customers who have always had Novell products and who are choosing NDS because it is technically a very good product.
But it has become clear with the Windows 2000 delay that anyone who seriously held the view that having a total NT environment was a good thing was misguided. You can't base a strategy entirely on NT and the delays have forced the issue.
'Realistically, there won't be any alternatives to NDS for the next two or three years. Even if Microsoft does bring out Windows 2000 in a year's time, many people will be too busy sorting out their post year 2000 problems.
Others will be waiting to see how Microsoft's product works before they deploy it. There's not going to be a sudden bang when Windows 2000 arrives. We're the only company with a scaleable directory services product on the market that has been tried and tested in the real world. There are 50 million people using NDS every day. Nobody has ADS.'
Brian Burke, ComputaNet manager at Dunn & Bradsteet, says: 'Novell will lose a proportion of its base to ADS, but it will not be as significant as people think it will be.'
A full and valid debate on the qualities of NDS versus ADS can't really be done properly until Windows 2000 appears. But that does not stop some from discussing the shortcomings in Microsoft's beta 3 version of Windows 2000.
Venter doesn't hold back on his view of ADS in Windows 2000. 'The problem is twofold. On a technical level, ADS is no competition. It's essentially replacing NT4 Domain, but it has tried to make it easier to deploy domains and has solved some of the management problems. But that's not what people need.'
Pointing out that Novell also has the upper hand because NDS can be used across multiple platforms, Venter says the fact that NT-centric environments can run NDS - by adding a NetWare server onto the system, but that does not mean it is independent of NetWare - is an advantage. It's all part of Novell's 'co-opetition' philosophy.
Unlike Microsoft , which insists its customers have NT and only NT throughout their systems, Novell has realised it is not in a position to demand such exclusivity from its customers. It has recognised that NT will be used for certain things, so it has had to resort to being flexible. Its products are so flexible there is not an environment in which it cannot be implemented.
That's the aim, at least. The end result of such co-existence is that customers have another option and Novell gets a healthier market share.
Despite the technical wranglings and the more or less undisputed title of technical expert going to Novell rather than Microsoft, the same cannot be said for its marketing and channel efforts.
Marketing has always been an area where Novell has faltered. It has recognised this as a problem and Venter is adamant that it is now putting its marketing right. 'We've done a lot of hard work and now we need to embellish and enhance it. We have to communicate the directory services. We have a bunch of leaders in their fields and we have to tell people about them.
'Novell is transforming into a marketing heavyweight. We have seen the impact marketing has had for the likes of Microsoft and we watch and learn.
Last year, we won a marketing award. We know it's one of the staple basics and we have invested in it.'
Marina Smith, research director at Datapro, agrees: 'I'm very encouraged by Novell's marketing effort. It has done well and has managed to make people think they need NDS. It has been a bit of a struggle and being seen as a failing company doesn't do a company any good, but people's perceptions are changing and that means its marketing is making headway.'
But the channel doesn't seem to hold the same view. Stuart Mansell, technical consultant at integrator Logical Networks, says: 'Novell would win the battle if it did more marketing. It has to woo the user base, let the user know it exists. Novell says it is doing that, but I haven't really seen any changes. Everybody has heard of Microsoft and Windows - it manages to get its logos everywhere - but who outside of the IT industry knows about Novell? If it says it is improving its marketing that's great, just as long as it realises it still has a lot more to do.'
Nitesh Bharadia, director of global consulting at Systems Group International, agrees: 'Not many people seem to know about NetWare and even fewer know about NetWare 5. Now, Microsoft is about to release NT 5 and plenty of people are confused. They also don't know what a directory is, so Novell has to make some kind of headway.'
Marketing is not the only thing that doesn't sit well with Novell's channel.
Its recent policy of selling its entire product portfolio over the internet did not please many resellers. The initiative has been set up in the US, with no official UK launch date as yet. The site, at shop.novell.com, allows customers to buy product at list prices. Some resellers have seen it as a threat to their business because they claim that only Novell's Business Expert accredited resellers can gain any real benefit from it by way of leads.
Stephen Uden, corporate and partner marketing manager at Microsoft, says: 'As well as the channel, Novell has a service and e-commerce business, which contributes a significant amount of revenue.
If a reseller comes across a large partner, it may find it is bidding against Novell. We have a services business ourselves, but our consultants are giving their knowledge away to resellers for free.
We are totally committed to the channel.'
Venter denies that the move to sell Novell products over the Web will be detrimental to resellers. He says: 'If you talk to UK channel members, the majority have an outmoded approach to business. They believe any change is bad. The channel has to realise that the business ecosystem is changing.
Using the Net will eventually mean they can focus on service and deliver expertise more cost effectively.'
Novell also has to convince the channel that it is investing in it. Bharadia says: 'Novell has improved a lot. It is making money every year and that can only happen if someone is buying from them. People are buying Novell out of choice.
I think there is no comparison between Novell's NDS and the ADS beta I've seen.
'But Novell does seem to fall short in improving its support for its channel and that's as important as anything else on the agenda. As an accredited reseller for Microsoft as well as for Novell, we get a lot of benefits from Microsoft. If we send someone on a Microsoft training session, I get money back in marketing credits. If I send someone to train with Novell, I get nothing back. And Novell exams are very difficult. It doesn't encourage resellers to get trained in Novell.'
Mansell at Logical Networks points out similar Novell shortcomings. Although, like Bharadia, he believes Novell has a technically superior product to Microsoft, he points out that Microsoft knows how to support its channel better. He says: 'Novell is bad at helping out its resellers. With Microsoft, if you ask for help it pulls out all the stops. It'll send someone along to support you in discussions with a customer, invite the customer to see the product on a site working, and throw in everything.
'If you want help from Novell you end up doing a lot of chasing to get someone to help you. Novell needs more account managers to get around to its resellers. It needs to rethink its channel attitude.'
Novell has set up a strategy that seems to be working for the first time in years, but it needs more definition. Amid its technological successes, it must remember that the channel will play an important role in its future, too.
Reinvention is the name of the game
The mid-1980s were heady days for Novell as its NetWare network operating system software ruled the Lan with a massive 80 per cent plus market share. Such a huge market share gave its senior management delusions of grandeur, and they pushed the company to take on not just the world, but Microsoft too.
A series of flawed acquisitions were made, including its purchase of WordPerfect to take on Microsoft Office. At the same time, Novell took its eye off its core networking business. In doing so it played right into Microsoft's hands. Microsoft moved quickly to exploit Novell's inactivity in the market.
It brought out Windows 95, incorporating extra networking features that superseded Windows for WorkGroups (the closest previous rival to NetWare) and continued to consolidate its Windows NT operating system.
Novell's WordPerfect buy failed miserably and was eventually sold, at a loss, to Corel. That was the start of Novell's process of steadily burning its product bridges.
On the people front, since Ray Norda founded Novell in 1983 there have been a few changes to the CEO line-up. Norda retired and was succeeded in 1984 by Robert Frankenburg. In August 1996 Joe Merengi took over, with John Young as chairman. In April 1997, Eric Schmidt became chairman and CEO, and he has led the company forward to recapture its former network-centric identity.
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