Novell to bring home the bacon, according to Hovsepian

Stan Beer
Thursday, 06 July 2006 17:56

Opinion and Analysis

It is no secret that Novell has been losing legacy Netware customers. It is also no secret that incoming CEO Ron Hovsepian has been directed by the board to turn things around quickly – some say within six months. The question is whether putting a super salesman like Hovsepian in charge of the show is the answer or does the problem lay with Novell’s overall business strategy.

Hovsepian adamantly denies that he is just a salesman.

“My background started as sales but really the last 15 years of my career has been more in general management and some of the technologies,” says Hovsepian. “I would say that what you get in me is actually a very well-rounded technologist as well as someone who understands customers. I understand what customers are focussed on in their business. What I try to do is translate that over to how does that apply to the IT world that we live in and what is Novell’s role inside of there.”

Having said all of that, however, Hovsepian admits that his primary role is to bring home the bacon. The problem is that while more bacon is being brought home by Novell in its new businesses, even more is being eaten by competitors in its traditional businesses.

“We would like to see more revenue growth,” Hovsepian admits. “What I think the company has to do is focus on a couple of pieces of the equation. We have a very good story occurring with our Linux business and that’s at the centrepiece of what we need to get done. Our Linux business grew last quarter over 20%. Our other key line of business, our identity management services, also grew over 20%. But as you have pointed out, the Netware business has declined. When you wash the decline of a larger number against the growth of the smaller numbers, it doesn’t wash out completely.”

So what needs to be done?

Hovsepian says, “Our first big focus is on growing Linux even faster. Our second big focus is our Identity Manager 3 product actually grew last quarter at 40%. We would like to continue to help our products grow faster. With our core business, what we need to do is to continue the migration of that base.”

Hovsepian is adamant that Novell’s shrinking customer base has nothing to do with Red Hat winning away its customers, but rather customers going to Microsoft, who don’t want to make the migration to Linux.

“Red Hat is not competing with us for our old customers,” he says. “We’re competing against them for fresh starts, particularly in Asia. They have a strong foothold in Japan. They have a decent foothold in Australia. Actually in China, we’re now a market share leader on the server side.

“In the traditional business, where we can do better is making the migration. It comes in three steps. The first step is to migrate the customer contractually. We have migrated about 80% of our contracts to the Open Enterprise Server product. Now underneath that, we are tracking the number of pilots on Linux so that these customers make the migration from Netware to Linux. Most customers will run Netware and Linux for a period of time and then they’ll make the full migration over to Linux. So the steps are contractual conversion, then pilot, then full migration. Like all critical applications that takes time. It doesn’t happen immediately.”

According to Hovsepian, Novell is putting into action what needs to be done to arrest the decline of revenues from its traditional business.

“Breaking down that particular part of the revenue growth story, I have got teams in place and have gone out and surveyed over 400 of our customers who have done the contractual migration. We’re now working with them on the pilots and we’re going to continue to stay focussed on that right through the migration of Linux for three or four years or however long it takes.”

Hovsepian says that Novell differentiates itself from Red Hat by having a complete enterprise platform offering.

“Red Hat has an edge server story while we have an enterprise Linux story,” Hovsepian says.

“We decided to focus on having enterprise class Linux for our customers. That means a number of things. One is that we have to have a global 7 by 24 enterprise support structure, which we do with over 900 people trained in Linux. I can deploy people anywhere around the globe at customers’ data centres. Red Hat doesn’t have anything close to that.

“Two is that we have to have enterprise class Linux with certain sets of services and support built into the technical packaging. For example, we have built virtualisation a full six months ahead of Red Hat.

“The third thing is that if you’re going to be an enterprise Linux play for your customer, the goal is to have your customer on the one code base. In our Linux environment, the mainframe Z series from IBM will run our product, Intel processors will run our product, RISC-based processors will run our product; we have a kiosk offering, a point of service offering and so on.

“The last piece that you need is the desktop. We think the desktop market has five major segments and we have two parts to the desktop. What we’re telling our customers is we have two key offerings. We have a thin client offering and a fat client offering. The fat client is targeted at the traditional corporate user. The fundamental value proposition there is we offer end-to-end Linux on the exact same code base. We’ve spent a lot of time on interoperability. We have built a set of functions that I would argue are equivalent but with better functionality at one tenth of the price of Microsoft’s productivity suite and operating system.”

Hovsepian believes that the current high interest level in Novell’s Suse Linux Enterprise offering on both the server and client side will reach a peak when users are faced with a choice of upgrading to Windows Vista.

“Vista is going to be a major migration and the question is what do I want do when that migration occurs,” he says. “I believe that Windows is not going to go away but, for a certain segment of our customers, I believe we can help our customers get a better value proposition.”

In a couple of weeks when the desktop version of Suse Linux Enterprise hits the street, potential users will be in a better position to be able to judge that value proposition for themselves and whether Novell under Hovsepian can bring home the bacon.