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Bruised Novell plans one Net bounce back
"It's a new tactic of Microsoft to try to stop us," cried Novell's COO Stewart Nelson as the
power for the whole city of Nice failed just before the start of Novell's Brainshare meeting.
But it's not Microsoft that's Novell's problem right now; it's Novell's own failure to sell
enough that is plaguing the company, as the recent profits warning showed. It seems that
the pesky customers don't have problems that can only be sorted out by upgrading. Of
course they're not deserting much either, but that's not much consolation.
Nelson says Novell is at the beginning of the third phase of its history. Phase one from 1984
to 1996 was the age of the LAN, where network administrators were the target. Phase two
was the era of network management, when the enterprise network was the focus. The third
phase is the era of network services, and servicing the Net-based economy. He hastens to
add that this doesn't mean the end of NetWare - that would remain the foundation - but
Novell is trying to do to software what Cisco had done for Net hardware.
Novell's problem, he admits, is that it hasn't talked about this in an interesting way. Although
Novell seems to have sorted out a viable strategy and is now executing it, CEO Eric
Schmidt says it has "taken too long to get to this point". Right.
Novell claims it supports more than 80 million users worldwide, that they have 3.8 million
servers, and that 405 of the Fortune 500 companies are Novell customers. The company
insists that Linux is growing at the expense on Unix, not NetWare, so that wasn't an
explanation for the financial woes. When we asked whether Novell had been stuffing the
channel again - a favourite trick some years ago to "make the numbers" - we were told in
no uncertain terns that this was not the explanation either. It looks as though the blame is
going to be heaped on the backs of the now-departed marketing team, and the wrong
channel strategy. eDirectory revenue hasn't started to produce any revenue yet because it
will take one to two quarters for pilot cycles, but the pipeline is full of directory deals,
Schmidt said. A cheery factor was that in heterogeneous environments - and essentially all
were for Novell - the deals were bigger. Nelson dismisses the view that Novell's price
increase at the end of October had adversely affected revenue.
Novell - industry standard marketing black hole
Novell has been talking about doing something about its marketing since the days of
file-and-print - and either it's done very little about it, or fluffed it again. Many believe that
when Microsoft kindly provided such a long window of opportunity for Novell before it
produced Windows 2000, Novell blew it by not marketing successfully enough during this
period. Schmidt did remark that he thought Microsoft's single platform solution would not
work in the future. He was relaxed about NGWS and said he was "looking forward to seeing
it when it ships". In retrospect, it seems that Y2K folly also took the focus away from
network upgrading last year - and that anyway, Novell's stuff just worked and its pragmatic
users weren't going to upgrade until there was a business reason to do so. Well, Windows
2000 finally arrived - Eric Schmidt quipped he was still waiting for what was promised for
Cairo - and still Novell is in transition, with the prospect of further transition to limitless
storage and infinite bandwidth over the next five years, he noted.
Schmidt does seem to have sorted out the product focus and has emerged with a better
strategy for the Net economy, with what Novell calls "one Net" being at the centre. Although
it is late - with a resultant negative financial impact - there may be an upside because
Novell seems to have found (some would say stumbled) into a marketing idea that is
simple to put across and sounds good. It is also something that Microsoft cannot achieve
because it woefully lacks networking experience and has a non-adaptable and flawed
design for Windows networking. It's some time since Novell came up with an idea that
looked as though it had the potential to win new customers, but one Net could just be it.
Schmidt said - with a trace of surprise, it seemed - that "one Net was wanted by everyone".
If so, then the problem is how quickly Novell can translate the idea into revenue.
The message, not the medium
Nelson said that Novell was getting over talking about what he analogised as the plumbing
in the Novell Jacuzzi and was [at last] trying to concentrate on the hydrological experience -
what Novell makes possible, rather than how its done. It's a novel idea for Novell. It's
pursuing the objective of getting NDS accepted as the industry cross-directory (and telling
people about the significance), and clearly hopes to get IBM to join Compaq on this. In the
medium term, Novell should gain from this ability - particularly when the limitations of
third-party efforts to make Microsoft's active directory cross-platform are appreciated. Big
banks are beginning to perk up interest, because typically they have three dozen or more
directories and no doubt many sleepless persons worrying about integrating information
and data integrity. Novell's message is that its one Net design can take over from the old
directories, so that they can gradually be phased out.
Much confidence is being put in "proven-leader" Steve Adams, the new marketing supremo,
but it will take at least another quarter before any actions he takes could have a significant
impact. Schmidt said that Adams was sorting out what he had inherited at the moment, but
that there would be "marketing and support dollars for the channel, which was why it was
screwed up last year". Nelson admitted that there was indeed a training problem for the
channel, but that this was being rectified. This all sounds like a pretty honest admission, but
changes won't come until under-performing and over-performing areas have been
identified. Nelson said that Adams would be supported financially if he showed a need for a
bigger budget, but there can hardly be a doubt that Novell needs to spend substantially on
marketing. At least Novell seems to have realised that there can be no significant effect on
marketing without leadership. Schmidt admitted that Novell had historically been too
product oriented, and that internally had not been coherent from a marketing perspective -
but at last it had a simpler message.
Novell is doing marketing things - it has an over-subscribed series of meetings throughout
EMEA, in conjunction with IBM, when some 10,000 people will be told about what the
companies can do in eBusiness and eDirectory. Nelson wants to make marketing a core
competency at Novell, and will be embarking on a major advertising campaign "this quarter"
(before the end of July - it has funny quarters) in the major financial and business press.
Failing to tell the CEO mob that there was someone out there other than Microsoft has
always been a Novell weakness: founder Ray Noorda was steadfastly reluctant to spend
anything on advertising. Perhaps in the future, if a CIO wants to go with Novell, at least the
company's business leader might be familiar with the Novell brand.
Fortunately buzz words come and go quite quickly: in Novell vogue at the moment are
phrases like "not providing the metrics to CFOs and CEOs". It's jargon for their not
understanding technology, with the sub-text that Novell doesn't seem to have a generalised
cost-benefit analysis of committing to Microsoft rather than Novell. Nelson said he saw an
opportunity to grow the market - but the reality is of course that the market is growing very
nicely, whatever Novell does. The question is whether Novell has momentarily stumbled, or
has been more badly hurt than is realised. We shall find out a bit more next week when the
gags are off and it announces its financial results.
Questions about Novell's finances had to go unanswered because the company was in its
quiet period, which must have been a relief after the warning and the dive in the share price
to around a quarter of what it was some months ago. Schmidt said he never comments on
the share price, but did observe that "It goes up and down". In a rueful aside, Schmidt noted
that Wall Street "works on a 90-day shock clock". Schmidt did say that "The company is
absolutely for sale - one share at a time, through your local broker." Maybe he's getting his
one-liners from Scott McNealy.
Schmidt also said that the issues that confronted Novell were tactical and not strategic, so
they are easier to fix. Shareholders who believed in the one Net strategy "would be happy",
but it was the middle of the debate so far as how long it would take for this to show in
revenue. It was clear enough that Schmidt had become very conscious of the need to
generate more revenue, particularly in new areas. ©
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