Novell, which was acquired by The Attachmate Group in April, wants to regain its status as an IT icon and will try to do so by focusing its efforts on its core assets and rebuilding relationships with its huge installed base. Network World Editor in Chief John Dix recently caught up with Novell President Bob Flynn and VP of Product Management and Marketing Eric Varness for a briefing on their rebuilding plans.
What was The Attachmate Group’s interest in Novell?
FLYNN: Several things, but a little history first. Attachmate was acquired back in 2005 by a set of equity firms and was merged with a competitor, WRQ, and my boss, Jeff Hawn, who was CEO of Attachmate, was installed as CEO.
The strategy as stated back then was twofold. One, we wanted to grow the business both organically as well as through acquisition, looking to build a billion dollar company over time. The billion dollar mark was based on our belief that size matters in the technology industry. We felt we needed to be that size so customers, particularly enterprise level customers, had confidence in the company they were doing business with. The other part of the strategy was to focus on IT operations, on solutions that help IT organizations better manage their businesses.
So we purchased NetIQ in 2006 for its systems and security management technology, and last April acquired Novell for its fit with this IT operations focus. Then we realigned some of the Novell assets.
We felt the SUSE business could accelerate in terms of market share against Red Hat if we provided a singular view on that business, so we broke SUSE out and reestablished it as an independent business in Nuremberg, Germany. Then we took some elements out of the Novell portfolio around identity and security management and moved those to the NetIQ business, augmenting and extending that portfolio.
ROUNDUP: Top tech M&A deals of 2011
And the Novell business which Eric and I oversee is focused on: collaboration, which really entails the GroupWise products; file and network services, which is where NetWare/Open Enterprise Server fit in; and endpoint management, which is the ZENworks products.
We felt these products were underserved and that we had an enormous opportunity to re-energize that business under the Novell banner. After all, we already have a large customer base in place.
You’re now looking at a $400 million dollar business fully focused on this set of products and we’re making investments. We’re investing in our engineering organization, and we’re in the process of establishing a sales organization that really did not exist in Heritage Novell. So some fairly standard blocking and tackling to really accelerate these products in the marketplaces.
Can you expand on your comment about the sales organization?
FLYNN: Heritage Novell had a strong channel influence, which we want to retain, but the direct sellers were selling across the entire portfolio and were largely motivated to generate new license sales. So we’re establishing a sales force that is compensated on their ability to develop or re-establish relationships with customers, to make sure customers are getting the full value out of these technologies.
But channel partners continue to be strategically important to us in terms of our strategy overall and in terms of how customers buy. Customers dictate to us, in many cases, how and when they want to use our partners and we will certainly respond to that.
Is Novell profitable at this point?
FLYNN: Absolutely. And we’re privately held because we took the Heritage Novell business from public to private. We like that model; it allows us to be much more nimble in terms of decision making, but in order to do that we have to run a profitable model.
Are there any more expense cuts that you’re looking at?
FLYNN: Nope. Our philosophy on that is to be fast and fair, and that’s what I’d like to think we had done; people that departed we think left under good terms and were treated well, and we believe we’re well past that now and really into the execution model.
What are your plans for Novell?
FLYNN: Our focus right now is in three areas. One is around the technology itself, around engineering excellence. The company was built on strong technology and ultimately we are a technology company; we’re only going to be as good as our technology. And as I mentioned, we’ve made some investments in that area to pick up the pace in terms of features, functions and quality. Not that we’re in bad shape today; we just feel there is room to improve and it’s fully our intent to do that.
Concurrent with that, the sale of Novell was a long process that created a lot of consternation in the market. We have a lot of customers who don’t know what’s been going on so we’re calling on our largest customers face-to-face to get the word out about what we’re doing, what we’re committed to and what our plans are.
And the third area is innovation, exploring opportunities in areas like mobility and cloud. I would expect to see us accelerate innovation when we feel we’ve reached a point where we have our products and associated processes up to the levels we expect.
We’ve been at this now for 150 days and this is a large technology company; we’re trying to turn this ship pretty quickly, but it’s somewhat challenging on a global basis, but we’re working as fast as we can to focus in on these areas.
I talk about Novell as an IT icon, and we’re going to do everything we can to see if we can’t re-establish that positioning within the marketplace.
How many employees do you have?
FLYNN: Supporting this particular business unit, around 1,000 or so. The majority of the engineering group is here in Provo. Across the whole corporation, we’re about 3,600-3,700.
Did you consider changing the company name?
FLYNN: We actually had a long discussion about this, but there is a large, active and supportive installed base that has strong affinity for the Novell brand. We keep hearing customers says, “We are so happy you guys are doing this,” and, “We’re looking forward to what you’re bringing forward,” and, “Here are the things that we think you need to do.”
Is most of the opportunity in the piece parts, or will you still try to leverage the relationship with the other Attachmate Group components?
VARNESS: We definitely see an opportunity to differentiate the technologies Bob described — collaboration, file and networking and endpoint — but there is benefit to being part of the broader portfolio.
But just within the Novell portfolio, we can use the components we have to help organizations increase workforce productivity. So, for example, as organizations look at how they are going to mobile-enable their workforce, how they are going to leverage virtualization to deliver portable workspaces to employees, our ability to combine some of the ZENworks technologies with our GroupWise collaboration technologies provides a unique opportunity to enable that productivity without putting the business at risk. And with OES and NetWare, we’re also helping organizations manage the explosion of data, primarily in the form of unstructured data and files.
FLYNN: We have around 23,000 customers globally so we have an established foothold that we want to build on top of.
So the low-hanging fruit is better serving that customer base, and then growing beyond that?
FLYNN: Exactly. Re-establishing those relationships, rebuilding trust, confidence.
Eric, you mentioned NetWare. Are some customers still using that?
VARNESS: We still have a number of companies using that technology. Open Enterprise Server is the next generation of NetWare, and we are in the process of helping customers upgrade to that.
I presumed that migration had already happened.
VARNESS: IT organizations have to look at priorities, and NetWare solutions tend to work very well, so maybe they decide changing isn’t a top priority. I think the economic downturn slowed that progress as well, but we continue to see customers upgrade to OES.
One of our tenets is to ensure customers go through those sorts of technology transitions at a pace that fits their business. Some of our early adopters were off of NetWare three or four years ago, but others are still plugging along and making incremental progress and still have it in some pockets of their organizations. But for the most part, when we talk to customers about where we’re going with our file and networking services, it’s around our Open Enterprise Server product.
SUSE is at the heart of Open Enterprise Server, right, and with SUSE being established as its own business unit in Germany, don’t you lose some of that lockstep development ability?
VARNESS: I think that’s something we can overcome. SUSE’s been a part of this business for almost a decade now, so those relationships are well established and we’re very confident we can continue to build on top of that even though the center of that development will be in Germany.
Now, I should also say that there are going to be components of the services, as we evolve over time, that we expect to offer on other operating platforms as well. So it will give us the ability to create solutions for organizations that want Linux as the core operating system, and other services that run on top of Windows or some other platform.
FLYNN: I’d like to add to that. The core business units were established to A), allow us to hone in and focus on the technologies, and B), establish go to market around those products, give us what we call “line of sight,” so I own everything from development out to the customer in terms of these Novell products.
Having said that, we have customers that purchase across the business units, so if a customer wants a single point of contact at a particular level in the enterprise, we will represent all four business units. We collaborate and we interact on a regular basis across the business units.
The particular instance you brought up in terms of Linux and Open Enterprise Server, we’ve established processes that tie the SUSE business to our business that ensure we’re in lockstep with them as they’re releasing technology. We’ve got some building still to do, but I would tell you that we are absolutely committed to the vertical part of these business units in terms of their focus and agility, but we’re also committed to the horizontal, reaching across the business units both in terms of how a customer wants to work with us and our ability to share technologies where that makes sense.
But as Eric was just saying, you now have some incentive to look above and beyond and, say, offer services for Red Hat?
FLYNN: Absolutely.
And vice versa, SUSE might support services beyond what Novell offers?
FLYNN: Absolutely. Of course we will collaborate on that and we’ve already had some discussions in terms of where that might create some challenges, and we’ll make decisions about whether that’s a good thing or not, but for the most part I would tell you that our bias is toward allowing the business unit to maximize the technology. But I’m certain we’re going to run into some conflict on that and we’ll resolve those and move ahead.
Do any customers question Novell’s long-term plans given the company is owned by equity firms?
FLYNN: No. If the business is performing well equity firms tend to continue to invest because they like to build on top of what they have. The Attachmate-WRQ merger went well, and we were about a year into it and boom, they decide to buy NetIQ. And then the capital markets dried up and they backed off, but then they were feeling so good about how things were going, boom, the Novell acquisition occurs. Our owners are very bullish about our opportunities here.
OK. Anything else we didn’t hit on?
FLYNN: Ultimately we’ll be measured on our ability to execute, so I look forward to talking to you in nine or 12 months and you asking, “How’d you do?” My expectation is that we will have made huge strides.
