Is Novell-SuSE deal a brilliant Big Blue power play?

Is Novell-SuSE deal a brilliant Big Blue power play?

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Is Novell-SuSE deal a brilliant Big Blue power play?
By David Berlind, Tech Update
November 4, 2003

As Novell CTO Alan Nugent told me yesterday, notwithstanding a $50 million injection from IBM, his company's decision to acquire Linux distributor SuSE was backed by a significant amount of market and technical rationale. But legally speaking -- an area where Nugent offered me only a peek -- the move may go down in history as pure chess brilliance on behalf of IBM and Novell in one of this industry's most notorious power struggles.

Although no official from Novell or IBM would come out and say it, a reading between the various official lines reveals how IBM may have cleverly dodged the Linux indemnification issue while ripping the legal rug right out from under SCO.

The first clue appeared in a prepared statement from IBM spokesperson Michael Darcy: "IBM's investment in Novell is consistent with the company's history related to Linux. We've invested in a number of Linux distributors, including Red Hat, SuSE, and TurboLinux in the past as a way to insure customer choice in the market. Today's investment also helps assure IBM's customers that there will be strong, continued support for SuSE Linux across our family of eServers and suite of middleware offerings."

"Helps assure?" Customers usually start needing assurance when someone notices that confidence may be lacking. Until SCO started rattling its intellectual property saber, few were questioning the viability of SuSE or any other distribution provider. In my discussions with various IBM officials about Linux on its mainframe and midrange systems, SuSE was invariably mentioned as the distribution provider around which the Linux-big iron strategies were designed. We may never know whether or not some of IBM's prospective big iron Linux customers were getting cold feet over the SCO lawsuit. But my hunch is that some of IBM's customers were demanding the assurances of which Darcy spoke.

Then, in my interview yesterday with the Nugent, the Novell CTO made some interesting statements, one of which had to do with his role in overseeing Novell's mergers and acquisitions strategy. "Part of my job is to make sure that our strategic investment goes into areas that are not commodities," Nugent told me. "The base operating system is an example of such a commodity." Considering that Novell had just announced the acquisition of something (an operating system) that by his definition is a commodity, I was confounded by his statement.

"Yes, the operating system itself is a commodity, Nugent added, "But the distribution is not." But if that didn't make it clear, this next statement did: "By doing this, we can make sure there are no problems with dependencies [in Novell's application stack] or intellectual property." We were getting warmer.

In talking to customers, Nugent went onto explain, Novell was told over and over again that there needed to be at least two enterprise Linux offerings (Red Hat being the other) with the backing of a large global company. I wondered if that was the message that IBM was getting too. Generally speaking, "backing of a large global company" equals assurance.

So, let's add this up, against the backdrop of indemnification. We've got two companies --- IBM and Novell --- both of which have made heavy technology and marketing investments in Linux and open source (including Novell's recent acquisition of Ximian). One of the companies (IBM) is the subject of a giant lawsuit from the company that claims to own the intellectual property rights to the technology in Linux. The other is a company that, dating back to its UnixWare days, is rumored to still have just enough Unix intellectual property rights to be immune to the wrath of SCO. The customers of these two companies want some assurances, and the CTO of Novell wants to provide them in the way of solid stack interoperation and issue-free intellectual property rights. Are we getting warm yet?

So, if Novell is immune (which Novell officials wouldn't comment on yesterday), and SuSE belongs to Novell, then it follows that SuSE's distribution of Linux could be untouchable. IBM's Linux strategy --- of which SuSE's Linux distribution is a centerpiece --- is preserved. Novell's cross-platform services strategy (which I'll get to in a minute) --- at least a third of which (or more) depends on the long-term viability of Linux --- remains intact. Customers seeking indemnification end up with something better--a free and clear license.

I asked Nugent what he thought of my theory. While he didn't give me much, he gave me this: "Your intuition is good. Stay tuned."

So, now that I've covered what I believe is the biggest reason behind this deal, let's explore some of Novell's other reasons for acquiring SuSE.

Hoping to prove that there is indeed life after NetWare, Novell's goal, according to Nugent, is to provide the best-of-breed offerings in the areas of directory services, identity management, resource management, system provisioning, and Web application development, and to do so in a way that provides customers with a great deal of flexibility. "We've been talking over the past few months about our standards-based approach and commitment to open source and our desire to offer customers choice," said Nugent. "To do that, we're offering a set of services that behave consistently across Windows, Linux and NetWare. We want to be the leading provider of cross-platform services. With SuSE and its orientation towards the enterprise, we saw a lot of synergies across the board. It was the right company to go after."

I reminded Nugent of another time Novell had made a similar promise. Novell had promised that most if not all of NetWare's functionality --- especially NetWare Directory Services --- would be available on UnixWare. I asked him why Novell felt that it was able to make good on its promise this time.

Nugent tactfully avoided bashing his ancestry at Novell: "That was a different company. There was nothing wrong with the company eight or nine years ago. It's just that the Novell of that generation had a different leadership and a different focus and it may have lacked a clear representation of a go to market strategy. In the last 18 to 24 months, we've sharpened our approach to the market by using a single code base to offer everything across all platforms."

Nugent went on to explain that the single code base issue is a critical efficiency for any company to succeed with the cross platform message. "Until you do this, you can't begin to say to the market that you're a cross platform vendor," said Nugent. "We took the code that was tied closely to the operating system, we put it into common code base, and made it compilable for other operating systems. Prior management teams wanted to go the cross platform course from multiple code bases. It's tough enough to maintain one code base for one operating system. But to maintain three for three or six for six? Now that we're on a single code base, we're in a much better position to deliver on the cross platform promise."

Another reason the Novell executive team likes SuSE, Nugent continued, is because of SuSE's people. The SuSE team understands the same customer set that Novell targets: the enterprise. "They understand enterprises much better than Red Hat does, " Nugent said. "As an example, SuSE wisely delayed the release of the next version of its enterprise class Linux until version 2.6 of the Linux kernel comes out. So, the next release of SuSE's Enterprise Server will be version 9 which will come out in the spring or summer of next year. Meanwhile, Red Hat just announced its newest enterprise version of Linux --- Red Hat Enterprise Linux 3.0 --- and it will be based on version 2.4 of the kernel. They'll have to rev it again when version 2.6 of the kernel comes out and the last thing enterprises want is that kind of change."

I asked Nugent why, even if the distribution is not a commodity, it makes sense for Novell to own a distribution when, as part of its commitment to choice, it promises to support other distributions as well. Said Nugent, "That is true. We are committed to supporting any enterprise distribution of Linux. In addition to SuSE, our stuff runs on Red Hat. The Turbo guys have announced they'll be coming out with an enterprise Linux and when it's out, we'll support that. If tomorrow, the folks at Debian said they're coming out with an enterprise Linux, we'd support that too. So, in light of that, internally at Novell, we debated this ad nauseum and we still decided that we needed a distribution to be successful. We thought about coming out with a third enterprise distribution of our own (in addition to SuSE's and Red Hat's). But in addition to SuSE's enterprise mindset, we saw a company that was successful in Europe and that had great relationships in Latin America, South American and Asia."

Nugent made it clear that the SuSE deal shouldn't be recognized as a Linux play, or even an open source play. "The decision was based on the fact that they understand the market," said Nugent. "Not the Linux market or the open source market. The enterprise market."

Fair enough. SuSE may indeed be an excellent fit for this new generation of Novell. But with $50 million of IBM's money in the mix, the real rationale is hard to deny.

You can write to me at If you're looking for my commentaries on other IT topics, check the archives.

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