When Ron Hovsepian took over as CEO of Novell in June 2006, the company seemed to have lost its way. At that time, Novell had just reported lackluster second-quarter revenue of $278m, a fall from the $297m in the second quarter of 2005.
Analysts gave Hovsepian a six-month window to turn around the company or face the consequences. Has he succeeded? Well, he’s still here nearly 18 months later, and last quarter the company announced a 243% increase in Linux sales, thanks largely to a major Microsoft deal the company won last year. And the company seems in a stronger position, reporting net revenue of $243.1m, compared to $236m a year earlier.
Rather than a convoluted plan to turn Novell around, Hovsepian’s vision for Novell is to keep things simple. Hovsepian talks exclusively to Computer Business Review about how he has set about changing the company.
Q What was your strategy to change the company when you took over the CEO last year and how far have you achieved those goals?
A Novell had been many things, but it wasn’t always clear. I wanted to make it very clear that we are a software company founded on producing software for the open enterprise. Our plan has three dimensions: customers, shareholders, and employees. We looked at what users wanted and where we could add value.
One thing we decided was to develop desktop to data center Linux. The second part of the strategy was that we made the decision that what CIOs really needed was interoperability – they need us to do more integration work on their behalf, so we came to the arrangement with Microsoft. It allows users to run Windows virtualized on top of SUSE Linux.
Another area we looked at was enterprise management infrastructure tools. If you’re going to have desktop to data center systems, then you’re going to need some management tools to deal with that. Now we’ve delivered ZENworks, which allows you to manage windows and Linux desktops and Vista.
The ZENworks Orchestrator gives customer one console with which to manage multiple virtual machines.
Q How are your product sales broken down?
A Linux makes up 10% of the company, systems and resource management is 15%, and identity management is over 20% of the company, and these three areas are now growth areas. We have a desktop-to-data-center strategy for Linux and management tool sets for desktop-to-data-center, and on top of that we have the ID strategy.
Roughly 50% is now growth business, and historical business is 50%. It’s an important part of the evolution of product development from the proprietary environment of NetWare to Open Enterprise Server 2 and its Linux kernel, so bringing NetWare users right into the 21st century. Our Linux growth rate is 243% year to date, which is great and we’ve had great feedback from customers.
But our financials are not where I’d like them to be overall, but we’ve set objectives for the year and I feel we’re making good financial progress.
Q How is your relationship with Microsoft working?
It’s actually pretty straightforward. We have two key constituencies for Microsoft. One is customers and I’ve only had positive feedback. We’ve got 17 additional requests for other things to work on with the Microsoft interoperability council. The second constituency is community, which is a critical group for us. They support what we do, but we could have done better with our initial communication.
Q Where do you see the open source market heading?
A We’re still in the early stages of the overall open systems market and in the next three years we’ll see more mixed source environments. Over the long run, open source will be the dominant framework customers will look at, but near term they tend to be more pragmatic. So they’re running Suse Linux, Oracle database, and IBM WebSphere. So it’s not open source, it’s mixed source.
Q How do you position yourselves in relation to Red Hat?
A They are an edge server strategy company with one product. We have a two-year lead on them for desktops.
Q What about the UK market?
A One thing we’ve got to do in the UK is scale up our business partnerships. I think doing it direct we have missed an opportunity in the UK, so we are now looking for partners. It’s all about reach and that’s very important for us.