The VAR Guy

Give Novell credit. Rather than slamming The VAR Guy for a particularly harsh blog post about the software company, Novell reached out to him and engaged in a healthy dialog. During a lengthy telephone chat, Novell Senior VP and Chief Marketing Officer John Dragoon (pictured) discussed the company’s business performance and strategy. Here’s a recap of the conversation, and some updated reactions from The VAR Guy.

First, let’s rewind a bit. The VAR Guy on January 17 posted a blog entry questioning whether Novell could remain relevant as the open source application market begins to consolidate through mergers and acquisitions. The VAR Guy regrets the blog’s headline (”Did Novell Just Die?”). It was too over the top, even for him.

However, our resident blogger continues to think Novell will need to greatly strengthen its position in the open source application market — either by partnering more deeply, building its own applications, or buying applications (a la Sun’s deal to acquire MySQL).

Dragoon, however, points out that the software industry involves more than operating systems and traditional applications. Yes, Novell has established application partnerships in place, he pointed out. But as a software and infrastructure company, Dragoon notes, Novell plays at additional software layers, such as systems management, security management and identity management.

So, I think this is where The VAR Guy and Dragoon see the market differently. In the 1990s and even now, many of the most successful software companies (Oracle, Microsoft, SAP, etc.) pushed beyond their base products and continued to strengthen their hand with applications (ERP, CRM, etc.), The VAR Guy notes.

Novell’s Perspective

Dragoon, on the flip side, says Novell can be successful through its existing SuSE Linux application partnerships plus the systems management, security management and identity management “infrastructure” plays. He also noted that SuSE Linux plays from the desktop to the data center.

Ultimately, Novell’s strategy is to make sure it SuSe Linux — and the additional infrastructure services — make Novell the best platform available for running third-party applications, whether they are open source (a la SugarCRM) or closed source (such as Oracle).

The VAR Guy still isn’t convinced that infrastructure-type software can deliver a big payoff for Novell, but Dragoon did offer up some compelling points. Including…

1. Revenue: More than half of Novell’s revenue now comes from growth categories (open source, identity management, systems management, etc.), Dragoon noted. Journalists and bloggers who dwell too much on Novell’s NetWare legacy may be missing half the picture, The VAR Guy concedes. (Yes, The VAR Guy just ate a little crow.)

2. Linux Growth: Even without the partnership with Microsoft, Novell’s Linux sales are growing as fast as — and perhaps slightly faster — than the overall Linux market, Dragoon asserted.

3. Mind Share: Recent market research (conducted by Novell) indicates that “we’re doing quite well when it comes to customer awareness,” Dragoon says. Potential customers, he says, associate Novell with core markets like open source and infrastructure software.

The challenge, Dragoon concedes, is to improve Novell’s marks in terms of customer consideration. In other words, people know of Novell but the company needs to do a better job of getting on the purchase consideration list, Dragoon conceded.

4. Partnerships: Dragoon pointed out that Novell has relationships across the application sector. This is a key area, however, where The VAR Guy continues to have concerns. Yes, Novell works with the vast majority of key ISVs in the market. But in private meetings with The VAR Guy, several of the hottest ISVs are lukewarm at best about Novell’s prospects.

5. Acquisitions: Sometimes your smartest business moves are the acquisitions you don’t make. Dragoon noted that the Red Hat-Jboss combo hasn’t exactly set the world on fire (agreed). And at $1 billion, Sun paid a hefty premium for MySQL (agreed).

Still, acquiring MySQL gives Sun more than a database. It also connects Sun with thousands of open source application developers. Microsoft became a dominant company because of its ISVs as well as its own applications. Oracle became dominate because of ISVs and applications. Novell has a critical mass of ISVs, but are they passionate about SuSE Linux? Are they willing to put Novell at the center of the platform universe?

Here again, Dragoon points out that SuSE Linux will continue to do well if the operating system and the Novell infrastructure around it provide the best foundation for third-party applications.

Time will tell if Dragoon and Novell are right. And while Novell and The VAR Guy don’t always see eye to eye, the lines of communication are open between our resident blogger and the software provider. If you’re interested in more thoughts from Dragoon, here’s a link to his corporate blog at Novell.

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