Novell took major restructuring steps this week by announcing the layoff of 600 workers, promoting an insider to serve as the company's new president and deciding to focus on three basic market segments, including Linux.
Longtime Novell customers took the news in stride, having weathered management transitions and market downturns with Novell over the years. In interviews with 10 Novell customers, several said they wished Novell SUSE Linux had taken a bigger market share by now. Others worried that the layoffs could hit Novell sales representatives and developers who they work with and know well.
But all of the customers said they remain loyal to Novell's products, the company as a whole and its Linux strategy. "Even with the layoffs, I'm not seeing any major changes coming. They've still got the best products out there," said Brad Staupp, senior support analyst at Johnson County Community College in Overland Park, Kan. Staupp said he has beta-tested Novell products for years with a core group of Novell developers that he hopes will remain at the company.
The layoffs comprise more than 10 percent of Novell's 5,800-person global workforce, and are part of an overall restructuring that is expected to reduce annual expenses by more than US$110 million, according to Novell CEO Jack Messman. He called the layoffs part of a restructuring designed to focus on key growth areas in Linux and open-source products as well as identity and resource management products.
Waltham, Mass.-based Novell also promoted Ron Hovsepian to be president and chief operating officer, giving Hovsepian direct responsibility for product development, marketing, sales and services. Hovsepian joined Novell in June 2003 and had recently been president of global sales and services.
"Hovsepian has overseen results in the North American sales force, and with Messman getting older, it will be good for Novell to have somebody as good as Hovsepian in place" as a potential successor, said James Taylor, president of The East Cobb Group, an integrator of Novell products with more than 30 customers.
Taylor agreed with Novell customers that "layoffs are always a concern ... especially to my customers worried about whether they'll lose a good sales rep."
"That layoff talk disturbs me, but maybe it's just a corporate cleansing, and if they get their financials back in order, they could hire people," said Joe Poole, manager of technical support at Boscov's Department Stores in Reading, Pa. Boscov's has been using SUSE Linux in its data center and on desktops for several years, even before Novell bought SUSE Linux in 2004. Since that acquisition, support for Boscov's Linux has been "more complicated" because Poole has to buy upgrades through a business partner of Novell instead of directly from Novell. "But that's my only gripe with Novell," he said.
"Generally, I hope Novell stays strong and healthy for a long time," Poole said, noting that Boscov's hopes to start talks with Novell about investing in identity management software next year.
Novell's continued focus on Linux came as a relief to some customers, including Steve Hartman, director of the state of Nebraska's directory services in Lincoln, where 22 clustered servers are running Novell SUSE Linux for identity management purposes. "We're very pleased with the stability and performance [of Novell Linux]," Hartman said, adding that it would help "if they got a little more Linux market share."
Red Hat Linux had the lion's share of Linux sales, with nearly two-thirds of the market in 2004, according to Credit Suisse Bank Boston. That compared with nearly 20 percent for Novell SUSE Linux.
Still, SUSE has gained some market share, which is a positive for Novell, said Rowdy Van Cleave, vice president of network operations at a major financial services company in the San Francisco area. The company is now testing SUSE Linux to see if it can handle myriad financial applications.
In remarks at the Open Source Business Conference East in Newton, Mass., this week, Hovsepian said Novell has improved SUSE Linux to support more than 1,000 applications, up from just 42 when Novell bought SUSE. But Hovsepian also said Novell realizes Linux cannot solve every business problem. Generally, he said, adoption of open-source technology in the data center is "slowing" partly because the customer "has to do too much" as an integrator.
The planned restructuring raises questions about what happens to products and services such as GroupWise and NetWare, said John Enck, an analyst at Gartner Inc. in Stamford, Conn. He said Novell officials had told him they remain committed to NetWare, for example. "But there is no doubt in my mind that [Novell] will drive from NetWare to the Linux-kernel version of NetWare," also known as Open Enterprise Server. He advised NetWare customers to be prepared to move to the Linux-kernel version within five years.
Novell officials also told Enck that they remain committed to GroupWise for at least two more versions, with support for another 10 years. Meanwhile, Enck expects Novell to accelerate movement of GroupWise to a Linux platform.
Another important direction for Novell will be a reduction in a broad array of professional services, Enck said. The focus will be on providing consulting that remains close to Novell products, he predicted.