What next for Novell?

Last week's revelation that Oracle is withdrawing support for the Netware operating system is just the latest in a series of dramatic announcements effecting Novell.

Nine hundred Novell staff were given their marching orders last month following disastrous third quarter results. Revenue had fallen from $327m to $270m, leaving a meagre $8.6m profit - 83 per cent down on the previous year. Next month Novell delivers its full year results. No one is holding their breath.

Oracle is also warning customers to migrate to the alternative operating systems that it does still support. In a twist sure to appeal to lovers of irony, this may drive many into the hands of arch enemy Microsoft. Though Linux is also likely to be a favoured option among smaller businesses.

So far, both Oracle and Novell have remained fairly tight-lipped about the latest development, details of which were leaked from a document otherwise intended for customers' eyes only. The only reaction so far has been from Eugene Forrester, Novell's European Net Services product director, who has pledged not to leave customers "in the lurch".

But the fact that Oracle's decision has taken Novell and its users by surprise leaves many questions unanswered. Not least of which is whether Netware has finally reached the end of the road? Though the latest release of the operating system Netware 6 is clearly geared more to the internet than the Lans and Wans of yesteryear, many feel that it is a transition that has come too late. It may only save Novell's neck in the short term.

Trouble in store
Figures from IDC meanwhile paint a picture of an operating system that is not only long in the tooth but is clearly failing to win over new users. In a report on departmental server operating environments in July, IDC researchers found that Linux had already overtaken Netware as the world's No.2 operating system in terms of new licence shipments.

What IDC also found that while shipments of server O/Ss were generally up by 17 per cent in 1999, revenues were flat. This was due to the switch by users to lower cost environments such as Linux and NT. Revenues were further flattened in the case of the latter due to the large percentage of upgrades, rather than new licences.

Otherwise, the main picture to emerge was of Microsoft cleaning up on the revenue front. This factor might explain why Novell is now striving to reposition itself as a vendor of network management software, rather than of operating systems. But if Novell is also subsequently seen off by Microsoft in this area too, then the entire future of the company might be at stake. In recent months rumours have resurfaced that IBM might be poised to acquire it, or even Sun Microsystems.

Neil Ward-Dutton, principal consultant at Ovum, makes the point however that while the number of Netware users might be on the wane, the loyalty of existing customers shouldn't be under estimated. Many, he says, became Netware converts because of its robustness and ease of implementation compared with Unix in the early days of client server.

Moreover, he argues, it's a loyalty that may yet benefit Novell in the network management arena, despite the company's disappointing figures in recent months.

"Ironically one of the reasons why Netware declined in popularity is because Microsoft cunningly turned NT into an application server, rather than just a file and print server," says Ward-Dutton.

"But at the same time Novell had overlooked the vital importance of helping independent software vendors to build applications for its environment, whereas Microsoft was virtually giving the tools away."

Fighting back
The upshot, he says, was that developing for Netware was "always a nightmare" with Oracle one of the few software vendors to offer its support - until now. Ward-Dutton says that while Novell has since fought back by making Netware immensely scalable through NDS, it may still be a case of too little too late. "A lot of people are now convinced that the decline of Novell's operating system is synonymous with the death of the company," he says.

Over at the 300-member strong Novell Users Association, chairman Paul Gardner counters that irrespective of Oracle's axing of its support for Netware, neither the operating system - nor the company - should be written off yet. If Netware customers start defecting in the direction of Microsoft NT and, with it, become converts to SQL Server, then Oracle might be forced into a rethink about its strategy towards Novell.

"I don't think Oracle have really thought this through strategically, and our members will certainly see their decision not to support Netware in a bad light. It's not very clever," says Gardner.

Life in the old system yet
Martin Brampton, chief analyst with Bloor Research, also shares the view that it is too early to sound the death knell for Novell and its long-standing operating system. Though he argues that Oracle's decision to withdraw Netware support is probably not as ill considered as it might first seem.

"Oracle's Larry Ellison will probably do almost anything to annoy Bill Gates, and therefore it might seem odd to run the risk of his users defecting to NT," he says. "But it should probably be seen as part of a bigger game in which Ellison wants to dish Gates over SQL server, and that's more important to him that dishing him over NT.

"If all the people currently running Oracle on Netware migrate to NT, Ellison can then trumpet the fact that the proportion of customers using his database on the Microsoft platform has magically grown - perhaps eclipsing SQL Server. It would be a great propaganda coup."

But then that assumes existing Netware users will willingly migrate to the Microsoft platform in the first place - something which Brampton believes shouldn't be taken for granted. So what does Netware still offer that NT or Windows 2000, for example, can't? "Well, for a start it stays up for more than three months at a time," he replies tartly.