Linux distributor Red Hat has chosen Novell's NDS as the directory platform for its new Red Hat Network service.

The move represents Novell's first tentative step to open source its crown jewels.

Speaking at the Networld + Interop trade show in Atlanta this week, Novell chief executive Eric Schmidt revealed that the company frequently discusses whether or not to give away NDS, but is so far undecided.

"Open source won't work for certain components of NDS, because of the way it's sold," said Schmidt. But Novell's announcement with Red Hat is a step in the open source direction, he added.

Red Hat will use NDS as the directory services infrastructure for its Red Hat Network service, which was launched this week. The internet-based service helps administrators deploy and manage distribution of the Linux operating system. The inclusion of NDS will enable customers to offer single sign-on to distributed Linux applications.

Analysts have previously criticised Novell for failing to gain control of the directory services market by giving away NDS before arch-rival Microsoft began shipping Active Directory within Windows 2000. However, some observers believe that Novell is keen to milk as much as it can from its directory-related products, because the installed base for its core Netware network operating system is being eaten into by Windows NT and Linux.

At the show, Novell also announced an upgrade to its Internet Caching System (ICS) to include a guaranteed connection capability and support for media delivery via HTTP. ICS 1.3 can also automatically push traffic, reporting logs to any location.

The company also showed off Portal Services, which enables businesses to build 'front doors' to internet, intranet and extranet-based information delivered via web browsers, personal digital assistants or wireless web phones. Novell said the key to Portal Services is the single sign-on facility to a host of information.

The company also announced that BT has agreed to upgrade from Netware 4 to Netware 5.1 in a multi-million dollar deal, which Novell said is its largest European contract ever.