The death of Novell

They haven’t agreed to sell just yet, but undoubtedly this is the final chapter in what has been for a long time a terminally ill company.  Earlier this week the Boston Globe reported that Novell was close to selling itself in 2 pieces.  The final chapter in a company that rose from a venture capital funded hardware manufacturer to a networking stalwart and finally a long and painful decline into obscurity.

People might say that Novell has in essence been dead for years.  Dating back to before Eric Schmidt was at the helm.  Side note: how perfect was his timing to bail out for the Google CEO gig?  HBR even did a piece on Eric taking the Novell “turnaround” job after leaving Sun Microsystems as their CTO.  Eric seems like a really smart guy and he couldn’t turn Novell around.  Jack Messman the original VC behind Novell and the guy that hired Ray Noorda came back on as CEO and couldn’t turn Novell around.  Ron Hovsepian the current Novell CEO is an incredibly talented and smart executive and he couldn’t turn Novell around.

Novell lost its way a long time ago.  Most of all the good people left a long time ago.  If any good people remain its simply because the pay is good and the hours are better.  I spent a few years on the inside, first at Novell Ventures, the captive internal (corporate) VC fund.  Next I spent time in a Corporate Development and Planning role and finally looking after the SuSE Linux business in the Americas, working with Nancy Faigen, Andre Hill, Marcin Kurc, Seth Shaw, Ryan Shinnick and a handful of other really talented people.

Most of my time at Novell was either managing the company’s money in terms of direct VC investment; and then later at SuSE Linux in driving a field organization and delivering a revenue number that was disassociated with the core Novell business.  This “arms-length” stance gave me a unique view into the innerworkings without being encumbered by the legacy business.  What I saw and learned was like literally seeing sausage made – a tangle of old and outdated processes that acted like a boat anchor when trying to do anything new.  The company had been designed and built for customers and a market way of doing business that had been passed by without Novell really knowing it.

For example, Novell generates the vast majority of its revenue from maintenance contracts on long since abandoned Netware licenses.  The predominance of which is from Netware 3.1 (the last version to include a database).  Each year, a growing set of customers finds their way to be free of their departmental and outdated applications that are tied in some arcane way to Netware (with the database) and therefore break or the abandon their maintenance contracts.  The other 2 revenue “titans” at Novell are Groupwise (remember Groupwise? its the 3rd place corporate email system in a 2 horse race) and Zenworks, which is really just a network (Netware) management system.  What about the consulting business?  I think the former CTP systems integration and consulting revenue died a painful death many years ago.

Most companies die.  Its a fact of changing markets, technologies, tastes, and leadership.  Novell simply had more inertia than most and has had the luxury of a tightly intertwined network operating system for legacy applications.  Applications  built on Netware that still continue to run deep in the bowels of Universities, School Districts, State and Local Government offices, and local branch offices of Fortune 1000 companies.

The final chapter for Novell post any breakup sale is likely a radical downsizing of employees, cutting way past the bone and really down to a skeleton crew of off-shore maintenance support teams.  I’m sure that the current Novell executives are working hard to put the best face possible on the business and I hope they are successful in getting the deal done.  Perhaps even some innovative open source pieces (patents?) can be pulled out and thrown a lifeline under a new company or at a big IT player. The company deserves to get put out of its misery.