Evaluating the Success of the Novell/SuSE Merger

Has Novell’s acquisition of SuSE been a success? Twelve months later, the jury is still out.

One year ago this month, Novell Inc. purchased German Linux pioneer SuSE. At the time, many in the Big Iron Linux community held their breath: SuSE was, after all, the distribution of choice for many mainframe Linux users. Would Novell execute well on the acquisition and deploy its global sales and support organizations—not to mention its credibility in many enterprise accounts—to grow the SuSE brand, or would SuSE join a host of Novell ventures (Dr. DOS, WordPerfect, and even NetWare) that failed to pan out?

Twelve months later, the jury is still out.

The SuSE acquisition was part of an ambitious effort on Novell’s part to recast itself—and its expansive portfolio of technology solutions—as Linux-friendly plays. At the same time, some Linux and open-source advocates speculated, Novell’s stewardship could be a good thing for SuSE: Provo, Utah-based Novell has a global presence and is a mainstay in many enterprise accounts. Novell/SuSE could be a match made in heaven.

“The SuSE acquisition was part of a long-term plan that started with an announcement that we made in our BrainShare conference in March of 2003 where we announced our intention to more fully support and embrace Linux,” confirms Ed Anderson, VP of product marketing for Linux with Novell. “Our intention all along was to make that a major focus for the company in terms of helping move open source and Linux forward in the industry, and also to enrich that environment with a collection of services.”

In mainframe circles, SuSE Linux is beloved as the Linux distribution that started it all, so to speak. Big Iron Linux became a reality thanks to a period of informal collaboration between IBM and SuSE engineers in Germany. To this day, SuSE remains the distribution of choice for many mainframe Linux adopters.

Since the acquisition, Novell’s most visible Linux moves have been on the desktop and in the volume-server space, however. Earlier this month, for example, Novell announced its Linux Desktop 9, a release that incorporates its own technology assets, along with contributions from SuSE and the former Ximian. Last month, Novell announced its forthcoming Open Enterprise Server—a product that provides kernel-level support for both Linux and the company’s NetWare networking operating system—and also notched a deal with Dell Corp. to resell SuSE as a standard option on its PowerEdge server line.

Nevertheless, mainframe Linux continues to be an important market segment for Novell, says Anderson. “That’s one of the areas where we think that SuSE Linux has a competitive advantage. And companies like IBM obviously are very, very interested to see that continue,” he says. “IBM continues to be very, very interested in mainframe Linux, and we are, too. On the revenue basis, we make a lot of our money on those other platforms: Power boxes and zSeries.”

At the same time, Anderson acknowledges, few customers have thus far taken the production plunge on Big Iron Linux.

“I think that real wide-scale, massive adoption for servers and data-center-type deployments with mainframes and so on, I still think we’re at the very early stages of that,” he explains. “I will say that the level of interest in our enterprise accounts is enormous. We have many, many pilots going on, and we have some big enterprise accounts that are closing.”

This jibes with the experience of others in the mainframe software business, such as Bill Miller, general manager of BMC’s mainframe business unit. “We … just haven’t seen the customers at the point where they’re investing in Linux on the mainframe—at least not for critical applications where they feel they need to have that enterprise assurance,” he acknowledges.

That may be so, says a professional with a prominent services firm who has a long history of involvement with mainframe Linux, but Novell also hasn’t done as much as it could to encourage Big Iron Linux uptake since taking over SuSE.

“From what I've seen, the volume prices for Intel [SuSE Linux] have dropped dramatically, which is a good thing,” he explains. “Unfortunately, the charges for trial/evaluation media have gone up quite a bit for the mainframe. It's now $600 for the mainframe, and $150 for all the others. Way too high, in both cases.”

This professional admits he’s had difficulty figuring out Novell’s labyrinthine pricing scheme for mainframe Linux. Unlike Red Hat and the former SuSE, the network operating system pioneer does not charge a mandatory fee for Linux support. This means its upfront costs are very high, but its SuSE Enterprise Linux 9 becomes a better value in large implementations. “I think SuSE was much more flexible on costs, etc., since they thought [my company] might wind up being a business partner. The problem [SuSE] had was meeting a lot of [my company’s] requirements for suppliers to have certain levels of insurance coverage,” he continues, noting that Novell isn’t constrained in this fashion. “SuSE was a small company, and couldn't afford that, unless [my company] was willing to commit to certain levels of sales, which [it] was not. Novell doesn't have the insurance problem, but they're not as willing to be flexible in other areas.”

Anderson, for his part, says that Novell is not the primary conduit for most mainframe Linux customers. Instead, he argues, Big Iron Linux adopters typically prefer to work through IBM. It’s Big Blue, and not Novell, that usually takes the lead in helping these customers understand the ins and outs of Linux pricing on the mainframe, Anderson asserts. “IBM, frankly, serves as the channel for those bigger systems, so we have less involvement with those from a sales engagement perspective than IBM does,” he says.

The mainframe professional quoted above does believe that Novell has been good for SuSE in other respects, however. “I think Novell has better sales channels and more credibility in the enterprise software market,” he notes. “I think that has helped, at least some. U.S. companies tend to be xenophobic a lot of the time, unfortunately. The Novell sales people have been willing to provide (lots of) Intel [SuSE] CD sets for ‘installfests’ at SHARE, and WAVV, etc. SUSE was, to some extent, and Red Hat never has … at all.”

The upshot, says Gordon Haff, a senior analyst with consultancy Illuminata, is that twelve months after Novell scooped up SuSE, it’s not clear that the acquisition has been a success. Haff lauds, for example, Novell’s Linux Desktop, but suggests that the company could more aggressively market (i.e., price) its SuSE version for mainframe systems. “There’s the perception that [Big Iron Linux is] a cash cow for them, and that’s, of course, the problem with cash cows—you milk cash cows,” he explains.

Nor has Novell significantly grown SuSE’s market share in the U.S.—in spite of high profile deals with Dell and others. “There’s some progress being made, but there’s a lot more that needs to be done. I certainly don’t think they have radically increased the footprint, for instance, of SuSE Linux in the U.S,” he concludes. “So I wouldn’t give them a failing grade at this point. I wouldn’t give them a good grade at this point. I would give them an incomplete.”

The long-time user of mainframe Linux offers a similar take. “I guess I'm still withholding judgment on whether Novell is good for SuSE Linux or not. I haven't seen much really bad or really good stuff yet, so I'm still hoping for a good outcome,” he concludes.

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