Interview: Doug Michels on the challenges facing Tarantella

ZDNet: Why did the sale of SCO's operating system and services arms -- announced last summer -- take nine months when you originally thought it would be over in three?

Doug Michels An acquisition is a process that requires the SEC to approve all documentation before you can ask shareholders. The transaction was more complicated than normal - and coming in the middle of the dot-com crash, the SEC was unusually paranoid about making sure everything was right. It's all about whether you disclose everything the shareholders need before they can take an informed vote. Because Caldera was a new economy Linux company, the SEC was meticulously careful. We ended up sending 800 pages of documentation to every shareholder. The process just took forever, but because of this we did have a chance to think about the actual deal and simplify it, but that meant making major changes to the document mid-way through.

When you have two public companies - one buying the other - then because both have already been audited it is a straightforward process, but because we were selling two out of three divisions we had to create accounts for the two parts of SCO going back five years.

A couple of years ago you were anticipating that Tarantella would be a major revenue earner for SCO -- how has that panned out?

Tarantella is going pretty well, but slower than we hoped back then, and the Caldera transaction took a lot of the cycle away. It has not been too bad though, because the development is done by an autonomous team in the UK. We are on track for what we want to do, but would have hoped to have been a separate company for at least three months longer than we have been.

Now that you are a separate company, what is your biggest obstacle?

Our biggest obstacle is understanding more about the customers who buy Tarantella, and the type of sales cycles they work to. It is very different from Unix where a lot of the business goes to SMEs through our resellers as configured solutions. Those sales that went to large corporates tended to go to specific projects, but Tarantella sells more to the corporate datacentre. We have to sell it to the chief information officer and get approval for the technology because it sits in the middle of their security framework. It is a whole different constituency, and we have tried to bring in some new sales people with different backgrounds - and get rid of some of those who could not make the transition - but it has been a pretty big shift.

So what is the next job?

We are continuing to invest in the product, and have support for wireless already and are now adding architectural features that will allow us to integrate much more tightly with major portals.

We see lot of corporations evaluating portals and making commitments to portal strategies. Some go with IBM and some go with iPlanet or some other vendor, but what they all tend to have in common is that once they adopt a portal they want to add to it access to all their applications. We can now integrate with most portals but it still takes some manual configuration and it is less seamless than we would like to see, so one area we are investing in this year is those architectural features that will make portal integration seamless.

Who do you see as your major competition?

Of all the other technologies that overlap us we look at Citrix as being the most on target. But even here we only see them in a fraction of the areas we focus on. We have some very significant differentiators, and given our current size we don't want to waste time on people who would consider Citrix a competitor.

Our second area of competition is internal development people in the corporations, because a lot of these think they can just build it themselves.

And what about Microsoft?

Microsoft added lot of Citrix capabilities to their platform, but if a customer has a lot of users with a lot of firewalls, VPNs and network segments then we are the natural extension, so we see ourselves as very synergistic to Microsoft. Politically Microsoft does not really like to support Tarantella because we don't run on NT we run on Unix. We will eventually do a Windows version.

Do you worry about Microsoft trying to buy Tarantella?

In theory they can buy anything they really want but not unless we want to sell - it is hard to a buy software company that doesn't want to be bought. And besides, Microsoft historically has never really launched products that were successful in the datacentre environment. People don't want to run Tarantella on NT in datacentre.

I think that if anything they have backed way out of the datacentre. They have put a lot of effort in NT into that space, and now they are focused on .Net, but if you look at all market research nobody really believes Windows Datacenter is what you base your datacentre on. I think the noise level has gone way down, and I think bigger threat would come if Microsoft moved into the low-end against Citrix and from there created a window for its RDP solution to get to the high end.

How close is the relationship between Tarantella and SCO?

We have two seats on the Caldera board, but this does not mean anything. Tarantella owns about a quarter of all the shares in Caldera, and although this is not a majority but it does give us some influence and help guide the company we can't control them. We are just there to help.

We do have close personal relationships with people at Caldera, and we expect there will be lots of cooperation between the two companies. In some geographies where we don't have a presence and they do, they will help us sell the product.

How did it feel losing the operating system side of SCO after all those years?

It was a difficult decision initially when we looked at the best thing to do for SCO and came to the conclusion that the best course of action would be to separate the Unix business from Tarantella business. The Caldera transaction proved to be the best way to separate them and give both businesses a chance to be successful. We never looked back and said 'boy that was wrong'. We had times when we were frustrated and irritable and times when thought 'gee this is hard work', but it was still the right thing to do for our shareholders, our customers, and our employees.

Personally I'm very happy to have chance to do something new and different after 22 years in the operating system business. It was a lot of fun and I did make a lot of money, and of course it was a great experience, but you only get to do a few important things in your career and thought it would be a nice opportunity to have chance to go do something that was also one of my babies. I feel just as protective towards Tarantella as I did toward Unix.

And will you be attending Caldera Forum?

We will be there and Tarantella will be there in some role, we want to be careful not to take the focus away from Caldera.

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