META Viewpoint Update: The Legacy of NetWare for Novell

Novell's true legacy for NetWare is in a range of management products that have been derived from the legacy platform, the training and support systems that enabled it, and the potential both offer for the SUSE Linux platform environment.

META Trend: Driven by compliance and cost, organizations will focus on identity as a business asset. Identity management will continue to confuse, but grow, as more organizations spawn projects around identity infrastructure (e.g., enterprise directories, Web SSO) and user life-cycle management. Web services (2005/06) will expand identity to non-person users and exacerbate the need for identity solutions. Identity infrastructure will be incorporated into application infrastructure "stacks," incorporating finer-grained authorization (2004-06), and cease as a standalone market (2006/07). User life-cycle management will draw closer to other operations functions (2006/07).

Setting the Stage
Novell has undergone a radical transition during the past five years, from languishing as a network operating system vendor to establishing itself as a major player in some of the industry’s few growth markets (i.e., identity management and Linux services). Novell’s strategy has focused on preserving its core money-making products while managing the transition to Linux and open source. The key product in that portfolio was, and is, Novell’s flagship network operating system - NetWare. During the early 1990s, NetWare was the system of choice for many IT organizations for file and print services. However, with the gradual penetration of Microsoft NT and Windows 2000/2003, NetWare lost much of its market share. In 2003, Novell purchased Ximian, a desktop Linux environment, followed by the acquisition of SUSE Linux in early 2004 (see Figure 1). Novell has now outlined a vision that encompasses the NetWare and SUSE kernel, termed Open Enterprise Server, which the company plans to have available by the end of CY04. But what do existing and potential NetWare customers think of Novell’s NetWare legacy? And what impact has that legacy had on Novell as a company?

NetWare and Revenues
From a revenue-generation perspective, Novell NetWare has been in decline for some time. META Group estimates the decline to be between 7% and 12% per year, varying by quarter. The decline has been relatively consistent, with no major increases in the past four years of tracking, including after the release of Microsoft Windows 2000 and Windows 2003. There have been some slowdowns in the decline, particularly in 2003, but no reversals. META Group predicts a gradual leveling off of the decline around 2007/08 as the remaining enterprises transition to Microsoft Windows (and a startup to Linux), with approximately 10%-15% of the total base wanting another type of platform. Many of those will be loyal NetWare customers, but some will also consider Linux for basic file/print needs.

At its peak, META Group estimates NetWare generated approximately 70%-75% of Novell’s revenues. In 2004, that is between 30% and 40% (excluding education-related product). Considering the generation of replacement revenues required and the performance of the company through some lean years, Novell managed to weather the worst of the dependency transition without adverse economic impact.

The Novell Study
In September/October 2003, before the SUSE acquisition was announced, Novell performed a study of 12,000 NetWare customers. The purpose of the study was to gain some insight on what NetWare customers were truly thinking about the product. Some interesting results were gathered.

Most customers surveyed were running a mix of various versions of NetWare. More than 50% still had older, unsupported software in production, including a small percentage of systems as old as NetWare 2.x, a testament both to stability and customer neglect. Approximately 80% were using NetWare 5, while 60% were current on NetWare 6.x.

When asked if they were planning to upgrade their platform, 60% of customers indicated they were going to upgrade to a more recent version of NetWare, while only 15% planned to move to another platform, indicating the characteristic brand loyalty of Novell customers.

Of those planning to migrate to another platform, approximately 65% said they would move to Microsoft Windows, while 24% said Linux. This indicates that Novell’s Linux strategy (which was just emerging in September 2003) is resonating with its installed base. It will be Novell’s challenge to grow this number as its combined NetWare/Linux server platform becomes available.

The number for Linux is a bit higher than expected and may reflect more wishful thinking than what is possible, since Linux platforms capable of providing rich file/print services on a par with Microsoft Windows and Novell NetWare are just becoming available.

The Linux Effect
One of the unexpected positive effects of the acquisition of SUSE Linux affects existing Novell 6.5 customers. Novell had some concerns initially during the release of the software for the extensive hardware OEM support required, relying on such issues as certifying drivers, testing, debugging, and support. There were cases where some hardware providers did not want to make the effort with Novell 6.5 because of perceived long-term viability. After the SUSE Linux acquisition and the publication of the road map to NetWare Linux, those providers became more conciliatory. Ironically, SUSE became an insurance policy for NetWare’s continued growth prior to its migration to the Linux platform.

Conclusions
Some considerations for enterprises include the following:

• Novell NetWare remains a viable offering and provides comparable services to Microsoft Windows for specific customer segments (namely, large existing NetWare customers with significant investments in NetWare), remaining the only product of its kind on the market to do so.
• Novell NetWare’s real story lies with the SUSE Linux platform now, not with the proprietary platform. Any long-term strategy that includes NetWare should have, at its core, the Linux platform in mind, as well as how to leverage the use of that platform in an overall infrastructure and application strategy rather than simply the deployment of file and print services.
• NetWare’s ultimate legacy will be an important contribution to the open source market, with follow-on products spun off from NetWare and the core system itself playing a significant role in the open source management and utility markets.
• The issue of continued NetWare existence for most enterprises is part of the same decision process as (and should not be separated from):
  -Consolidation of infrastructure services for operational cost savings (i.e., one vendor for file, print, authentication).
  -Consolidation of identity infrastructure and identity management services (i.e., directory, metadirectory, user provisioning).
  -The strategic information security requirements of application and database services of the enterprise.
  -The application development and deployment support strategy and its impact on infrastructure service needs.

Business Impact: A vendor product's transition to legacy status does not always have to present the business with limited options.

META Group originally published this article on 3 May 2004.