Microsoft and Novell: Fox marries chicken, both move into henhouse

The stunning news that Microsoft will partner with Novell to support SuSe Linux as an alternative deployment platform to Windows -- and that they announce it on the cusp of the arrival of Windows Vista! -- is one of the most intriguing events in IT in some time.
One has to surmise that the Oracle move on Unbreakable Linux must have played into the timing, if not the substance, of this Microsoft-Novell barn-burner. As I blogged just this week, Oracle has reshuffled the deck and forced the hand of all the players in the open source business. We look to IBM with tired eyes.
I have not yet heard the Steve Ballmer announcement at 5 p.m. ET today. But already I have some major questions:
--Is Microsoft in a sense in league with Oracle, perhaps in an uncoordinated way, to subvert the commercial Linux -- and by extension open source -- business models? If you can get Red Hat Enterprise Linux support from Oracle for $99 and up, and you can get SuSe Linux support from Microsoft (assuming at price parity to Oracle), then all bets are off for commercial Linux businesses. These moves take the oxygen from the other Linux vendors. Linux will be fine, I suppose, but given their sales forces, Oracle and Microsoft will soon dominate the Linux distro business, and use it to sell their own wares. That could mean they own and then snuff out the open source components that threaten them.

--Or is Microsoft in opposition to Oracle, not in principle but in practice? That is, if Oracle can make good business selling Linux support and moving up the stack for service support for both commercial and open source components -- to complete with IBM, HP, Sun, and BEA -- why shouldn't Microsoft, too? Both Microsoft and Oracle have deep pockets and highly profitable other product lines to keep the going as they hollow-out the lower-stack components business.

Wow, again the implications are staggering. More to come when I hear the Microsoft announcement.

UPDATE:

Here is the analysis after the news conference. 

Maybe it has more to do with virtualization as a weapon than subverting the business model through cheap support. Seems Novell gets to keep its support revenue, but what does Microsoft get? Take a look.

Here are the major points of the release:

Novell and Microsoft have signed three related agreements with the objective to enhance interoperability between Linux and Windows and give customers more flexibility in their IT environments.

1) Under a technical cooperation agreement, Novell and Microsoft will work together in three primary areas to deliver new solutions to customers: virtualization, web services management and document format compatibility.

2) Under a patent cooperation agreement, Microsoft and Novell provide patent coverage for their respective customers, giving customers peace of mind regarding intellectual property issues.

3) Under a business cooperation agreement, Novell and Microsoft are committing to dedicate marketing and sales resources to promote joint solutions.

Here's the release:

Microsoft and Novell Announce Broad Collaboration on Windows and Linux Interoperability and Support

Companies also announce a patent agreement covering proprietary and open source products

REDMOND, Wash., and WALTHAM, Mass. – Nov. 2, 2006 – Microsoft and Novell today announced a set of broad business and technical collaboration agreements to build, market and support a series of new solutions to make Novell and Microsoft products work better together. The two companies also announced an agreement to provide each others’ customers with patent coverage for their respective products.

These agreements will be in place until at least 2012.  Under this new model, customers will realize unprecedented choice and flexibility through improved interoperability and manageability between Windows and Linux.

“They said it couldn’t be done.  This is a new model and a true evolution of our relationship that we think customers will immediately find compelling because it delivers practical value by bringing two of their most important platform investments closer together,” said Steve Ballmer, president and CEO of Microsoft.  “We’re excited to work with Novell, whose strengths include its heritage as a mixed source company.  Resolving our patent issues enables a combined focus on virtualization and Web Services Management to create new opportunities for our companies and our customers.”

Under the agreement, Novell is establishing clear leadership among Linux platform and open source software providers on interoperability for mixed source environments.  As a result, Microsoft will officially recommend SUSE Linux Enterprise for customers who want Windows-Linux solutions.  Additionally, Microsoft will distribute coupons for SUSE Linux Enterprise Server maintenance and support, so that customers can benefit from the use of an interoperable version of Linux with patent coverage, as well as the collaborative work between the two companies. “Too often technology companies ask their customers to adapt to them.

Today we are adapting to our customers,” said Ron Hovsepian, president and CEO of Novell.  “Microsoft and Novell are enabling customers to take advantage of each others’ products where it makes sense in their enterprise infrastructure.  We jointly believe that our business and patent agreements make it possible to offer the highest level of interoperability with the assurance that both our companies stand behind these solutions.”

Agreement has broad scope

The two companies will create a joint research facility at which Microsoft and Novell technical experts will architect and test new software solutions and work with customers and the community to build and support these technologies.  The agreement between Microsoft and Novell focuses on three technical areas that provide important value and choice to the market:
* Virtualization.  Virtualization is one of the most important trends in the industry. Customers tell us that virtualization is one way they can consolidate and more easily manage rapidly growing server workloads and their large set of server applications. Microsoft and Novell will jointly develop the most compelling virtualization offering in the market for Linux and Windows.
* Web Services for managing physical and virtual servers.  Web Services and service oriented architectures continue to be one of the defining ways software companies can deliver greater value to customers. Microsoft and Novell will undertake work to make it easier for customers to manage mixed Windows and SUSE Linux Enterprise environments and to make it easier for customers to federate Microsoft Active Directory with Novell eDirectory.
* Document Format Compatibility.  Microsoft and Novell have been focusing on ways to improve interoperability between office productivity applications. The two companies will now work together on ways for OpenOffice and Microsoft Office users to best share documents and both will take steps to make translators available to improve interoperability between Open XML and OpenDocument Formats.
“As a result of this collaboration, customers will now be able to run virtualized Linux on Windows or virtualized Windows on Linux,” said Jeff Jaffe, executive vice president and chief technology officer at Novell.  “Customers continually ask us how they can consolidate servers with multiple operating systems through virtualization.  By working together, Novell and Microsoft enable customers to choose the operating system that best fits their application and business needs.”
The patent agreement enables Microsoft and Novell to address the patent issues between them, which will give customers assurance of protection against patent infringement claims.  It gives customers confidence the technologies they use and deploy in their environments are compliant with the two companies’ patents.
As part of this agreement, Microsoft will provide a covenant not to assert its patent rights against customers who have purchased SUSE Linux Enterprise Server or other covered products from Novell, and Novell will provide an identical covenant to customers who have a licensed version of Windows or other covered products from Microsoft.
“Both companies had to think creatively about how to create an intellectual property bridge between the two worlds of open source and proprietary software,” said Brad Smith, senior vice president and general counsel of Microsoft.  “This bridge is built on respect for the innovations of each company, the open source community, and a passion for what we can deliver for our customers together.” 
Customer and partner reaction
Microsoft and Novell announced the new alliance at an event attended by several customers and partners.
"We applaud Novell and Microsoft in their efforts to provide greater Windows and Linux interoperability,” said Paul Otellini, president and chief executive officer of Intel Corporation.  “Customers want solutions that meet their individual needs and higher levels of software interoperability gives them the ability to more easily make the best choices."
 “This technology and business collaboration provides a model that allows Microsoft and Novell to develop new solutions to enable open source and proprietary software to work better together in a mixed source environment.  We applaud these two companies for doing the hard work to build a bridge between Windows and Linux,” said Shane Robison, EVP, Chief Strategy & Technology Officer, Hewlett-Packard Company.
"IBM is encouraged to see more industry endorsement of mixed source solutions that promote open standards and offer assurances to customers and open communities," said Steve Mills, Senior Vice President and Group Executive, IBM Software. "We are particularly glad to see Microsoft supporting interoperability with the industry standard Open Document Format. Open Documents give customers choice and help unlock broad industry creativity, allowing access to a new generation of innovative applications. Our view continues to be that interoperability and choice are key values that customers demand and deserve."
“SAP has been the first enterprise application vendor to run our apps on Linux, while we have more Windows based deployments than any other platform,” said Shai Agassi, President Product and Technology at SAP.  “Today's announcement means that customers can now choose their preferred operating system for each part of their SAP implementation with the confidence that the systems will have strong interoperability and be supported by SAP, Novell and Microsoft - both companies being strong SAP partners”
"One of the key challenges in government is IT interoperability. We commend Microsoft and Novell for their collaboration and their efforts to build bridges in the interoperability area, which will help government to better serve our customers, our business community and our citizens," said Thomas Jarrett, Secretary of the Department of Technology/CIO, State of Delaware.
Good for the open source community
Novell officials noted that one of their priorities in working toward the agreement with Microsoft was making sure that the agreement made sense for the open source community.  As part of today's agreement, Novell and Microsoft are announcing three important commitments.  First, Microsoft will work with Novell and actively contribute to several open source software projects, including projects focused on office file formats and web services management.  Second, Microsoft will not assert its patents against individual non-commercial open source developers and users.  And third, Microsoft is promising not to assert its patents against individual contributors to openSUSE.org whose code is included in the SUSE Linux Enterprise platform, including SUSE Linux Enterprise Server and SUSE Linux Enterprise Desktop.
"Today's announcement by Microsoft and Novell marks a significant milestone in the adoption of Linux," said Stuart Cohen, CEO, Open Source Development Labs. "By choosing a course of co-opetition, Microsoft acknowledges the critical role that open source plays today in enterprise IT infrastructure. We appreciate the role Novell is playing to help bridge the gap between Microsoft and the open source community. We are glad to see these two companies collaborating to further diminish the legal threat posed to developers and customers by patent assertions. This is good for customer confidence in Linux, good for the open source community, and the broader IT ecosystem."
Additional announcement details
Like many commercial transactions, the financial terms of the agreement are not being disclosed at this time.
Under the technical collaboration agreement, the companies will create a joint research facility and pursue new software solutions for virtualization, management, and document format compatibility.  These are potentially huge markets – IDC projects the overall market for virtual machine software to be $1.8 billion by 2010, and the overall market for distributed system management software to be $10.2 billion by 2010 – and the companies believe their investment in interoperability will make their respective products more attractive to customers.
Under the business collaboration agreement, the companies will pursue a variety of joint marketing activities.  In addition, Microsoft will annually purchase as part of a resale arrangement approximately 70,000 coupons, with a mix of priority and standard support, for SUSE Linux Enterprise Server maintenance subscriptions.  This program enables customers to benefit from the use of the new software solutions developed through the collaborative research effort, as well as a version of Linux that is covered with respect to Microsoft’s IP rights.
Under the patent agreement, both companies will make up-front payments in exchange for a release from any potential liability for use of each others patented intellectual property, with a net balancing payment from Microsoft to Novell reflecting the larger applicable volume of Microsoft’s product shipments.  Novell will also make running royalty payments based on a percentage of its revenues from open source products.
The parties are assessing the accounting treatment for the agreements and will provide information as required in the course of their filings with the SEC.