Novell's Schmidt: 'We're now just getting to the fun part'

When Novell Inc. Senior Vice President of Marketing John Slitz resigned late last month, rumors started to fly that CEO Eric Schmidt was not happy with the progress of the Provo, Utah, company's directory strategy. Whispers of a shake-up circulated through the industry. But Schmidt downplayed those rumors this month during an interview with PC Week Senior Writer Scott Berinato. Instead, he talked about Novell's growth potential with its NDS and "Zens," or directory-based applications.

PC WEEK: Is Novell moving fast enough for you? Is the directory strategy moving as you want it to?

SCHMIDT: I'm never happy. I'm very, very pleased with what we've done so far because I think what we've done in the last two years is we've taken the core franchise and really revitalized it. And I'm very, very pleased with this directory stuff. It makes sense to customers now. To me the issue is: To what degree can Novell take advantage of what is obviously a huge opportunity in the directory? But ... we can always do more, we can always run faster. When I talk about this internally, I tell everybody, "Congratulations. Good job. What have you done for me lately?"

PC WEEK: Are you officially out of survival mode?

SCHMIDT: Yes, very much so. I think we were out of turnaround mode maybe a year ago, when NetWare 5.0 shipped. We've seen strong growth since then. Each quarter we've shipped NetWare 5.0, we've beaten all our goals.

PC WEEK: Your comment about shipping "10 Zens" has haunted you. Are you frustrated by the pace of application development at Novell?

SCHMIDT: In fact, what happened was [our] ZENworks [network management platform] last year revitalized the company's image around directories. I've vowed to have 10 by the end of this year, and we will hit that. I track this monthly. The single sign-on is a huge, huge product for us. It's technically elegant because of XML [Extensible Markup Language], and we believe XML will be the way the directory and metadirectory ultimately merge, so that combination of single sign-on and XML is very powerful to customers.

PC WEEK: But have the Zens communicated to your customers the value of an enterprise directory effectively?

SCHMIDT: I think some of them have. The Zens around client and server management [like ZENworks] are well-communicated, and single sign-on is well-understood. The ones coming out around certificate management and some others aren't completely there, but they haven't shipped yet. Remember, we have to communicate this to the channel, too. We run a very large channel training program. We trained 11,000 channel salespeople that needed to be retrained to understand this, too.

PC WEEK: Do you see any changes to Novell's licensing model for the directory and its applications?

SCHMIDT: At any given point, there are debates on all aspects of licensing and pricing at Novell, because there should be. I want people to challenge assumptions. Where we are on the NDS stuff, in the ASP [application service provider] type of a model, we will make some adjustments to the way NDS is priced. However, we will not make adjustments in the current models where it's not appropriate. It's clear to me that when NDS is used for the customer's customer, there's a different way to think about the value proposition than in the enterprise.

PC WEEK: Are you worried that the arrival of [Microsoft Corp.'s] Active Directory will cause confusion in the market?

SCHMIDT: You always keep your eye on what Microsoft is doing. "Worry" is a vernacular way of saying it. A better way of saying it is, we believe Active Directory will ship sometime, and when it ships, we [will] have ensured that NDS works extremely well with Active Directory. And we think it will only create management and Zen opportunities for us.

PC WEEK: With the turnaround at Novell complete, will you move on?

SCHMIDT: I don't understand why people say that. They should ask me. I love this. It's the "Do you kick your dog?" question, and I say, "I don't have a dog" and it's like, "He would kick a dog if he had one." There's a presumption there. I came to the company to build a network services architecture for the year 2000 and beyond. And in order to build that, I found we had to do this hard-core turnaround, which was, frankly, a surprise.

We are now just getting to the fun part. So I think that's a very clear answer. My motivation is I wish this part had started two years ago.

PC WEEK: Novell keeps promising Internet service provider and ASP partners for the directory, and we're still waiting.

SCHMIDT: There are no proven pricing models there yet. Look at [America Online Inc.]. Even for them, the best example of someone who understands this market, theirs is not a pure model. A lot of their revenue is still from connection charges. It's too early to know the answer.

If you follow my principle of the Internet, this will happen over and over. All alternatives are tried at least once on the Internet. It's reasonable to assume we will see a lot of companies try to be ASPs. You will see telcos, ERP [enterprise resource planning] companies. ... But we, Novell, will not go into the ASP business ourselves. We want to be a supplier of the technology, and in order to do that, you need a directory that stores certificates, and ours is the one that does that.

PC WEEK: Finally, we saw digitalme demonstrated last March; will it ship by the end of the year?

SCHMIDT: Yes. What happens is, we do a technology demo, and that's what it was, not a product, but it will ship. It's very sexy technology when professionally done. What you saw in March, really, was a bunch of engineers having a really good time. Now, it will be very professional, and I believe there's a very good chance it will have a big impact.