Novell Takes Action

Their mission: Establish Novell as a player in XML Web services,turf now dominated by archrival Microsoft and ally IBM,and amplify its image as a solutions company.

To that end, Novell is working to rebuild its once-vibrant channel and re-engineer its entire product line to conform to Web standards such as XML, SOAP, WSDL and UDDI, as well as Java and J2EE. The software vendor also is reportedly mulling acquisitions in the Web services, application server and integration markets.

Novell's first step is to revamp its channel, a move that Messman and Stone deem critical to jump-starting software and solution sales. By the end of this month, the vendor is slated to formally unveil a handbook for its long-awaited rules of engagement for channel partners. And Messman said the new rules,combined with a named-accounts/named-partners model disclosed last November,will erase concerns that Novell is merely becoming an extension of Cambridge Technology Partners, the e-services firm it acquired last July.

"We made a mistake when we went to a direct-sales model and allowed Novell direct-sales [staff to call on customers," Messman said in an interview at Novell's executive offices in Cambridge. "We'll push more business to the channel and get our sales force to sell more deeply into the enterprise."

The new rules will specify how partners can air sales-conflict grievances and when Novell will sell with partners and through partners. Under the named-accounts/named-partner model, Novell has 800 to 1,000 named accounts in North America and 750 to 850 named partners. Novell and Cambridge Technology Partners plan to sell with the named partners, which are mostly Platinum partners, and Novell will sell products through another 25,000 solution providers. Compensation for Novell's sales force will be the same whether product is sold direct or via the channel, company executives said.

By defining sales boundaries, Novell is signaling that solution providers remain key to its business, said Stone. "When Novell focuses on the channel and provides the support, solutions and programs they need, it's dead-on proven that it works. When we walk away, it dies," he said.

Solution provider and corporate disdain over Microsoft Licensing 6.0 may open up new business opportunities for Novell and help resurrect NetWare, but Novell will have some hard selling to do, industry observers say.

For one, NetWare continues to be squeezed by Windows 2000 and Linux on the network operating system front. In CRN's Channel Champions 2002 report, Linux distributor Red Hat finished first in the OS category for overall solution provider satisfaction, while Microsoft and Novell tied for second. NetWare rated third,behind Red Hat Linux and Windows,in technical satisfaction.

What's more, some solution providers say Novell has made promises to the channel that it couldn't keep and that the acquisition of Cambridge Technology Partners sent a message that Novell aimed to compete with partners in services.

"Why did Novell let its [channel slip away?" said Brian Giese, a former Novell employee and now president and CEO of IT Selling, a Bethesda, Md.-based consulting firm. "I was talking to one of the largest solution providers in the country and he remarked how he used to sell a ton of Novell and is not selling any Novell anymore. But I think resellers will run to them if they can get back in alignment and create some branding and clarity for solutions."

Steve McHale, an analyst at research firm IDC, said Novell's new product strategy and rules of engagement are a step in the right direction, but they don't guarantee that it will win back the channel's allegiance. "Novell has already gone the route of easy-to-sell solutions and Web services. They need more," McHale said. "Novell is only right if their rules-of-engagement handbook includes a charter about the principles on which Novell will deal with partners. If the rules aren't based on principles, you need to keep changing them."

However, since Messman took the helm from former CEO Eric Schmidt last year, Novell has sent signals that it wants to be channel-friendly. As part of the Clear Channel program unveiled last year, Novell cut fees on its PartnerNet 2002 program by more than half and announced its first named-accounts/named-partner model. The vendor also began talks with its partner advisory council that resulted in the North American partnering handbook, due out in late May.

At Brainshare 2002 in March, newly appointed Vice Chairman Stone announced that Novell would consolidate all partner functions under one organization and had created a new channel position, vice president of channel sales for North America. Novell filled the post last month with 14-year company veteran Nancy Reynolds.

Messman said Novell aims to mimic IBM's business model, in which products and integration services are combined to form a solution. The rationale is that Novell can be both a technology and services company without igniting channel conflicts, he said, adding that a hybrid approach is necessary for Web services, where partners sell sophisticated solutions rather than simple red boxes. Novell has the products and technology, but it lacks the reach of an IBM Global Services and needs to re-enlist more partners to drive Web services, Messman said.

What makes Novell's channel policy different this time around is the strong backing of its top brass: Messman, Stone and H. Carvel "Carv" Moore, president of Novell Americas, Reynolds said. "What's different is we have executive support. They're behind this 100 percent," she said. "As we put forth our business plan, we'll be able to deliver."

The upcoming partner handbook and rules of engagement show that Novell means business with channel partnerships, Reynolds added. "It's the first written document for key partners in quite a while," she said. "One of our many priorities is the channel, and we're going to treat the channel as an extension of our sales force."

Paul Jarvie, president of Buffalo Grove, Ill.-based ASAP Software, a key Novell reseller, said the vendor's new management is making the right decisions to rekindle its standing in the channel.

"ASAP has been Novell's largest volume channel partner for several years. Our business with them continued to grow in 2001. We would love to do more business with Novell," Jarvie said. "One of the strongest channel champions in the Novell organization was recently elevated to VP of channels [Reynolds. Since Cambridge Technology was largely a direct-sales organization, it was imperative that Novell selected a channel veteran to motivate change. It appears they did so with this appointment."

And Novell's new partnership efforts are beginning to bear fruit, said solution providers who bristle at the notion that NetWare,and Novell's channel,is dead. "In our district, managers have seen an increase in the number of solution providers applying to become partners again with Novell. That should speak for itself," said Terry Calloway, president of Data Technique, Pittsburg, Kan.

Charlie Tragesser, CEO of Polar Systems, Portland, Ore., said he's impressed with Novell's new management and training programs and has reactivated Polar's Platinum status. "We have more concern about continuing to nurture our relationship with our local Novell staff than we do about their rules of engagement," Tragesser said. "We do not expect Novell to bring us leads, nor do we anticipate that they will attempt to unseat us from our current client base. We also don't seem to need to use Novell resources to close business."

Other solution providers said Novell has burned bridges it can't repair. "Novell has approached us to become a Platinum dealer yet again. We were their largest [reseller in San Francisco a few years back. But we have declined, primarily because our engineers have now all been retooled in support of Microsoft," said Dave Sperry, CEO of MicroMenders, which plans to remain a Novell Gold Partner. "It's difficult to see a reasonable return on investment by retraining our engineers again on Novell products. It's also proving difficult to stir any interest among the engineers in being trained. They don't perceive any cachet associated with Novell certification anymore."

On the product side, Novell has developed Internet services that bolster its NetWare installed base, notably the iPrint and iFolder features in NetWare 6.0, company executives said. They also point to new solutions like Novell Workspace and Synergy,which offer solution providers new opportunities in the midmarket,and efforts to convert all product interfaces to support XML, SOAP and UDDI and to revitalize NetWare as a Java- and J2EE-friendly platform.

Another strong selling point in Novell's Web services drive is its eDirectory product and directory-enabled applications and solutions, which partners can push, according to Messman. "Web services is made for directories," he said. "We'll be there."

Novell's fortified product and technology lineup lays a solid foundation for selling solutions and services, Messman added. With the shift to solutions, Novell plans to alter its revenue mix. The vendor's current revenue breakdown is 60 percent from products and 40 percent from services, but eventually company executives would like to reverse that ratio, Messman said.

"Good services are built on great technology. You can't separate the two," he said. "We need the channel more than anyone else in the business. Microsoft is going more direct with customers with their licensing model. But Novell can't reach all of our customers with our field-sales force. We need other means to get to the customer."

The company expects to certify 250 Platinum and 1,000 Gold partners by its June 30 certification deadline. So far, it has signed up 198 Platinum and 580 Gold partners, executives said.

Novell hasn't lost its opportunity to mend relations with old channel partners, but that task won't be a cakewalk, according to analysts.

"Novell has more charismatic leadership than what's been there in the past, but their problems have not been solved. Revenue is declining, and Novell has to get into a growth pattern," said Mike Neuenschwander, an analyst at The Burton Group, a network consulting and research firm. "The channel is open to Novell.

They haven't forgotten how much fun it was when Novell was successful."