CRN Interview: Novell CEO Ron Hovsepian, The First 100 Days

More than 100 days in office, Novell CEO Ron Hovsepian outlined Novell's challenges and opportunities with Linux and NetWare, the channel, Red Hat, Microsoft and Xen, as well as his goals for moving the company forward, in an interview with CRN Senior Writer Paula Rooney. Hovsepian, a former IBM and Internet Capital Group executive and former Novell sales chief, is the fifth CEO to lead Novell since its founding in 1983.

The interview occurred a week before the death of Ray Noorda, Novell's founder and first CEO, at 82. But CRN later got some words from Hovsepian on the passing of the local area networking pioneer.

CRN: Talk about Ray Noorda and what he meant to Novell and the industry.

HOVSEPIAN: The technology industry is famous for the rapid rise and fall of trends and personalities, but there are a few clear moments in the history of technology that everybody recognizes were truly game-changing. Ray Noorda's embrace and promotion of networking was one such moment. His focus and tenacity in making Novell a leader in the networking business served as a model for many of the technology companies that followed.

People today can effortlessly share files, exchange e-mails and print across networks -- the core things most people do on their computers day in and day out -- thanks in no small part to Ray. Novell is proud of his legacy and honored to continue his commitment as a positive force for innovation.

CRN: Tell me about your first 100 days in Office.

HOVSEPIAN: It's been very interesting. In the first 60 to 90 days, I've met with 30 customers, 15 to 18 key partners, 100 analysts and investors, and 700 employees. It was important to get a feel for what customers and people perceive us to be. We can put all of that together and lay out a good game plan for success for our customers, employees and shareholders. That's where my head has been in first 100 days. I'm excited about the progress we've made inside that first window as we get up and going much more focused on what Novell is at its core: a great software company.

CRN: What have you learned from that feedback?

HOVSEPIAN: The most interesting dimension is the need for clarity around leadership. What people want to know is, what are we going to mean to them as a customer, as a company and to shareholders? And all of that I put under the umbrella of how are we going to lead the company and how will this team lead this company into the future? That's the biggest surprise, the desire for leadership.

CRN: What do they need? Obviously, every company needs strong leadership.

HOVSEPIAN: They want more focus on what Novell's business will be, narrowing the focus and clarity of what we are and what we are not. It's very important. Although you and I take it for granted, it's important to all three [groups] because it helps set the direction, and they know what the boundaries are. It's about depth of leadership. I feel good about the leadership team that's emerged here in the last 18 months.

CRN: What has that done?

HOVSEPIAN: Let's talk about external facing. We just had a great launch of SUSE Linux 10. There's concern Novell is not out there enough. I think what John Dragoon and marketing team has done in first six to nine months is a nice job driving that change and bringing discipline there. Product management is another area we're focused on and being more market-driven. We're taking great innovations in Novell labs and validating it with our customers. That was missing and is something we've been able to do under [Executive Vice President and CTO] Jeff [Jaffe's] leadership. It will be a critical project into next year for us

CRN: Which products have been developed under that system?

HOVSEPIAN: None of the products. We're just starting to put the discipline in place. It starts with the next cycle of products. We won't know for 18 months, in my experience, because takes two cycles to really see it hit. But we're validating our strategies in real time with customers now and doing more one-on-one visits.

CRN: Are channel partners involved in this?

HOVSEPIAN: Partners are absolutely involved. They review strategies and have come back with suggestions. And we've turned and executed in terms of some of the product road maps. In addition, we're doing a third dimension in our route to market and refining and improving and bringing more focus to partnering. Our partner advisory board has played a big role communicating to us about how we can continue the path of improvement and how we can gain market growth and momentum.

CRN: How many partners are on your advisory board currently?

HOVSEPIAN: Eighteen, last time I checked. CRN: How have Novell's relations with partners changed since you've taken over as CEO?

HOVSEPIAN: The first thing we did is I went out and hired Steve Erdman from Dell and put him on projects with the partner advisory board. ... We've started down the right path, but I'm not even 100 days into it. I'm coming up on 100.

CRN: What has been biggest challenge to date? You've held executive posts at Novell.

HOVSEPIAN: We've had a lot of changes in the executive ranks, and that's probably been the biggest issue we've had to deal with. And we have dealt with other things like the voluntary stock option.

CRN: There was a report about Nasdaq possibly delisting Novell. What was that about?

HOVSEPIAN: There's a formal process we're going through right now ... and because of the voluntary review, Nasdaq [rules] automatically kick in. I don't know how many companies are in that process right now, but probably 40 to 50. It's a typical process everybody has to go through. We feel good about it. We're being proactive, but this qualifies as another challenge in the first 100 days. We're going through that process.

b>CRN: What are you seeing in the economic environment for IT and the need for software?

HOVSEPIAN: Customers value software and IT differently. That dimension and the oligopoly effect are going on, where markets begin to consolidate and you end up with 'X' number of big vendors and smaller ones aligned with bigger ones. And we have the beginning of that cycle. You'll see key players with stacks. IBM sells the whole stack, Microsoft does software and tools, and Oracle does database right up to applications. People are jockeying for different positions, but at the end of the day the customer needs to buy the whole stack. And when you add value base dimension and macro-economic phenomena, it will yield a whole new cycle of innovations and push companies to innovate around value and simplicity of use. Linux and open source are so perfectly timed for the intersection of those two events.

CRN: You mentioned bringing more clarity and focus to Novell. How has that been done?

HOVSEPIAN: Clearly, we've laid out a two-pronged strategy that says we're going to be a Linux distributor. We'll be ubiquitous and doing it from the desktop to the data center, and we did that with SLES 10. The second part of our strategy is we need to deliver additional management services for our open-source customers, and that's where the identity management, file and print and system management dimensions [come in]. So it's a nice fit in terms of the assets that we have. And that's bringing more focus to the organization.

CRN: To what extent are Novell partners leading the charge to Linux? Are they too timid about pushing customers to Linux?

HOVSEPIAN: Partners make a living helping their customers deal with change and go through those changes. Linux represents an opportunity to help their customers have a different computing platform. It's not binary. It's not in lieu of Microsoft but in addition to Microsoft, because customers have different workloads. So to me, it's not an either/or, like a lot of people present it. Partners will make their money helping customers deal with dual environments and, where appropriate, they'll migrate workloads over. And that to me is all positive.

CRN: To what extent are you seeing migration from NetWare to Linux?

HOVSEPIAN: Eighty percent of customers have moved to OES [Open Enterprise Server] contracts, so the good news is they've given us a first step of migration to OES, which is a Linux dimension. We're in pilots and reviewing those pilots and filling in features and other services they need to make a full migration successful, with backup, performance. So we're not fooling ourselves that the job is done because we have contracts in-house. We need to focus on successful pilots and monitoring how those customers migrate over the next 18 months. CRN: How will Novell help them with migrations?

HOVSEPIAN: At BrainShare, Novell talked about the next generation of OES, called Cypress, with virtualized NetWare so they don't have to worry about drivers or anything going forward. When is it due? I'd say summertime. Next summertime. And it's not in lieu of Microsoft.

CRN: What other products are coming up?

HOVSEPIAN: The biggest one is Access Manager 3.0, [due out] this winter. We delivered Identity Manager and GroupWise 7 and did a release on OES, so now we're gearing up for the next cycle in the spring or summer.

CRN: Any other products in the pipeline?

HOVSEPIAN: A Linux thin client, yes, like stateless Linux. I know we've talked about it, but [we] don't know about [ship] dates.

CRN: What's happening at SUSE operations in Germany? At one time, morale seemed low and many top engineers and executives were leaving.

HOVSEPIAN: I think they have a very interesting world they live, balancing the needs of the [open-source] community with the needs of our commercial customers. They're excited about new areas we've crossed into, especially virtualization. It's a big hit, and we're ahead of anybody in the [Xen] market. And they're excited about including it in SUSE 10 CIM [Computing Infrastructure Management] model and the security model. They're working on the next evolution of virtualization.

CRN: Novell already has an aptly named management platform to serve that purpose: ZenWorks.

HOVSEPIAN: Exactly.

CRN: Some Xen companies maintain that integrating Xen into the operating system, as Novell and Red Hat have done, is somehow less valuable than stand-alone virtualization platforms. What do you say?

HOVSEPIAN: We have a two-pronged strategy: one is Linux, and the other is management services. And we'll make sure our management services compete. There are different approaches for heterogeneous management, automation service, an architectural approach and application-driven approaches, and our Linux distribution can leverage our management services. There are different approaches, and management depends on the market segment. There's no single approach.

CRN: Is Novell considering acquisitions in the management and virtualization space?

HOVSEPIAN: Virtualization will help management services get better. Fair question. But I can't share anything.

CRN: How do you think Novell's channel strategy differs from that of Red Hat? How will Novell differentiate its Linux from that of Red Hat?

HOVSEPIAN: Two things. We have more feet in the street with customers that can help a partner be more successful. And two, Red Hat's model to date has had two dimensions, one of being a solution for the edge servers and we build a desktop for the data center for enterprise computing. What's also different is our ability to have a worldwide support team behind partners, and they have trained Linux professionals already in the marketplace, which makes a big difference to customers and partners. Partners are our largest customers. IBM is one of our customers. CRN: How many partners does Novell have now?

HOVSEPIAN: Roughly 4,000, last time I looked. [Company spokesman interjected, saying the total number is 5.000.]

CRN: If it's 5,000, then it doesn't seem Novell has done a paring down at all, which was expected.

HOVSEPIAN: We're narrowing by segments, so we're being more segmented by customers. Our traditional partners were solution providers, while Red Hat's program is more fulfillment partners. They work more with distribution and fulfillment partners vs. solution providers, and our strength has been with solution providers and application vendors.

CRN: What will be Novell's response to the Red Hat Network?

HOVSEPIAN: We delivered something called Novell customer center with SLES 10 that allows customers to come and see all their licensed products from us, do their license management and do their upgrades and maintenance management. We shipped that with the SLES 10 July code release.

CRN: How has Novell's relationship with IBM and Dell developed over the last six months, with former IBM executivess like you and former Dell executive Erdman at Novell?

HOVSEPIAN: It's gotten stronger. If you look at the last quarter's revenue coming from OEM partners, it doubled, in general. So we'll get stronger, and we'll also get deeper with those big ecosystem partners and try to leverage their network of partners. We'd like to tap more into our partners and leverage those of our global strategic partners as well.

CRN: Novell said it was doing that in the past, leveraging partners of HP and IBM to sell through. What's different now?

HOVSEPIAN: We've had great support from IBM, HP and Dell. I think we can do more to spend more program dollars with them on their partner programs and give more face-to-face support to their internal organizations. ... Steve [Erdman] and his team have really really galvanized the thought process and put dollars and cents on why we need to do it.

CRN: You worked with former CEO Jack Messman. How is your strategy different from his?

HOVSEPIAN: From a business strategy, I bring a a greater focus on the software dimension of our business, rather than trying to be a full-service provider, [which] is a big difference. From a management style, different from Jack, I will have a very deep focus on building the team relationships we need to have to make a big enterprise work. I'm trying to engage the team, and you'll see a more participative leadership style.

CRN: How will Novell begin to generate revenue on the same scale as Red Hat?

HOVSEPIAN: We just reported last quarter that we grew faster than the market, about 30 percent, so I feel good about that. We need to continue that momentum.

CRN: How will you get Linux sold for the desktop? There's a lot of excitement but not a lot of sales. What will be the breakthrough?

HOVSEPIAN: We had 290,000 downloads of SLES 10 by the end of September. But to your point, we need to translate that into numbers. We need to get five to seven good customers to stand up. When when will happen? We got pilots out with those customers and we're on the front end of that, since we just started pilots. The second thing is also getting to partners who sell desktops to understand the value proposition.

CRN: In terms of Xen, there's been a controversy that it's not ready for the enterprise. How will Novell compete against Red Hat?

HOVSEPIAN: I think there's a lot of market share for both of us. They've captured the edge, and we captured the data center. We captured 80 percent of mainframes running Linux, and we differeniate ourselves on security, management tools, and we've taken a leadership position in in delivering virtualization. Xen is absolutely ready right now.

CRN: Is Novell's ZenWorks [management platform] ready to manage Xen at this point?

HOVSEPIAN: Xen support will be in the February release.

CRN: What's happening with Novell Consulting Services (NCS), and what are the plans for it? How has its relationship with Novell's channel partners changed?

HOVSEPIAN: Novell Consulting is focused on identity management and our open-source work. And that's where we refocused it. It's getting good traction. In the Americas, we made a shift to NCS [supporting Novell products] a while ago. Around the globe, we're making that shift and are really focused on subcontracting, which has jumped from 5 percent to between 34 and 36 percent two quarters ago, and we're using our partners to fulfill that. It's all heading in the right direction.