Microsoft and Novell announced a partnership whereby users of Novell’s Suse Linux operating system and Windows will be able to more easily manage virtualized IT environments.

In a Webcast, executives from both firms said the partnership would also include technical solutions around systems management and document format compatibility.

The companies are developing “para-virtualization” that will allow users to run Linux application workloads on top of Windows, and Web services management of heterogeneous application environments. The companies will also work to allow interoperability between Novell’s eDirectory and Microsoft’s Active Directory, as well as “translators” between MS Office and OpenOffice.

Every customer who purchases a subscription for Suse Enterprise will get a “patent covenant” from Microsoft to assure them they will not be subject to a patent infringement suit, as well as service and support from Novell. Microsoft sales teams will redistribute Suse Enterprise Server coupons for 70,000 servers into the market to help customers who want to run Linux.

Novell will offer a running royalty to Microsoft based on the products shipped under the agreement, while Microsoft will offer an up-front “balancing payment” to Novell. Microsoft will pay Novell US$240 for Suse Linux Enterprise Server subscription certificates. It will pay another US$108 million up-front for a patent co-operation agreement and Novell will pay US$40 over five years in return.

Microsoft CEO Steve Ballmer said the partnership is an unprecedented attempt to meet the needs of both proprietary and open source users. “People have struggled for a number of years to bridge those differences. A number of people said it couldn’t be done, but we think we’ve come up with a solution that respects both business models and allows for IP going forward,” Ballmer said.

The news was cheered by at least one joint customer who spoke during the Webcast. Goldman Sachs CTO Randy Cowan said he operates an IT environment that includes both Windows and Linux and even Unix.

“Until now, the burden of ensuring all those things run seamlessly . . . has been borne by us,” he said, adding that the partnership will allow his team to focus less on integration, “which is not where we want to be.”

Microsoft took the first steps towards acknowledging open source earlier this year, when at LinuxWorld Boston it announced its Virtual Server 2005 R2 (released in December for $99) would be available as a no-charge download, and made virtual machine add-ins for Linux distributions from Novell and Red Hat Linux. “We all know that Linux would continue to grow as a market segment with or without this deal,” said Novell president Ron Hovsepian.

“When I reached out to Steve and Microsoft, it was a conversation about how we work with our customers.”

HP executive vice-president Shane Robison said he has often discussed the emerging presence of Linux in enterprise environments with Ballmer. “He usually wasn’t smiling when we had those conversations,” he said. “This is truly a breakthrough.”

Ballmer said the partnership between the two firms doesn’t bring an end their rivalry in other areas. “If anyone is confused . . . if you have a new application that you want, for instance, the right answer is Windows, Windows, Windows. If you ask Ron (Hovsepian, he’ll tell you something different,” Ballmer said. “We’ll also co-operate in the right way.”

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