There are two sides to Jack Messman – just like the company he runs.
On the one hand there is a traditional chief executive running a traditional security and system management business. On the other is a man who is just one of many technology executives trying to make sense of the open source software model. Unlike IBM’s Sam Palmisano or Oracle’s Larry Ellison, however, Messman isn’t just supporting Linux and preaching its virtues. He bought a distribution, and that makes all the difference.
At this year’s BrainShare 2006, Messman performed a delicate balancing act between reassuring NetWare customers they wouldn’t be left behind while nudging them towards a successor product that integrates Suse Linux Enterprise 10. This product, Open Enterprise Server, is the cornerstone of Novell’s turnaround strategy and Messman told attendees this week that the roadmap for both OSes will continue in parallel. “Either way, you win,” he said.
ITBusiness.ca spoke with Messman about the challenges facing Novell’s future and his perspective on the changing business software market.
ITBusiness.ca: When did you know the integration with Suse was complete and you were really acting as one company?
Jack Messman: Yeah, I think that’s something with any acquisition, not just with Novell, the issue of integration of the people is always the big concern. You know, over the years, even before I came back to Novell, it had made a number of acquisitions, and as I always said, the corporate antibodies would come out and reject the implants, which were the acquisitions we made. We were sensitive to that, and when we did the Suse acquisition the big difference was that over the years the acquisitions that we made were somewhat tangential to the base business, and the management didn’t do a great job of explaining how they fit. And the market sometimes questioned how they fit. But when it came to the Suse Linux deal, they understood. It was an operating system, and that’s what Novell was all about. They knew Linux, so I think the embracement of the Linux business was much more rapid as a result.
Now, before we bought Suse Linux, we bought Ximian, which was an open source company with Nat Friedman. And what we got out of that deal, more than anything else, we got DNA. The open source part of Ximian became part of our DNA, such that when we acquired Suse Linux, we really embraced it. The fact that the products fit, and the fact that we had some DNA grafting going on, was really the key.
ITB: Although you’ve moved quickly into open source, you’ve had shareholders telling you to dump your commercial products, and criticizing you for not moving fast enough. How do you respond to that pressure?
JM: Well, you have to do what’s right for the customer. That’s the beginning and the end of this story, and we couldn’t move solely to Linux as some shareholders had suggested, because it would mean divorcing our customers. It’s much more expensive to gain a customer than it is to retain one, and so focusing on retaining our customer base by doing the NetWare to Open Enterprise Server step. Many of the people who were pressuring us didn’t focus enough on the other parts of our business. We have a very good business in identity. We had this NetWare business that we could migrate to Linux, so we weren’t going to be a pure startup in Linux; we had a base business that was set to be converted to Linux. And we had this workgroup business that was very, very good. We couldn’t leave the customer behind, we decided to do the migration with the customer and sell them stuff once it was over with. And I think we’re going to be successful. I mean, we are successful. We’re profitable, we have US$1.7 billion in the bank, people are accepting Open Enterprise Server, and the Linux migration is underway.
ITB: At the same time, you’ve had to make some tough decisions in reorganizing Novell, laying off about 10 per cent of your workforce recently.
JM: We had to do some re-architecting of the legacy products to make them ready for the new markets, and that took some time, it took a couple of years. Now all of our products work on Linux, and we still have a couple of small re-architecting jobs we’re working on. At the end of that time, we looked at the skills of our people, and we had tried to train them on Linux, so their skills would be relevant and up to date. But some people just didn’t make the grade, and therefore they had to be let go because they couldn’t be put on to other projects or other new products that we’ve been working on. So we just had to have a cutback. Our business in total has not grown because the decline in NetWare was offsetting the growth on the Linux and identity sides. We couldn’t afford to have the infrastructure that we had when we were a much larger company. So we had to make some changes. It’s all about the shareholders, and we weren’t delivering the returns that shareholders needed. We’re now in the five per cent of operating income as a per cent of shares, and we’ve committed to shareholders that we’re going to get up to the 12 to 15 per cent level in the ’08 timeframe. It’s unfortunate when you have to go through restructurings. I think they become a fact of life when you have a transition taking place the company. The key thing from a shareholder’s point of view is we did the transition, we’re profitable, we’re in two really growth areas and we’ve got a good balance sheet.
ITB: And with Ron Hovsepian being promoted to the No. 2 job – how has that changed your role and responsibilities?
JM: Well, there’s plenty to do. Ron is the COO, and he gets involved in the nitty-gritty of running the field organization and keeping track of the day-to-day stuff with the product development units and making them all work together. Even though they could all be doing a great job, they’re not interlocked. Guys who are selling want something that’s different than the guys who are producing the new products. He’s basically an internally focused job that’s trying to optimize what the sales guys want and what the product guys can produce. The other thing that’s happened over the last few years, before we got into our Linux strategy, the technical market thought we were becoming irrelevant. Therefore we had difficulty hiring people – or at least, the right people. Once we developed our Linux strategy, things changed. We’re starting to get resumes from people who are very, very attractive. And that gave us an opportunity to upgrade many of our positions. So that’s part of the layoffs that you’ve seen occur.
ITB: When did it become clear that the notion of spinning off the Celerant consulting unit was a necessary step?
JM: Well, strategically it never fit. Back before Novell acquired Cambridge Technology Partners, Cambridge was a consulting firm, and Celerant was a consulting firm, but they turned out to be a bad fit even there, because Cambridge was a technology consulting firm and Celerant was a process management firm. They had two different cultures even then. Then when we did the purchase of Cambridge, it became clear that Celerant was not in the mainstream of the business. Cambridge bought Celerant because they believed they needed to develop vertical market expertise. They didn’t have any, they had horizontal technology expertise. And Celerant had some very good vertical market expertise in the petroleum business, process industries, things like that. And they thought by buying Celerant they could take Novell’s horizontal technology and put it into those markets. It turned out to be a total culture clash. As a result, we separated the two, and decided to let Celerant be independent, largely. And as a result they started growing again. For years they had done very well, and had been very profitable. We decided to sell them because they don’t fit strategically. One thing you’ve got to know about selling a consulting firm is that the people are the company, and if they don’t want to work for the buyer, you don’t have a sale. It’s taken us a little longer than we would have thought, but because we want to make sure it’s a win-win for them and us.
ITB: Novell doesn’t offer middleware, but your products obviously end up working within middleware type of projects. How is all the consolidation that Oracle and others are doing and the increased competition in that space affecting your business?’
JM: There’s several angles to that. We think Oracle buying into various things validates some of our strategy. On the identity side they’ve bought Oblix. Then of course the rumours they were in the process of buying several open source companies. The second thing is, some people thought they were doing it to kill open source. You can’t do that. Let’s assume for a moment they bought JBoss in order to kill JBoss as a competitor to their stack. Well, then the open source community would just fork that code and start another JBoss. So they can’t kill it. It’s just impossible. They had legitimate reasons for wanting to buy it. But I think if I look at Oracle, they have a similar stack to the one we have. It’s more focused on the middleware piece. And they look at the stack as a way of protecting their database piece. If we put ourselves in their shoes and looked at the JBoss deal, they were protecting the onramp to their stack, the low end of the application server market. They have an app server, but it’s not as good as BEA, and of course that led to rumours that they were going to buy BEA. Likewise, IBM having a similar stack, they’ve been promoting Apache. They bought Gluecode and contributed Gluecode to Apache to create Geronimo. IBM was protecting the onramp to their stack. We support both Apache and JBoss. We’ve been making major contributions to open source that have helped JBoss. We sell JBoss, we support Apache and we support BEA.
You have to decide where you’re going to play and where you’re going to place your bets. We don’t need to be in that space ourselves, we just need to make sure when we walk into a customer we can recommend the piece of the pie we don’t own. If you have to decide between BEA and JBoss, some of things that come into your mind is, “Maybe JBoss won’t survive, so maybe I should go with BEA.” What we’re finding with our customers is they will develop in JBoss but they deploy on BEA, because they think the tools are so much better in JBoss. But then not to put their corporation at risk, they deploy on BEA. Ultimately, if a company like Oracle buys JBoss, that hurts BEA because then they’ll deploy on JBoss. Oracle may not have to buy BEA. They could just buy JBoss.