New Novell Chief Hovsepian Gears Up To Drive Linux

New Novell CEO Ronald Hovsepian hopes to accelerate the company's channel charge to Linux with simplified pricing models and rebates.

Hovsepian, named CEO last week following the Novell board's ouster of Jack Messman, said he aims to simplify operations, align employees on its Linux goals, and offer partner rebates and other Linux incentives.

As an example, Hovsepian and Novell channel chief Steve Erdman (read Q&A) pointed to a 20 percent rebate on Linux sales the Waltham, Mass., vendor enacted earlier this month.

Partners say the affable Novell sales executive, who was promoted to president and COO last October in a prelude to his latest role, is a worthy successor for Messman.

A CRN.com quick poll found that 76 percent of respondents felt the appointment of Hovsepian will drive more SUSE Linux growth."Jack did great things at Novell, and there's no question that he's leaving the company in better shape than he found it," said Paul Anderson, CEO of Novacoast, a Novell Platinum partner in Santa Barbara, Calif. "With that said, I am very comfortable with Ron Hovsepian as the CEO. He's convinced that he needs to leverage the channel to get his company to where he wants it to be."

Hovsepian said one key priority is partner profitability. "Over the years, we've had multiple pricing models and maintained a lot of different pricing models. That makes it harder for our partners and too complex for our partners to do business," he said.

He acknowledged some NetWare VAR partners have adopted Microsoft practices as NetWare sales have waned but insisted Novell's Linux focus will bring them back and add new partners.

"We're seeing partners expanding their businesses, and when we think about the Microsoft partners, their wage rate is now down in the $35- to $45-per-hour range. And that's going in the wrong direction for partners," he said. "The partners make their best money when there's a sea change in the industry. Linux gives them a chance to reset the bar to generate profitability."

Novell's channel remains strong, with more than 70 percent of the company's revenue driven through partners, and its Linux business is growing nicely, Hovsepian said.Observers say Novell has convinced many of its top 10 NetWare accounts to migrate to Open Enterprise Server—a NetWare-Linux hybrid—and then to SUSE Linux. It also has attracted a new bench of partners such as Akibia and Forsythe Solutions Group.

But Hovsepian faces a tougher market than his predecessor, who, along with former vice chairman Chris Stone, engineered the acquisition of Nuremberg, Germany-based SUSE in 2004. Since then, Novell's overall Linux uptake has fallen far short of Wall Street's expectations.

For Novell's second fiscal quarter of 2006, sales of Open Platform products including Open Enterprise Server reached $57 million, up from $20 million in the year-ago period. But Novell's revenue from pure SUSE Linux increased only slightly to $10 million from $8 million in the same period a year ago.

Moreover, IDC research indicates the rate of growth of Linux and Windows servers has slowed in recent quarters due to consolidation of workloads on single servers. Sales of Linux servers, for example, grew modestly to 1.5 million units in the first quarter of 2006, up slightly from 1.2 million units a year earlier.

"Both platforms have been impacted by slowing growth rates, but the decline in Linux is more pronounced," said Matt Eastwood, an analyst at IDC.

Red Hat has been romancing Novell partners, and Microsoft is capitalizing on the slowdown. In a meeting last week, Microsoft's chief platform strategist said Linux isn't a threat to Windows on the desktop and is losing steam on the server as customers distinguish between the benefits of the open-source development model and Linux as a product."The magic of open-source software is not the software. It has nothing to do with the code at all," said Bill Hilf, general manager of competitive strategy at Microsoft. "Most open-source code is terribly inferior to commercial software code. The magic is the community."

One partner has petitioned Novell to "incubate" more Linux engineers at partner sites.

"By the end of 2006, our Novell practice will be larger than our Microsoft practice," said Sean Canevaro, CEO of KIS Consulting, Fremont, Calif. "And this time next year, at the present growth rates, our Novell practice will be twice the size of our Microsoft practice."