Novell's Restructuring Offers Clearer View of Strategy

G00135827

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Summary

Recent announcements offer some clarity about how Novell intends to address the market. But the company must back up its stated strategy by offering further details on its intended direction for its products and services.

News Analysis

Event

Two recently announced changes reflect a shift in Novell's market strategy:

  • On 1 November 2005, the company reported that its board of directors has promoted Ron Hovsepian, executive vice president and president, global field operations, to president and chief operating officer (COO) of Novell.

  • On 2 November 2005, Novell said that it would restructure its business so that it concentrates on the Linux, open-source, identity management and resource management markets. The restructuring will mean the loss of approximately 600 positions, more than 10 percent of Novell's workforce.

Analysis

During 2005, Gartner viewed Novell’s strategic plan to realign itself around the broad topics of Linux and identity management as viable. We have, however, been very concerned about Novell’s execution of this plan as it attempts to transform itself from a proprietary software company into one that makes open-source software a critical and strategic initiative. We have assessed the company's progress on four initiatives, using market data and the experience of Gartner clients, and concluded that:

  • Novell must migrate more of its NetWare users to Linux.

  • Although Novell is attempting to become the data center Linux supplier of choice, it must balance its strategy to gain Web server, clustering and infrastructure volume business.

  • Novell must attain a ratio nearer to 50-50 in the percentage of undecided customers who evaluate SUSE and Red Hat, and then opt for SUSE.

  • Novell must be perceived publicly as a dynamic company with a new and viable business.

Novell has struggled to articulate its strategy to the market and has been plagued by many high-level and midlevel management departures. As a result, we believe Novell has been ineffectual at obtaining significant market growth in 2005 in any of its initiatives, including those we've listed.

We view the promotion of Ron Hovsepian to the joint position of president and COO as a potentially positive move. Hovsepian has the opportunity to focus the leadership of the company and change the perception of Novell in the market, which became increasingly negative as 2005 progressed. This is no easy task: Hovsepian must clearly demonstrate that Novell has strong vision and leading technology in several key areas.

 

We see Novell's job cuts and its statements regarding its renewed focus on Linux, open-source software, identity management and resource management as the first steps toward a clearer view of how the company intends to engage the market. However, to make this announcement meaningful, Novell must quickly back it up with additional product road maps and service definitions.

Recommendations: Evaluate Novell as a strategic software supplier on the basis of the four variables we have cited. Demand statistics and performance data from its executives and track Gartner surveys and research on the company's progress.

Analytical Sources: John Enck and George Weiss, Gartner Research

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© 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

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