Friday, March 03, 2006

No Network effect for Novell

Novell reported results for their 1Q06 yesterday, and Linux has done little to lift the company's fortunes. I remember the announcement of the Novell acquisition of SuSE when I was running North America sales for Red Hat. The theory was that Novell's much larger sales team would see more opportunities than Red Hat and therefore be better positioned to convert them into Linux sales. It has not happened. Red Hat is growing subscription revenue at 2 times the rate of Novell from a BIGGER base with a fraction of the sales team. The network effects of market leadership continue to provide enormous benefit to Red Hat while Novell continues to struggle in a booming market for Linux and open source.

It is curious to me that Novell continues to operate their Linux business as a mirror image of the way Red Hat operates their business, but for lower price points and lesser market share. The positioning is the same. The technology is the same. The business model is the same. Something needs to change. If you listen closely enough to your customers and your prospects, they will tell you what to change. We should all find ways to listen a bit more . . . .


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