Open sauce saves Novell's bacon

US SOFTWARE HOUSE Novell, which climbed its way to success on the back of client-server networking software, is thanking its lucky stars that it became a Linux distributor.

While the rest of its business has been losing money, Novell says that its Linux distribution is continuing to make it a lot of dosh.

Novell announced that its Linux revenue has made a 22 per cent year-over-year increase, topping $40 million.

In fact Novell's Linux figures are the only the things good about the outfit's results. Net revenue slumped to $216 million from $245 million for the third fiscal quarter of 2008.

All of Novell's other products besides Linux saw huge revenue declines. Its ID and security business fell by 16 per cent, its systems and resource management sales were down 15 percent and its workgroup revenues dropped 12 percent.

For years Novell has regarded Linux as a tool to promote its separate, proprietary products. However clearly this is not working. In fact the company's loss leader is actually making more cash than the proprietary products.

Now it seems that Novell is at a crossroads. It does not seem that its ordinary business is going to get any better. But its open platform business, of which Linux comprises the majority of revenue, has consistently been increasing.

It somehow needs to increase its open platform business faster so that it can make up for the lost ground in other areas. Novell's workgroup business has been losing money as its once market leading software such as Groupwise starts getting too long in the tooth.

Novell's main rival is Red Hat, which has done reasonably well in the recession.

It is difficult for Novell to justify propping up Groupwise in its current form in the long term. It might better be sold off or be updated along with other products.

However Novell's cunning plan needs to expand its open platform business further and to do that it needs to lean harder on the open sauce community and its partnership with Microsoft.

Firstly its products need to work on both Linux and Windows. Novell has a product list that includes stuff that either does not run on Linux or can only run on Windows. To make all that work, it has to rely on its partnership with the Vole.

The problem with working with the Vole is that it miffs the open sauce community, much of which would rather have sex with a diseased rat than work with Redmond.

SuSE Linux's supporting community suffered from a mass exodus when Novell teamed up with the Vole. Those that remain treat its involvement with Microsoft with at best suspicion, at worst, outright paranoia.

Another problem for Novell is that it actually competes against the Vole in the workgroup networking space. True, not very well these days, and Microsoft is not going to want Novell to give up and leave it in too dominant a position.

So how then can Novell get more growth from its user community while at the same time buttering up the Vole?

We will have to see some action from Novell to solve this conundrum pretty soon, we reckon. µ