interoperability

Novell and Microsoft pact reaches third year mark

This post was contributed to by Pam Derringer, News Writer

On the third anniversary of the 2006 Microsoft-Novell pact, Novell is touting 475 customers who have bought SUSE Linux Enterprise certificates from Microsoft under the settlement. Under the controversial agreement, Novell agreed to give Microsoft either a percentage of all its Linux revenue through 2011 or a minimum of $40 million. Microsoft, in turn, bought $240 million in SUSE certificates that it could then resell to customers with mixed environments who wanted to buy new Windows servers and purchase Linux machines. In addition, Microsoft gave Novell another $108 million as a “balancing payment” in connection with the patent part of the deal.

This joint marketing initiative worked so well in the first two years that Microsoft committed to buying up to an additional $100 million in SUSE certificates in the summer of 2008. To date, Microsoft has only actually purchased an additional $25 million. In fact, SUSE certificate sales boomed so much in 2007 that they were cited as a major factor in SUSE’s three-point market share gain that year vs. Red Hat.

A look at the numbers after three years
While interoperability was the stated goal of the partnership, financial factors were the key motivator for both companies.

“While technical interoperability was the announced basis for the Microsoft relationship, Novell did the deal because it needed to jump start its Linux subscription sales,” said Bill Claybrook, founder of New River Marketing Research, a firm specializing in Linux. “In November 2006, Novell was on the tail end of four or five consecutive quarters of flat SUSE Linux Enterprise Server subscription sales. At the same time, Red Hat was reporting year over year increases in revenue and subscription sales of 30% - 40%, and Red Hat was already way ahead of Novell in subscriptions sold and in revenue from subscriptions.”
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Data shows down economy spurs Linux adoption

A Novell-sponsored IDC survey reveals a surge in the acquisition of Linux driven by the worldwide recession. More than half of the IT executives surveyed are planning to accelerate Linux adoption in 2009. If that’s not positive enough, more than 72% of respondents reported that they are either actively evaluating or have already decided to increase their adoption of Linux on the server in 2009, with more than 68% making the same claim for the desktop. The study surveyed more than 300 senior IT executives spanning manufacturing, financial services, and retail industries across the globe, as well as government agencies. The survey results are a good update to the fall 2008 Purchasing Intentions survey we conducted that hinted the economy would impact Linux adoption.

Linux has been gaining ground in the enterprise, as was seen with Red Hat’s impressive results from 2008. We said back in January that open source would do well in a down economy, and now there’s data to back up the prediction.

In the IDC survey, the leading reason given for migrating to Linux was an interest in lowering ongoing support costs. More than 40% of survey participants said they plan to deploy additional workloads on Linux over the next 12-24 months and 49% indicated Linux will be their primary server platform within five years. (Is anyone else surprised by that number?) Among those hesitant to adopt Linux, lack of application support and poor interoperability with Windows and other environments was cited as the primary concern, indicating the key areas that need more work. Companies have made great strides where interoperability is concerned, but clearly more work needs to be done before Linux can gain more ground. We have covered Red Hat’s recent interoperability agreement with Microsoft, Canonical’s effort’s toward certification on HP servers, and reviewed the leadership of Novell in interoperability efforts. But, clearly the market needs more assurance that Linux will meet their critical business needs.

Key to the recent interoperability efforts has been virtualization. This is a good move according to the survey results as nearly half of respondents stated that moving to virtualization is accelerating their adoption of Linux. A notably high, 88% of those surveyed plan to evaluate, deploy or increase their use of virtualization software within Linux operating systems over the next 12-24 months. An increase in virtualization uptake was seen in our 2008 Purchasing Intentions survey, which revealed that virtualization interest was influencing server purchases.

In our recent newsletter, we asked readers to tell us what’s missing from all of these agreements. We encourage you to share your thoughts here. What would you like to see in terms of specific application support or capabilities? What’s missing from the interoperability landscape?

Red Hat and Microsoft sign virtualization interoperability agreement

This morning I was sipping my coffee and browsing what my Twitter friends were saying, when I discovered some big news had been released today. Urged by customer demand and OEM concerns, Red Hat and Microsoft have announced a virtualization interoperability partnership. Matt Asay, a fellow Twitterer and blogger, pointed out that there would be a webcast at 11 EST, and with 15 minutes to spare, I got ready to get the details. Essentially, Red Hat has become a Microsoft Server Virtualization Validation Partner (SVVP), and Microsoft is now a Red Hat partner for virtualization interoperability and support. The basics of the agreement are outlined by Red Hat on their SVVP FAQ page.

Prior to the webcast this morning, a couple of bloggers had pointed out why this news was a little different than your run-of-the mill partnership. Their emphasis was strongly focused on the lack of patent agreements with the deal — a new turn of events for Microsoft and Red Hat after a few years of battling publicly over the topic.

On his CNET Blog, Asay shared his surprise and adulation of the maturing of both Microsoft and Red Hat to the needs of the market.

Today, Red Hat and Microsoft have together demonstrated that interoperability can exist independent of back-room dealings over patents. Microsoft has increasingly been forced to open its stance on patents by the European Commission, anyway, proving Red Hat’s resolute stance against patents was the right one. But today’s announcement suggests that Microsoft is maturing in its views as to how to interact with open-source vendors.

Asay pointed out that when Novell signed its agreement with Microsoft (in 2006), the announcement was met with criticism of the company from the open source community.

Asay’s Twitter post was a little more to the point (only 140 characters, afterall):

I guess this means, dear Novell, that in fact patent covenants need NOT be included in interop deals, including those with Microsoft

Matthew Aslett of the 451 Group posted a blog 15 minutes prior to the call, echoing Asay’s concerns.

In the webcast, Mike Evans, vice president of corporate development at Red Hat, and Mike Neil, general manager of virtualization strategy at Microsoft, tried to emphasize the customer-focused nature of the arrangement. Evans displayed statistics and sections of a recent IDC report on virtualization that proclaims we are only seeing the beginning of virtualization efforts in enterprise IT, and that more will begin to use the technology in 2009. These statistics match up with a recent survey conducted by SearchDataCenter.com that revealed that virtualization is on the rise in IT departments. In the call, a slide with a quote from Gary Chen, research manager of enterprise virtualization software at IDC, was displayed:

“IDC research shows that Windows and Red Hat Enterprise Linux are two of the main operating environments deployed by enterprises, accounting for 80% of the x86 operating systems running on hypervisors. It is great to see two of the big platform vendors put aside their competitive differences and put the customer first.”

Certainly, the effort is focused on the customer, but today, much of the focus seems to be skewed to the patent and financial language in the agreement. This seems fair, as the struggle between the two companies on the issue of patents has been publicly hashed out for almost three years. Microsoft had held fast to its claim that it couldn’t do interoperability without a patent pledge, but it looks as if Red Hat has won on its argument that a patent deal isn’t necessary to an interoperability agreement.

What do you think? Is this just another agreement? Or does this signify another change in Microsoft’s attitude toward open source collaboration? Or, have both companies just seen the writing on the wall and jumped just in time to take advantage of the virtualization market?

Red Hat proves value can be derived from open source

This week, Jim Whitehurst, president and CEO of Red Hat has issued a “State of the Union at Red Hat” message that at first glance appeared to be little more than a cute press pitch, well-timed with the State of the Union address from the President of the United States, Barack Obama. Whitehurst weaves in the common theme of open source being a “value” during the down economy, talks up acquisitions from 2008, and gives a shout-out to Linux community members JBoss.org and Fedora.

But things start to get interesting at point number six in his list, and I honestly would have missed this if I hadn’t seen the comments of The VAR Guy, who stated “Red Hat is destroying the old myth that there’s no money in open source.”

The VAR Guy’s declaration was based on Whitehurst’s statement with this information about the success of the company:

Weathering the economic storm. Red Hat has continued to execute well in what is a pretty competitive economic climate. In fiscal year 2008, Red Hat became the first open source vendor to cross the $500 million mark in revenues and we’ve also maintained 27 consecutive quarters of sequential growth in total revenue.

Impressive. Or is it? The VAR Guy points out that Microsoft earned 120 times as much during the same year.

Red Hat may be leading in the Linux distribution race thus far, but Novell is charging ahead, on the cusp of releasing SUSE 11, with greater virtualization and interoperability promised. With Novell’s partnership with Microsoft, the company is making gains in the market.

As businesses try to bounce back from the downturn in the economy, open source may be an even more attractive alternative. What do you think? Is Red Hat’s $500 million a true achievement, or is it just an attempt to give credence to open source? Share your thoughts.