Novell hangs on - for the time being

At the beginning of this month, Novell announced its biggest ever contract outside the US for NetWare 4.11. UK telco, BT, will be rolling it out to more than 70,000 users, and ultimately intends to upgrade to NetWare 5.

However, in the same week, Lotus CEO, Jeff Papows, made a damning statement about Novell's future in the application server market. He said: "Under circumstances of relative market share, and projections we see for enterprise deployments of NetWare, we're not planning to resurrect Domino for NetWare." Instead, Lotus plans to bring out a Linux version of its Domino Server by the end of this year.

Novell has already been knocked off the top spot in the file/print server market by Windows. It is now having to contend with the fashionable Linux operating system in the application server market as well. And as Robin Bloor, CEO of Bloor Research, pointed out, this is increased competition that Novell is unlikely to bear well. "Microsoft may or may not lose this [market share] to Linux, but Novell will never get it back," he said.

This only leaves the directory-enabled applications market, which Novell predicts will grow by 40 per cent over the next three years. As a result, it's repositioning itself squarely in that market with Novell Directory Services (NDS) - the product described as the jewel in Novell's crown. However, there is a dark cloud looming - Microsoft's Active Directory, due out with Windows 2000, which even Novell's CEO Eric Schmidt has admitted could pose a threat.

But if the picture is so bleak for Novell, why has it seen a rise in sales and why are large companies like BT still committing to NetWare?

For Mike Thompson, research manager at the Butler Group, the answer is simple: "Microsoft is yet to prove itself at enterprise level. NetWare still has a huge market share and people are not going to rip out their installed base for an unproven product," he said.

This is fine for the short term, but in the long term Thompson admitted that NetWare is unlikely to retain market share. When Microsoft does prove itself, Novell is likely to see a steady decline. It could, however, be a different story when it comes to NDS.

Bloor argues that NDS has plenty of time to establish itself in the directory market. "Microsoft is already late to market with Active Directory and the longer it is delayed, the better it is for Novell. Now that Windows NT is clearly under challenge from Linux, Active Directory may never become the force that Novell was fearing," he said.

This sentiment is shared by Thompson, who believes that Active Directory will be no competition against a proven NDS when it does eventually surface. He argued: "Even if Active Directory appears in a reasonable form, NDS will be looking at one to two years before it starts to feel the pinch."

However, Thompson is less certain of Novell's future after that: "If the Microsoft marketing is true to form it could be a landslide after that."

But Bloor is less convinced that marketing will make the difference: "Microsoft can only replace it by being as good or better than NDS, but that won't happen now, next year or in three years time."

So it seems Novell's future is safe - for the next few years at least. It has rightly focused on the directory market in which it is currently the only real contender, and if it successfully gains a large installed base it will be a long time before that can be overturned by Microsoft. But as Bloor pointed out: "It has never been in Novell's culture to stand up and boast."

Perhaps, if Novell wants to avoid losing another niche market to Microsoft, it should start doing just that.