Red Hat Under Siege!

In a move that I still can’t totally figure out – more on that later – Microsoft and Novell announced a partnership that resolves a potential dispute between the two vendors over intellectual property in Novell’s linux distribution. The announcement also touched on the two firms working together to enhance technical interoperability between the OS’es, and it mentioned that Novell would be paying Microsoft royalties for this “patent peace.”

The winners in this situation are the customers who have both SuSE linux and NT servers in their IT system. It eliminates the threat of a legal war erupting over who owns what IP, a fight that would both retard Linux expansion and do no favors to Microsoft’s image as a bully.

Novell is also a big winner here (stock up 14.65% at press time). They have managed to do about nothing relevant or interesting since Chris Stone went on the open source buying spree in 2003. New CEO Ron Hovsepian didn’t take long to shake things up at Novell and was credited during the Q&A as initiating the dialogues with Redmond. Suddenly Novell goes from circling the drain to the owner of the Linux distribution that has made peace with Microsoft. And that’s a huge differentiator.

So why did Microsoft do this? Because of the customers? Bah. Consider they could have done this a year ago but didn’t. The relevant landscape hasn’t changed much in that time. If you buy that, you have to explain the sudden change of heart.  And just how many customers are tearing their hair out because they can’t get their SuSE server to interoperate with their NT server? 

So why did Microsoft do this? Because of the royalty? Pshaw. A drop in the ocean to Microsoft.

So why did Microsoft do this?  A response to Oracle?  The irresistable urge to kick Red Hat while they're down?  Amusing to consider yes, but is that enough of a reason to legitimize the principle threat to the Microsoft cash cow(s)?

So why did Microsoft do this? Because they suddenly look in-step with reality for a change? That, combined with the previous two reasons probably gets us halfway there. But again, Microsoft had no visible compelling reason to do this TODAY. Deals just don’t get done unless they have to. And I am too dim to see why Microsoft HAD to do this.

There just doesn’t seem to be enough benefit to Microsoft to justify this move. They don’t need the money. Their customers are beholden to them already. Despite Linux’s runaway success and threat to their core business, Microsoft could chug away for years without a noticeable dip in their earnings.

The big loser, of course, is Red Hat. The Raleigh, NC outfit has taken two huge shots in the past few weeks from two of the heaviest hitters around. First Oracle threatens 95% of all their revenue by undercutting Red Hat’s support by half AND indemnifying users at the same time. Then Microsoft lends legitimacy and competitive differentiator to their biggest competitor. I can’t recall two such shots being absorbed by a single entity in such a short amount of time.

You know Oracle and Microsoft approached Red Hat. I can’t help but wonder what on earth the head of Business Development was thinking in failing to close these deals. Red Hat missed opportunities to partner with Oracle and/or Microsoft, eliminate IP issues, and put a stake through the heart of Novell. Of course we don’t know the offers extended to Red Hat, but as I mentioned in another post, they really didn’t have much choice in the first place. Red Hat is left with a Linux distribution that is cheaper to be supported by Oracle and isn’t indemnified by either Microsoft or Oracle.

Ultimately, what happened is that Microsoft has legitimized Linux, Novell is the principle beneficiary, Red Hat looks pretty bad, and Microsoft looks aggressive again.

Comments

[Mike Marzolf]

Does MSFT like NOVL? Linux? So why the love fest? Who is the enemy? IBM and ORCL (and everyone else including the EU). What are their weapons of choice? 1) Open Source, 2) Heterogeneous Virtualization, 3) Open Document Format.

Open Source in that via Linux, ORCL and IBM can sell data center stacks that are more secure, more stable and yes, cheaper than MSFT.

From the bottom, Linux is being met with heavier workloads than file/print, and that is good for ORCL and IBM (and others), and largely bad for MSFT and SUNW. From the top, 65% of mySQL installations are on Windows.

MSFT feeling the Squeeze?

Now toggle to Virtualization -- with MSFT vitualization, users can run multiple O/S on the same machine, provided all (host and guests) are Windows. Great if you are a pure Windows shop. If heterogeneous, you need to manage two farms, two management consoles, more servers, more HBAs, more power/heat/space, lower utilization.

With VMWare or XEN, you can have either O/S be either host or guest. This is a better solution for most customers. Now, ORCL and IBM (via Linux with XEN) would have the upper hand in a data center virtualization bake-off. So, MSFT/XEN/NOVL would prevent MSFT from being excluded from these opportunities.

Then there is Open Document Format (ODF). The EU is on a mission to require ODF as the standard format for document archival. If you save it, it needs to be in ODF. Why? So Joe Schmoe 70 years from now doesn’t need to buy $700 worth of MSFT software which may or may not be able to open a property abstract, or some other document. PDF works, but is only Open* (with-an-asterisk) per the EU. ODF interoperability through the NOVL/MSFT love fest will promote document interoperability with MSOffice, which may result in Save-As ODF within MSWord, and Save-As MSFT’s new Office XML format within Open Office, and potentially could get the EU off MSFT’s back. Time will tell.

So, by partnering with NOVL, MSFT can play the interoperability card with customers, avoid being left behind in heterogeneous virtualization, protect your database business, get the EU off their back, and at the same time hurt the #1 penguin flag carrier RHAT.

[SidneyV]

Why did Microsoft do this? Here is a diabolical thought. They want Novell Linux to be taken seriously in the enterprise, which it is not today. Microsoft hopes that this would lead to a replay of the 90's situation of various annoyingly incompatible Unix flavors, driving independent software vendors mad, leading them to embrace Windows to keep their sanity.

I believe they would fail (I am no fan of Red Hat in saying this). Novell is cynically manipulating Microsoft's need to fragment enterprise Linux and they are richer by $300+ million as a result. The Microsoft geniuses don't understand that Linux is already quite fragmented without their help, and that fragmentation is essentially irrelevant, because enterprises run Linux for either databases (which are easy to run on all the Linux flavors) or for Java/one of the scripting languages, which are also fairly easy to run. The key here is that none of these have GUI (only idiots will use Java for its GUI now!) and that is why they render the "Windows" game irrelevant.

Unix got killed not because of incompatible flavors (that played a small role) but because unix vendors were greedy pigs out to milk the enterprise. Open source solaris fixes that problem now, and that is why Sun is coming back.

Web services are another arena where fragmentation is utterly irrelevant (that should inspire the enterprise). Google and Yahoo (just to name the top two) run utterly incompatible systems internally. Yahoo runs BSD, and Google is Linux, and who cares?

To cut the long story short, the server OS is irrelevant now, which is what should scare the heck out of Microsoft. On the client side, the browser is the OS, and the rise of the web is giving the Mac a new lease on life.

[tjrsfca]

Re: Mike's comment

While I found myself nodding away in agreement to your central points, my over-arching sentiment is still incredulity.

Is this Microsoft's first concession? Probably not, but this seems to be the highest profile concession to market (and legal) forces beyond their control.

What you're saying makes more sense than most of what I've read but fundamentally this heralds a shift from a natural monopoly to something in a more competitive arena. This is a company that is acknowledging Xen, ODF, and Open Source... they've come a long way in a short while.

Re: SidneyV. I don't think MSFT would be disappointed if their "endorsement" of NOVL slowed the adoption of Linux if even temporarily. But your main point that the server OS and client OS are waning in importance is spot on, IMHO. The question is one of timing.

Upon further review, I might have entitled this entry "Microsoft Under Siege!"