My last blog I wrote briefly about the idea of killing the company's cash cow. Laura Ries, in her Ries Report argues that Microsoft Windows is a cash cow that needs killing. I will address that idea in the future, but for now I want to discuss how Novell's cash cow, NetWare, nearly destroyed the company and how Novell became a perfect case study for killing the cash cow. 

My last blog I wrote briefly about the idea of killing the company's cash cow. Laura Ries, in her Ries Report argues that Microsoft Windows is a cash cow that needs killing. I will address that idea in the future, but for now I want to discuss how Novell's cash cow, NetWare, nearly destroyed the company and how Novell became a perfect case study for killing the cash cow.We are all familiar with NetWare, the dominate Network Operating system of the 1980s and 1990s. We are all familiar with Microsoft's tactics of penetrating the NOS market with Windows NT by focusing on using Windows as an application platform.

We are also mostly familiar with Novell's blindness or inability to adjust to this market threat and allowed Windows NT to overtake them in the market and dethrone them as the leading Network Operating system.

What you might not be aware of is how late in the game Novell was still completely oblivious and unwilling to admit that they were no longer #1.

A short history

I worked for WordPerfect from 1989 until 1994 in the WordPerfect Office team (Now called GroupWise). I left about 6 months before the WordPerfect/Novell merger in 1994.

I went to work for an integrator in North and South Carolina who was focused on servicing law firms.

In 1994 WordPerfect was the #1 word processor for law firms and NetWare was the #1 network operating system for law firms.

I recall clearly a question that was put to me as I was preparing to leave Utah and move to South Carolina to begin working directly with law firms...someone asked me,

"What are you going to do about NT?"

At the time, I didn't understand the question and had a moment of panic attack. Oh no, what was I going to do? The answer was easier than I realized...Absolutely nothing...there really wasn't anything I could do. I serviced customers who had a vested interest in Novell and WordPefect. They weren't going anywhere and they certainly weren't moving to NT.

A Sea Change

After being there for about 9 months, the lead sales person and I started to grow slightly concerned about something we were seeing. Even though 90% of our customers were Netware/Wordperfect users, 75% of all NEW sales were NT. It was quickly becoming obvious to us in the field that in a very short time, the future customers would be running NT and NetWare would be only used by legacy customers.

Interestingly enough, when these concerns were brought to the owner of the company, that we needed to think about investing in NT expertise, he brushed it aside, assuring us that the large amount of cash and money coming into the company from NetWare/WordPerfect customers wasn't in jeopardy.

This was 1994 and it was obvious to me, living and working in the field, that the world had shifted dramatically, but it wasn't impacting the bottom line yet for those who sat higher up on the food chain.

Forward to the year 2001

I went to work for Novell in April of 2001 to head up marketing for GroupWise. What I found happening at Novell was shocking. Even though the world recognized that Windows had dethroned Novell from the Server market, you couldn't tell that to anyone on the NetWare Team.

The entire team continued to operate as if they were still number one. As if the entire shift in the market had simply not happened. They were blind and oblivious to the realities of the market place.

Needless to say, it was a little bit of an adjustment for me to deal with the NetWare team and their grand delusions of importance.

The reason was because within Novell, NetWare was still king. It continued to generate more than 80% of the company's revenue, and it was extremely profitable revenue. When the NetWare team wanted to do something, they always got their way. Smaller teams, like GroupWise, ZENworks, and Identity Management, were often stripped of resources, budgets, and face time with management simply because NetWare dominated all.

Stark example of disconnect with reality

At one point, it became painfully clear just how out of touch the NetWare team was with the real market.

Advisor, www.advisor.com, decided to do a trade show with Novell where GroupWise and NetWare both were to be presented. Novell paid for Advisor to send out conference brochures to their install base. Novell provided the names and contact information.

A few weeks later, Advisor contacted the NetWare team about what to due with the brochures that had been sent back due to customer no longer being valid.

The NetWare marketing person suggested that they simply throw them in the trash. Novell didn't really need them or want to update their databases.

That is when Advisor explained to the NetWare team that they didn't understand the magnitude of the issue. They weren't talking about a few hundred returned brochures...

They had more than 24,000 returned brochures. Several pallets of brochures were sitting at Advisor's offices.

BrainShare Keynote - Giveaway NetWare

Most companies at this point have a sad history. They traditionally hang on to their former glory, never giving up, always thinking that the market is about to turn itself around, fighting the media and analysts for their shortsightedness and ranting and raving against the technical inferiority of their competitors.

It certainly appeared Novell was heading down that path. And then Chris Stone gave a very interesting keynote at BrainShare. In his keynote he talked about the future being very different. That difficult decisions were going to be made. And maybe, just maybe, NetWare would be given away for free.

WHAT!?!?

It was a PR nightmare. Suddenly press were wanting more explanation, customer's who had just renewed their hefty maintenance agreements wanted to know if they could get a refund. No one knew what was going on.

What was going on was the beginning of the changes at Novell, changes that would prove extremely difficult for many longtime employees. The change was to basically take the cash cow out behind the barn and shoot it in the head. Shortly after that Novell announced their SUSE Linux acquisition, and the NetWare cow was beginning to be chopped up for hamburger.

It isn't over

In Novell's case, they shot their cash cow dead after their competitor had long ago turned it into a stumbling downer cow. The new management simply put the thing out of its misery. The problem for Novell has now been how to ramp up the next cash cow in time to keep the cash flowing. Normally the idea is to bring on the new cows before the old one dies. In Novell's case, management held on so long, that it has made a normally difficult transition that much more difficult.

The future is currently looking bright for Novell that they are making the right moves to change the company, to remove itself from the legacy of NetWare and to find a new future. But it isn't over and the competition is stiff.

In the future we will talk about the GroupWise cash cow.

Richard Bliss