Why Novell Embraced Open-Source
CEO Jack Messman is using Ximian's hacker culture to reinvent his software company.
By Owen Thomas

(Business 2.0) – When Novell CEO Jack Messman decided to buy Ximian in 2003, speculation was rife about what the decades-old networking-software company, known for its NetWare operating system, wanted with the scrappy Linux startup. Ximian co-founder Nat Friedman, now a 27-year-old vice president at Novell, says the $15 million deal was done for "mojo"—Ximian's knowledge of open-source. After years of double-digit sales declines at Novell, Messman thought the company's culture was partly to blame. The meritocratic ways of open-source hackers could be a cure.

How's it working? Novell has adopted the new thinking, but it's not out of the woods. Though revenue grew 8 percent last quarter, Novell missed Wall Street estimates, for which Messman blamed weak demand for tech gear. Still, Friedman continues to work his mojo. "Novell now feels like a giant startup," he says. Here's how open-source fixed the company's three biggest problems.

PROBLEM: Novell coders were accustomed to face-to-face collaboration. The culture didn't encourage the sharing of code outside small groups, which led to duplicative efforts and incompatible products.

FIX: Post all code on an internal website and share design decisions via mailing lists and blogs. Friedman says the practice saves time: "I don't need status reports—I read their blogs."

PROBLEM: Engineers were often reluctant to declare a product ready, which allowed them to add bells and whistles until the 11th hour—or later. That caused problems, since panicking customers were considering dumping NetWare for Linux or Microsoft Windows rather than waiting for the next version, expected to come out in late 2005.

FIX: In March, Novell announced that its next-generation Open Enterprise Server would work with both NetWare and Linux—and would ship by the end of the year. While it will lack some server-management features the engineers wanted to include, OES will still come out more than a year before Longhorn, Microsoft's next operating system.

PROBLEM: Novell's tin ear was legendary in the industry: Top engineers at the company had spent six years working on Modesto, a do-it-all 64-bit version of NetWare that never saw the light of day. Why? Novell hadn't bothered to ask customers if they wanted it.

FIX: When a company shares code, customers can provide rapid feedback. Some of those Modesto programmers are now working to make Linux even better at running data centers—a need for which there's clear demand. — OWEN THOMAS AND BRIAN CAULFIELD