Microsoft Resembles Novell, Circa 1995
Microsoft (MSFT) CEO Steve Ballmer plans to exit the software giant within a year. The new CEO will need to manage a major acquisition (Nokia) — essentially playing catch-up with market-trailing products. It sounds a lot like Novell around 1995. And that’s alarming. Let The VAR Guy explain why.
During the early 1990s, Novell was the dominant provider of network operating systems. The company’s NetWare had roughly 65 percent to 75 percent of the file server market. But CEO Ray Noorda, obsessed with countering Microsoft, embarked on a tragic M&A strategy.
Instead of focusing on next-generation markets, Noorda focused his time on maturing markets — where standards and market leaders had already been determined. Noorda oversaw:
- Novell’s buyout of WordPerfect and the Borland Quattro Pro speadsheet. But Microsoft Office was already pulling away in the market. And the shift to Windows 95/Office 95 was coming. Ouch.
- Novell’s move into the Unix business. But fractured standards meant Novell’s x86-based Unix could never really compete effectively against RISC Unix and another emerging Microsoft product — Windows NT Server.
- Novell’s move into development tools with AppWare. But Microsoft development tools were firmly established. ISVs didn’t have the time or money to write AppWare applications, which were supposed to unlock the full value of NetWare’s network services.
At the time Novell was only a $2 billion company or so. By the time Noorda exited around 1994, his successor (Bob Frankenberg) was forced to unwind or shut down many of the acquisitions. Even more tragically, Novell’s core business — NetWare — collapsed amid competition from NT. Novell never really did position NetWare effectively for Internet services.
Now, let’ apply that story to Microsoft and current CEO Steve Ballmer, who expects to exit within a year.
- Ballmer is still busy competing against Google in the search market, where the standard has already been set. The VAR Guy loves Bing. But as Google ties more services (Google+) to search, our resident blogger doesn’t see how Microsoft can stand out.
- Microsoft is now buying Nokia’s cellphone business. Here again the standard is already set — Apple iOS and Google Android. Developers don’t have the time or money to jump platforms — essentially leaving Windows 8 smartphones out in the cold in many cases.
- Microsoft has been busy protecting its core franchises (Windows,Office) much in the way that Novell attempted to protect NetWare. Not good.
Instead of competing at all costs on all fronts, The VAR Guy has a simple suggestion for Microsoft. Transform yourself from the world’s largest software company into the world’s largest ISV. That essentially means you become the biggest, best supplier of apps on Android, iOS and even Linux servers.
Even more importantly, postion Windows Azure and Office 365 as the best cloud platforms for all endpoint devices — smart phones, tablets, PCs and more.
Oh, and one other warning: Back at Novell, Noorda’s successor Bob Frankenberg lastest only about two years. Consider that a warning to Nokia CEO Stephen Elop ot any other Ballmer successor: Time won’t be on your side as you attempt to integrate Nokia’s cellphone business with Microsoft. As the old saying goes: Fail fast — or at least faster than Noorda and Frankenberg did with Novell in the 1990s…
Good article. It made me
Good article. It made me think of this – in the early 90’s the SMB networking battle was Novell vs LANtastic. (I was a LANtastic guy). Fast forward 20 years and neither company is relevant anymore. Could we actually see Microsoft and/or Google becoming irrelevant?
It’s hard to imagine on the Google side – until we get to cybernetic brain implants I don’t see Search going away. On the MS side it’s possible.
The reverse question would be this – can you think of any examples of a major company successfully reinventing itself in another niche once it’s original niche dries up? IBM comes to mind, not sure of any others though.
Hey Chip: Ah the classic
Hey Chip: Ah the classic LANtastic days. I even remember when Artisoft launched a LANtastic dedicated server with Novell. Some thoughts on companies that successfully reinvented themselves:
1. Nintendo: Founded 1889. Offered handmade hanafuda cards. Even tried cab services and so-called “love” hotels. Mastered video games. Needs to reinvent itself yet again.
2. Apple: The obvious pick.
3. Pixar: Originally wrote graphics tools and hardware. Became full-blown digital movie company. Steve Jobs proves, yet again, you can always reinvent yourself.
4. Harley-Davidson: Nearly went bankrupt in 1985. Niche didn’t really dry up. The problem was lack of product quality, which the company addressed.
Others? Not sure…
-jp
I somewhat disagree with the
I somewhat disagree with the examples you posted. None of the companies listed were “THE” major player in “THE” market and then needed to change markets.
Nintendo has been producing video games for more than 30 years – and still does.
Apple was a bankrupt shell of a company before it was able to “re-invent” itself.
Pixar was a small operation until it teamed up with the “big boys”.
Harley? quality improvements is not really going to save a “non-niche” software company.
The problem Microsoft faces is that it is too large and too cumbersome to make the necessary changes. IBM didn’t really change market areas. Rather, they shed business components and “morphed” ever so slowly into something new – it took the better part of a decade as well. In short, Microsoft is just too big and too slow to change rapidly enough to match the changing market.
Just a couple of thoughts
Just a couple of thoughts about this.
Nintendo of course reinvented itself. I think saying that it needs to reinvent itself again is a bit premature. They’re still making plenty of money on their franchises. Particularly, they still pretty much dominate the handheld video gaming industry. They’ve managed to continue to stay on top there against strong competition, sometimes using very inferior hardware. The list of bested competitive models includes:
Atari Lynx (I had one)
NEC TurboExpress
Sega Game Gear
Neo Geo Pocket
Sony PSP
You might think that the Sony Vita would do better, but the 3DS is still pretty dominant.
Apple reinvented themselves when they introduced the iPod. Their recent success still stems from that.
I wouldn’t call Harley Davidson’s quality revamp a reinvention. They still made the same thing before and afterwards.
Samsung started out as a trading company in the 1930’s. I’m sure we could find some others because almost any company that old and not specializing in a food or beverage has to have reinvented themselves at some time.
Well, Chip — there’s always
Well, Chip — there’s always Apple who’s now a phone rather than computer vendor, for the most part. Internet security could impact the search crawlers with each company forced to run it’s own internal search within their own domain.
I agree with Pixar, but I
I agree with Pixar, but I don’t think the others qualify – as you say, Harley’s niche didn’t dry up it was more poor execution on their part which they recovered from. Similar with Apple, though they’re unique across the board – their original niche hasn’t died, and they’re still (arguably) successful with PCs, but they’ve created multiple new successful niches.
My hypothesis, which IBM and Pixar refute, is that once you’re highly successful in a given niche you have too much of your company DNA invested in that niche to ever become equally successful in a completely different niche. Which is why Blackberry and Myspace and Kodak seem unlikely to recover their former glory.
Priceline might be another example of a successful change, though like IBM their “new niche” isn’t hugely different from their old niche.
Chip
5. Nokia: Started off as a
5. Nokia: Started off as a paper company, went in to rubber tires and rubber boots (nowadays called Nokian and still good) over to TV screens and later cell phones…The next step in the evolution seems to be to stop cell phones and only do the network infrastructure (MS takes over the cell phone part)
By 1995 the writing was
By 1995 the writing was clearly on the wall that NetWare, although dominant at the time, had no long-term future. Novell’s CEO could foresee this long before 1995, and so he explored many directions for reinvention: those you mention, as well as others that were shut down by the board (e.g. linux & web apps). The greatest threat was Microsoft, and many of the directions for reinvention appeared to be directed at sucking the air from that threat.
Around 2005 Google was looking like Novell of 1995. They knew then, as they know now, that search could not be a cash cow forever (although it’s still going strong, eh?, at least until Facebook stops treating it’s own search like an afterthought ). In 2005 Microsoft seemed to be Google’s greatest threat, and so Google embarked on its own anti-Microsoft M&A strategy. If a business could hurt Microsoft, Google would buy it and use it to suck the air from that threat. The biggest examples were the acquisitions that became Google Docs, to form an office suite that Google could give away for free to suck away Microsoft’s Office air; and the Android acquisition, to give away a mobile OS at a time when it appeared Microsoft’s mobile OS would come to dominate the smartphone market.
Maybe Google’s 2005 strategy looks like Novell’s 1995 strategy partly due what Eric Schmidt learned as Novell’s post-Frankenberg CEO. But more likely it’s just how every company’s strategy looks when their dominant cash-cow’s days are numbered. And so we reach Microsoft in 2013…
It’s ok … let Microsoft
It’s ok … let Microsoft fail. Their hostile business practices set the entire technology world back by a decade or more. One of the reasons the post-PC era has such an air of euphoria around it is the feeling that the days of living behind the Iron Curtain of Redmond may finally be over.
(Dart) Ballmer: You were a
(Dart) Ballmer: You were a good apprentice, young Steve (Elop), you will become a Dark Lord of the empire. You destroyed a company that was profitable and huge competitor to our mobile OS and wanted to use Free and Open Source Software, you ruined it and now we bought it for small cash. Mission accomplished!
I personally knew Ray Noorda
I personally knew Ray Noorda and some of these statements are a lot of banta poodoo. Ray Noorda was not “obsessed” with Microsoft. He and Gates had a mutual admiration society going for years. It wasn’t Ray Noorda who did Novell in, it was Larry Sonsini and the attorneys on the Board from Silicon Valley and their constant in fighting and diversion of Novell’s assets that finished off Novell, and constant changes in the companies management. in 1997, Microsoft wanted to get in bed with Novell , and the Board nixed it. I know I was there. I have to say this garbage article is so far from reality it’s not even funny. NetWare was like a magic crack in spacetime that opened up and money magically poured out of it, as long as Novell didn’t screw that up, they would still be around. It was David Bradford and Sonsini and their perpetual litigation machine that finished off Novell. Customers still wanted NetWare and kept using it until ERIC SCHMIDT started suing all the resellers. Take a reality check. Better yet, try wikipedia and the Novell article on Novell’s decline.