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Microsoft’s Novell Deal -- What’s It All About

Analysis: Once bitter rivals now working on a peaceful relationship in business and desktop realms.

The devil must be ice skating.

In an unexpected announcement Thursday, bitter rivals Microsoft Corp. and Novell, Inc. signed a peace agreement that will allow Windows and the open source Linux operating system to work smoothly together.

Under the terms of the deal, Microsoft will offer its corporate customers a chance to license its Windows operating system as part of a package offering maintenance and support for Novell's SuSE Linux operating system.

"They said it couldn't be done. This is a new model and a true evolution of our relationship that we think customers will immediately find compelling because it delivers practical value by bringing two of their most important platform investments closer together," said Microsoft CEO Steve Ballmer.

Both companies also plan to improve the way Microsoft's Office desktop applications software and its open source competitor, OpenOffice, work together. And as a way to encourage corporate users to accept Novell’s operating system, Microsoft officials promised not to assert its patent rights over any of its proprietary technology that might be intermixed with SuSE Linux or with code developed for OpenSuSE.

The idea is to give customers more choices, chief executives of both companies told a hurriedly gathered group of press and analysts at a surprise press conference in a San Francisco hotel on Thursday afternoon. (See "Old Foes Microsoft, Novell Join Forces," November 2, 2006)

The five-year deal, which has been in the works since April, has three major components: a technical cooperation agreement, a patent agreement, and a business agreement.

"For anybody who runs a mixed Windows and particularly SuSE Linux environment, this is all good news," Ballmer told the crowd. "The technical aspects of these agreements will result in higher levels of interop between Microsoft Windows and Novell's SUSE Linux environment."

That resonates with Novell CEO Ronald Hovsepian. "When you look at the customers' environments, that mixed source environment that they're dealing with brings a whole host of benefits in each one of the individual platforms while creating other complexities for our customers," Hovsepian said.

Under the technology portion of the deal, the two companies will set up a joint research facility at which Microsoft and Novell technical experts will architect and test new software solutions. The two companies will collaborate in three key technology areas: virtualization, Web services for management of physical and virtual servers and document format compatibility.

In virtualization, the two companies will work to assure each’s technology will work with the other’s operating system. For instance, Novell’s SuSE Linux Enterprise will be able to support Windows Server as a guest operating system, and vice versa. "Microsoft and Novell will jointly develop a compelling virtualization offering for Linux and Windows," Microsoft said in a statement.

In Web services management, the two firms plan to make it easier for customers to federate Microsoft Active Directory with Novell eDirectory.

Meanwhile, on the document format front, the two companies said they will work together to create translators to enable users of Microsoft Office and the open-source OpenOffice exchange files in either Microsoft’s Office Open XML or the open-source OpenDocument Format (ODF).

Critics of Microsoft hailed the move. "We see yesterday's announcement as further acknowledgement from Microsoft that ODF is something customers are demanding," said Marino Marcich, Managing Director of the ODF Alliance in an emailed statement.

Under the business cooperation agreement, Novell and Microsoft are committing to dedicate marketing and sales resources to promote joint solutions. As part of that effort, Microsoft will distribute approximately 70,000 coupons for support and maintenance of SuSE Linux Enterprise per year to customers, and the two firms’ support staff will cooperate in handing customers’ issues off to each other as needed.

Each coupon entitles the recipient to a one-year subscription for maintenance and updates to SuSE Linux Enterprise Server. "Microsoft will make these coupons available to joint customers who are interested in deploying virtualized Windows on SuSE Linux Enterprise Server or virtualized SuSE Linux Enterprise Server on Windows," a Microsoft statement said.

The pivotal point, however -- as the two companies’ CEOs and other senior officials pointed out -- was figuring out how Microsoft’s "proprietary" source code could coexist with developers in the open source community. Microsoft promised not to sue individual open-source developers for the use of its intellectual property as long as the work is for noncommercial purposes.

"Under this agreement, customers of SuSE Linux Enterprise know they have patent protection from Microsoft in connection with their use of SuSE Linux Enterprise, further encouraging the adoption of Linux in the marketplace," Microsoft officials said in documents accompanying the announcement.

That doesn't mean a new era of détente between the two companies or between the proprietary source world and the open-source world will dawn.

Ballmer pointed out repeatedly that he and his sales and marketing staff will continue to try to dislodge Linux and to maintain Windows as the primary system used by corporate customers and that he fully expects that Novell will continue to try to do the same against Windows. Additionally, Novell’s lawsuit against Microsoft in the United States will continue, Hovsepian said.

"The Novell-Microsoft arrangement allows for more technology exchange and cooperation between the companies without disrupting their different intellectual property licensing models," said Joe Wilcox, senior operating system analyst for JupiterResearch on his blog. "It is a makeshift way for the two companies to work around their oil-and-water licensing models."

Analysts said a major significance of the agreement is that Microsoft is acknowledging strategically that it understands Windows will have to coexist with Linux in the data center.

"[It] recognizes that Windows and Linux will coexist in the enterprise. So they might as well get along, even if they can't like each other. Interoperability is good for Microsoft customers," Wilcox said.

For Novell, the deal could help give it a leg up versus competitors like RedHat -- the largest distributor of Linux -- IBM and Oracle. Novell’s Linux could become a sort of de facto standard Linux, given Microsoft’s semi-endorsement of it, not the least because Microsoft is saying it will indemnify customers who buy Novell’s version against patent lawsuits.

"[Microsoft is] saying, 'I guess we love Linux but only the Linux we can bless and that we feel does not infringe on our intellectual property,'" said Dana Gardner, principal analyst with InterArbor Solutions. "That is another way of making an implied threat."

"So tactically this is Microsoft saying you better pay a premium to SuSE in order to be safe from us, but my take is that is an idle threat ... And the larger strategic message here is that Microsoft recognizes it has to play with Linux," Gardner added.

Officials insisted that, because this deal has been in the works since last April, the announcement had nothing to do with Oracle’s recent announcement that it would sell and support its own distribution of Red Hat Linux.

About the Author

Ed Scannell is the editor of Redmond magazine. Stuart J. Johnston has covered technology, especially Microsoft, since February 1988 for InfoWorld, Computerworld, Information Week, and PC World, as well as for Enterprise Developer, XML & Web Services, and .NET magazines.

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