At least a quarter of Novell Inc.’s recently laid-off employees are from the company’s SUSE Linux development teams in Germany and North America, according to an anonymous source close to the company. The news comes just days after CEO Ron Hovsepian told reporters that Novell is looking to acquire a company in the open source software space.
Last week, Novell announced it would cut fewer than 100 employees from a total head count of about 4,000 employees. And while speculation has surfaced that CEO Ron Hovsepian has warned the company’s employees in Germany that more cuts are coming, Novell spokespeople are sticking to the party line.
“These layoffs are in progress, and the numbers have not changed,” Novell’s public relations director Ian Bruce informed ComputerWorld Canada regarding the 100-employee layoff report. “No more layoffs are planned at this time.”
While still awaiting confirmation from Novell officials, it appears that the company’s Linux development teams will bear the brunt of these cuts. According to one industry analyst, this could leave Novell’s remaining open source developers especially disheartened.
Jay Lyman, an analyst covering the enterprise open source community with The 451 Group, said that while vendors are justified in making staff and expense cuts where necessary, they must also be cautious to avoid cutting from communities that are the source of their development and innovation.
“In the case of Novell, I think the company continues to struggle somewhat against the backlash of its partnership with Microsoft,” he said. “Although Novell has benefited by gaining customers and SUSE Linux subscriptions, it is still criticized and questioned by open source software proponents – including Linux kernel developers – over its agreement and relationship with Microsoft.”
Despite Novell’s continued contribution to development of the Linux kernel, Lyman added, cutting its Linux developers will run the risk of perpetuating concern and criticism over its dedication to Linux and open source ideals.
Ironically, as news of these layoffs continue to break, Novell announced early Wednesday morning the general availability of the Moonlight platform. The Novell-sponsored open source initiative provides Linux users access to Microsoft Corp.’s Silverlight content and is part of Novell’s commitment to Linux as a platform for multimedia and online applications.
The motivations behind the layoffs aside, most analysts agree Novell is wise to enter the buyer’s market.
“I could speculate that a new acquisition would be useful if they were looking to get access to new user communities as an attempt to increase the pool of potential clients or move into related sectors of open source software,” Jeffrey S. Hammond, a principal analyst with Forrester Research Inc., said. “In this sense, the costs really come out of two different buckets.”
Lyman agreed, saying that the company’s “ongoing extension of SUSE Linux makes a couple of categories of vendors more likely – identity management and systems management, in particular.”
According to Mark Driver, research vice-president of application development tools and methods at Gartner Inc., Novell will be looking for a deal that helps them expand beyond the core operating system. He compared it to Sun Microsystems Inc.’s acquisition of MySQL and Red Hat Inc.’s purchase of JBoss.
“The more products you have, the more you can cross-pollinate and create a synergy across the software stack,” he said. “This will bring in more revenue, but also give people a reason to upgrade. If you can go to Novell for the OS and the other stuff that goes on top of it, than you’d be more likely to deal with that way, rather than just a one off thing”
“A lot of vendors are going to be looking for opportunities to catch some of these smaller open source startups in this economy,” he added.
Driver said that the current economic conditions will play a key role in both increasing consolidation among open source software companies and boosting enterprise interest in open platforms. Recent research has shown that more businesses are considering open source out of desperation for cost savings, he said.
“What I’m finding is that many companies are struggling with open source because they are dealing with the integration of a whole lot of different pieces,” Driver said. “It’s a typical systems integration problem.”
This is a problem that companies like Novell and other industry giants will have to try and tackle by going after the smaller and extremely innovative open source startups on the market, especially those that are experiencing their own troubles in this economic recession.
“Anybody with some extra money can pick these guys up for fire-sale prices over the next 24 months,” Driver added.
