Novell heeds advice with new strategy

Industry experts have long suggested that Novell Inc. rethink its marketing approach and it seems as though the company is finally listening.

Last month, Novell launched a new discount pricing strategy that may save network managers money when deploying Web services to customers.

The new pricing program tailors license prices to the type of end user to create a more equitable environment to offer Web services and applications, the Provo, Utah-based company said.

Novell’s pricing program introduces two categories of discounted user licenses: Business-to-Consumer and Government-to-Citizen. The Business-to-Consumer license price is 25 per cent of Novell’s standard user license, while the Government-to-Citizen license is 10 per cent of the standard license.

According to William Mahler, director of volume licensing and worldwide pricing for Novell, the new strategy lets the company forego the typical one-off pricing negotiations, and in turn allows businesses to enter the Web services playground without cost being an inhibitor.

“Companies are saying that they just can’t pay the same price for opportunities that they can for employees,” Mahler explained. “It is not as predictable and we understand that. After going through those pricing negotiations with customers, we aggregated information together and said that, based upon what we have been able to provide and what customers are willing to pay, we figure that the price is about US$0.25 on the dollar for what we sell for an employee user. It is the same software but it is a different class of customer who is accessing it.”

While Web service offerings are still relatively new, many vendors that provide them do not distinguish between types of users. Vendors like BEA Systems Inc. and Microsoft Corp. establish pricing based on the number of CPUs hosting and using the software. Traditional Web services pricing models can charge businesses licenses for each computing device that accesses the service, meaning that laptops, PDAs as well as PCs would require individual user licenses.

According to Dan Kusnetzky, vice-president of software research for Framingham, Mass.-based IDC Ltd., Novell is taking note of recommendations put out by IDC and other industry experts to define the “new user” for Web services.

“In the world of the Web, there are a range of people who might touch a system, and ultimately only some of them should be considered users where fees are charged,” Kusnetzky said. “There are people who log onto a system and stay attached to it all day. It (becomes) their transaction system.”

Anecdotally, he added, users often find business and licensing models highly complex and difficult to understand.

“In many people’s view, they are not at all equitable. They do not feel they are getting value for what they are paying. Tying the fee that they pay to the value they receive seems a good step in the direction of coming up with a reasonable and equitable model.”

North of the boarder, IDC Canada Ltd. offered similar sentiments. According to Warren Shiau, software research analyst with the Toronto-based research firm, Novell’s new pricing strategy is an advanced approach, one that presents an indication that somewhere in the corporate brain trust, “someone is thinking.”

“What [Novell] has done is in some way progressive because they have in some ways attached a price onto a Web services offering,” Shiau said. “There is a formalized pricing structure there, which not everyone has done. In a way, you might take this as an indication of the beginning of an industry trend toward actual true commercialization of Web services.”

Novell’s Mahler said that the big plus for customers is that they can extend the same value they have from Novell to their potential customers at a fraction of the cost.

“In a practical sense, it puts Novell back into the playing field,” Mahler said. “While we had the technology, people were asking why they should use our stuff. The answer is in our new pricing model.”

Still, both analysts concur that it may take more than licensing schemes to bring Novell back in the game.

“It is something that time will tell,” Kusnetzky said. “I think that Novell faces some significant challenges. They have talked about making changes and becoming more of a marketing-oriented company, and now we say, ‘Prove it.’ They have the infrastructure to do it and they have the technology to do it.”

Novell’s Web services pricing strategy applies to any of the company’s products that could be offered for user operation including eDirectory, iChain, NetWare, GroupWise and ZenWorks.