Interview with Ron Hovsepian

Linux Foundation

Ron Hovsepian Interview

January 15, 2008

Jim Zemlin: Good morning, Ron. Thank you for joining us today.

Ron Hovsepian: Good morning, Jim. Good to catch up with you.

Jim Zemlin: Great, well this is part of our ongoing series of conversations with industry leaders in open source. We’re pleased to have Ron Hovsepian here today, the CEO of Novell. Novell is obviously a prominent leader in Linux and in open source, and it will be interesting today to hear Ron’s perspective on both trends in the industry and then broader trends in technology and software as a whole.

So, I’d like to start out to talk a little bit about your background. Many people in the industry know Novell and they certainly know you by name, but I’m not sure that they know you personally in terms of where you came from. Can you give me a little bit about your background? How does a guy like you end up being a leader in open source and in platform software?

Ron Hovsepian: A lot of it is serendipity as to how the world turns, but I began my career out of university at IBM and that was a wonderful training ground to really learn computers at its very core. Even though I started my career over in the sales side, my first month was spent doing Assembler programming, actually first three months, and classroom time of Assembler. So, it was great because it really taught me the core of how a computer works and what goes on inside of a computer right down to the instruction set which I thought was just a great learning.

From there I had a series of different management experiences inside of IBM from professional services to hosted applications. My last role there was in a world-wide general manager [capacity] running sales, marketing, product development, manufacturing for a series of vertical industry offerings.

An example that people might be familiar with is some of the point of sale cash registers that you see out in major retailers. Those are products that our team designed and built a long, long time ago using a, you know, multi- tasking, multi-user operating system environment - back in ’87 was when we actually designed that. And there weren’t a lot of choices out in the market at that particular time that had these high availability attributes.

So, it was a great experience to develop my background in engineering and the financial dimensions of running a business. And then from there I went off and did venture capital for several years which was a great experience in terms of understanding how small companies work. So, I went from a very large company in going through all the changes it went through in redefining itself and then I went out into the venture world where life is very fast and there’s a lot of exciting ideas out there. And to have to pick from the portfolio and pick the winners was a very gratifying experience for me as I developed myself.

And then serendipity had it that someone called me and asked me about Novell. I was always impressed with Novell’s brand, its technical heritage, the strength that it brought to the customers and it also had a strong balance sheet for us to do some exciting things in the market. And that’s what attracted me ultimately to come join the Novell team and where we were going with open source was something that I was on the other side investing [in] and I was very excited about that. And SUSE Linux was obviously the first thing that we went out and did as an acquisition so that was very exciting. So, that was kind of the medium version of how I ended up here at Novell.

Jim Zemlin: That’s an interesting background. I can see how you’ve not only had the experience running a large business unit within IBM that preps you for Novell, but more importantly the venture capital experience helps you understand how to pick areas where you see growth which obviously for - Linux, open source and Novell - is important. I wonder parenthetically if software guys take a similar sales training class to the Assembler class that you took.

Ron Hovsepian: {laughter} Yes – no, I’m not sure they do. Although some of the best salesmen that I’ve met are the developers. So, because they know the code so well - and it’s great - when they hear a customer problem they can apply it pretty quickly. So, it’s a good experience. But, you know, it was a great training ground. I really have to give them full credit for that.

Jim Zemlin: Many people in the community, when they look at a company like Novell, one of the things they may miss is just how big of a company you are and how difficult it is for companies like Novell to really achieve rapid growth. And certainly your strategy of embracing a large market trend in order to achieve growth is one that’s been successfully employed by many companies over time. And you’re already seeing the signs that that strategy seems to be working quite well for you.

Let’s talk a little bit about that without pinning you down into making any kind of forward-looking statements on this call. Let’s talk a little bit about the Linux business and the strategy you’ve chosen more deeply. You’ve been posting some pretty impressive numbers lately - had very good sequential quarter-over-quarter growth in your Linux business, one of the big bets that the company has made. How do you see that business growing? How do you see competition in the marketplace?

Ron Hovsepian: We’re very excited with the performance of the team in terms of from a revenue dimension, which is only one measurement that we look at in the business and an important one from an investor perspective. What we’re seeing is year-over-year if you really look at ’06 to ’07, we use a leading indicator of what we call our invoicing. Novell grew 200% in the SUSE Linux marketplace year-over-year from an invoicing perspective. So, we’re absolutely thrilled with that from that point of view.

We also think, you know, there’s a lot of opportunity in the market. The overall market is growing at 22% according to IDC, so we’re enjoying a good position. We’re taking some market share from our competitors, but we’re really focused on driving overall growth in the market. To us that’s the most important dimension is [that] we want Linux as a market bigger to the overall market, that’s really the long-term goal.

So, if you notice we really focus our marketing and our messaging to the customer as to how they can move their UNIX environments over to Linux, how they can move their Microsoft environments over to Linux. These are all important footprints that we want to migrate onto a Linux platform and really differentiate ourselves as the place to be on top of Linux.

And obviously we compete against Red Hat. I fundamentally believe there’s plenty of room for both distributions in the marketplace on the corporate side. And from that perspective when we run into Red Hat - and the reason we’ve been able to take some share here - is we’ve got a very simple, clear message to the customer based on really good solid engineering from the community and the team which is a Desktop-to-Data Center story for ourselves where we really are focusing the customer on applying Linux in a segmented manner as to where it belongs in their enterprise. And that is resonating very strong with the customer.

Additionally, the interoperability story that Linux will co-exist with a Windows platform and work with it - while I appreciate the desire to take away that market from our competitor whether it’s Microsoft or anyone else and get it on to Linux - the realities of a customer’s world is that they’re going to live with both for a long time in our lifetime. And we have to do as much as we can to make it easier to pick SUSE Linux as their platform of choice in that enterprise because that’s the lifeline that feeds back to the community is the amount of money that we can get and give back in our projects.

And then the last thing we did to really differentiate it that’s really gotten some headway here is being mission critical, having high availability and deterministic-type processing capabilities down at the Linux level. Making sure that we continue to mature the tools that support Linux in the market and most importantly doing things like SAP as a proof point, having them develop on our Linux as well as have us as a preferred Linux distribution. And to get SUSE to be that was a really gigantic vote of confidence for mission critical in the marketplace. So, we’re very excited about what that means and how we’ve differentiated it at the core distribution level.

And the last thing that we’ve done is we also have some enterprise capabilities around security management that we continue to bring to the customer in this manner which is helping them manage this mixed-source world that the customer lives in. We’re in this weird spot of promoting this full open source dimension while we’re helping the customer make that transition.

Jim Zemlin: It’s interesting, I talk to a lot of people in the Linux community and in this case the community being defined as the development community around Linux. One of the things that I often discuss with them is there’s also a dimension of a business community around Linux platform and around open source. And both of these communities essentially help each other. One of the aspects that many people in the development community want to see in addition to being able to access source code in the principles of freedom is they really want to win. They take great pride in the work that they do. They want to see Linux be deployed in new and interesting ways and in serious and, to your point, mission critical ways.

And in that case, how do you see Novell as being an actual part of that community? What are some of the contributions that you see coming from Novell that help get Linux into deployments that are interesting, that can be used to either report bugs in high availability settings and then have those implemented upstream and make a world better for everyone else. How would you characterize some of the contributions that Novell is making to the community in that way?

Ron Hovsepian: It’s a great question. You know, we feel the privilege to be a good supporter of the open source community efforts. And what we’ve been seeing and they really do make a difference to your point about they want to win and they want to see the technology applied. I would say there’s a couple of things that have been real interesting: I think the work that Greg Kroah-Hartman has been doing for us around the Linux kernel has been outstanding. The leadership that we played [in] our role, and again it’s a role because it’s a community, around the Xen virtualization - I think Intel, I think IBM, ourselves and obviously the XenSource team put a lot into getting Xen up and out into the market. And that was a very important piece of work.

There’s been some real important projects around the GCC tools, the desktop, that are real exciting things that drive our contributions in those projects because we see them as breakthrough capabilities and what we want to get done.

And then there’s some emerging projects that I see around Mono which is obviously a very exciting project around emerging technology. And we’ve doubled down on that particular area in terms of the development, and what we want to get done there, because we see some excitement and a way to differentiate Linux further and bring more of those Windows developers over to Linux which is what we would love to do, is see more of those applications placed on Linux.

So, those of the kind of things that are exciting. And to the other extreme, what we really see in terms of, like, the SUSE Linux Real Time that we’ve been working on, we’ve been handing things back up into the tree as we make those contributions, but there’s been some real excitement around CPU shielding that we did that was really great work that’s been contributed back.

We’re working on some of the open fabric components and handling the nature of some of the deterministic processing that occurs inside the market space and some of the financial services. That’s a real important piece of work that we’ve done, that guys like [Sven-Thorsten] Dietrich on our team and others are working on, that have really been some nice, nice work around leadership and Real Time and I can’t thank those guys enough for the preemptive-type work that they’ve done around the Real Time work that has gone on.

Those are just a few of things that kind of pop right into my head that are really making a difference in front of the customer. And the community – bridging that conversation as a distribution partner to the community and to the customer is really the role we play sitting there having those conversations and then feeding it back into the community as to where some of those needs go. And it’s a tricky role, I mean, it really is a tricky role sitting there, hearing what the customer wants, hearing where the community wants to go and trying to make the handshakes between them. It’s also been the most rewarding part of work for our community developers to get engaged in these different projects because they get very excited about what they see. And they’re hearing some of the customer feedback real time which I think is great. So, we’re excited about those types of projects, Jim, as an example.

Jim Zemlin: A very pragmatic approach in terms of if you look at developers who are working on this type of software, the thing that excites them is working on interesting and new innovative technology. And many of them got into open source in order to share ideas and create new technologies. And as Novell and the SUSE platform become more successful, enter into more enterprise environments, or desktop environments you just get an increasing snowball effect in terms of the number of users who are reporting bugs or the number of internal software development teams of which I – the majority of software development happens around the world contributing back new and interesting and unforeseen technology to the community as a whole. And Novell certainly benefits from that in the relationships you have with the customer, but it’s safe to say the community also is a large beneficiary of that entire process.

Let’s talk a little bit about some of the new customer wins that you’re seeing both in the enterprise data center and also on the desktop side. Many people, in fact, find the desktop a real interesting arena, something that is very tangible, easy to understand because everyone has a desktop computer.

I’ve noticed that you got a big win at Office Depot as of late and a server consolidation play. I’d love to hear about that and I’d love to hear about some of the desktop wins that you’ve been seeing out there lately and what’s driving that growth in the Linux desktop.

Ron Hovsepian: In terms of some of the desktop wins, , that’s one of these real exciting ones to me personally. And the leadership that the SUSE Linux desktop team in particular showed with our product that we’ve now had out for well over a year in this latest version is very exciting.

So, we saw a nice win at PSA Peugeot over in France where there – got about 70,000 desktops and this is a good example of where the customer needs us to think more like them. And what they see of their 70,000 desktops is they shared with me is, “Hey, Ron, we see Linux playing on maybe 20,000 to 40,000 of those desktops. And we see Windows over here. We see these servers being Windows, these being a main frame, and these servers being Linux.”

And what’s been exciting as we work with them is they’ve now been in the process of rolling out 20,000 of those desktops and it’s been very exciting what we’re seeing the reaction of the customers, been very positive, good feedback as we continue to develop the loop.

What’s also exciting is it validates this Desktop-to-Data Center point of view because as companies like Tamil Nadu which is also a 30,000 desktop implementation in India in the State Electronics Agency there which is very exciting. And you take that with the Peugeot with 20,000 desktops, you start to see a trend where the customer is trying to tie their servers and their desktops together. And as you know, the beauty of Linux is once we’ve trained them on one Linux set of skills, they can migrate those skills for the desktop to the Data Center. And we think that’s going to help the customer save money.

But we really have to make sure that we keep that core distribution that everyone contributes to as standard as possible. And now what we’re seeing is that type of trend. So, as you see the desktop we think it’s early, it’s still a young market, we’re very excited about Dell and Lenovo committing to pre- load their desktops with SUSE Linux Enterprise Desktop for that commercial enterprise market. And that’s really the segment we focused on. So, we’re very excited about the momentum we see there.

And then in terms of just giving the guys in the community a feel for the impact they’re having, the excitement that I see like at Office Depot where they’ve just made SLES their core operating platform. They’re going to migrate Solaris, Windows, z/OS, all of that is going to be standardized on top of SLES. So, that’s very exciting.

It’s all going to be in an x86 and a z footprint. And they’re going to put their Global ERP System on this which is gigantic when you look at mission critical apps. And it gave them a broad range to choose from. And this is the kind of decision criteria we’re getting into with customers as they make those key decisions.

And just to give everyone else a couple of teasers to feel good about all their hard work, Office Depot is one, but we’ve seen Credit Suisse standardize on a Linux platform. CVS here in the U.S. which is a big drug chain, they’re in the process now of doing a full store replacement, Nationwide, a big insurance company also going over to z.

Over in Germany the air traffic control as you come in—that is about as mission critical as any of us who fly could appreciate—and that German air traffic control system is using it. The New York Stock Exchange, the trading floor is using it to do their trades, and Nomura Securities in Japan is doing a billion dollar trading system with this.

So, we’re seeing some great uptick. And then to some big financial behemoths like an HSBC they’ve just standardized on SUSE Linux as their platform. And as I mentioned before, I think BMW is in virtualization. And Wal-Mart is doing a big consolidation on UNIX to replace that.

So, when you look across the board, these are household brand names - big, big customers that people in the community work very hard should take great pride in seeing the results of their work show up in these very large customers and now in some really, really important application areas.

Jim Zemlin: It’s interesting and impressive when you talk about the breadth of Linux adoption that you’re talking about and the scale and the mission critical nature of many of these implementations. One of the things that we talk about at The Linux Foundation is the pace of development in the Linux community. In many ways when Novell made their decision to go with a Linux and open source strategy for your business, you characterized that as moving with the moving, moving with market trends. And that’s obviously a form of agility.

The open source development model itself is extremely agile and fast. Do you see that speed of development, that breadth of collaboration assisting Novell in meeting new customers’ needs in terms of when consolidation and virtualization start to begin to emerge as technical strategies. Are you seeing an ability for Novell to come in with Linux fast ahead of proprietary platforms and really meet those market needs? Is that something that helps drive your business?

Ron Hovsepian: Yes, I do see that making a big difference. And the one that I talk about in front of customers and I do it both as a proactive advertisement for Linux as a family and then the impact that it’s had on our business as a second point. I point to two things: one is if you look at the life cycle of development for Windows, for example, it averages about five years plus for release cycles. When you look at a Linux distribution it’s cycling every two years. So, just right there the customer’s opportunity to gain innovation and the innovations that occur from the open source community happens at a really rapid rate in comparison to the generalized market.

The second thing that I saw firsthand was around virtualization. Us getting that into market nine months before any other Linux distributions made a big difference. Our ability to deliver on 64-bit addressing 12 months ahead of others makes a big difference to these customers who have these very high- end needs and want to take advantage of those innovations.

And we know that everybody in the community gets to share all this stuff over time. It’s a philosophical approach of embracing that innovation. And what SUSE Linux has done through the openSUSE project as well as through our distribution approach, is we’ve really made sure those are integrated so as those innovations and validations come back through the system we’re able to apply those in the fastest manner to get them out to the customer. And I think that’s just something we will continue to do as we try to take advantage of the innovation pipeline that’s in front of us. It’s very exciting.

Now the part we all have to be careful together with as a team – as a community team is customers can only absorb so much innovation. So, we have to be more sensitive and aware to some of the standards that a customer has to bear because while the innovation is exciting, they have a business to run. They have that trading floor to run that I just described to you. And they don’t want to be taking that apart every six months or every year because the risk to their business is so high.

So, this is part of the balancing act that we all have to help manage between the community and the customers. And it’s a delicate balance. It really, really is a delicate balance. And I’d ask all of our community friends to get a little closer to a customer on the projects they’re working with so that they get a little better feel for how we can make it more standard on a regular basis so that they can take advantage of it. I think it would be a really innovative set of discussions for community people to think about having with their friends who are customers because most of our community people work at a site or work with things in front of their own shops beyond just being a core developer out there.

Jim Zemlin: Yes, it’s interesting. We really are treading in new territory here in terms of balancing consistency with this incredibly broad and rapid development model in particular around Linux which is arguably one of the most successful collective development efforts in the history of computing. One of the things that Linus Torvalds mentioned to me in a conversation the other day in terms of the differences between Linux when he first started with it and now is not that the development process had changed so much that really it’s a similar model in terms of how people participate.

But more importantly a sense of responsibility that if something gets screwed up it has a real big impact out there. It’s this, sort of, sense of growing up to understand that if you have a problem that’s not going to affect a small community of folks that you happen to be sharing software with from a hobbyist perspective, that this is going to have a broad impact throughout industry, both within enterprise, but also in consumer electronic devices or in healthcare systems and so forth. It’s just an amazing maturing…

Ron Hovsepian: Amazing maturing there.

Jim Zemlin: …there. So, it sounds like Novell is also thinking about how to break ground in terms of that balance of consistency and rapid innovation and is a leader as such.

Let’s talk a little bit about – we’ve already touched on that need for consistency as one of the shortcomings that someone might point to. I would argue that it’s a challenge. What are some of the other challenges that you see in the Linux and open source community in industry as we move forward?

Ron Hovsepian: As I look at it I think there’s probably two big pieces of the equation that we need to just sensitize ourselves to. The conviction that we all believe our software’s better than the other guys, we can’t lose. Because we all know it deep down in our soul that that’s what it is.

But what we have to do is when we enter into those commercial relationships; we have to understand that the customer’s probably going to have a few stacks of software sitting there that aren’t ours. So, we have to find this equilibrium, is the word that I use internally, between the things that we want to get done with the commercial customer and the religious fervor that we all operate at because we believe in this community approach. We’re going to have to continue to balance that in front of the customer and find that equilibrium point. I think it’s going to be very, very critical as we go forward because it will give us the credibility.

The second thing that I see is really around what you were highlighting in terms of the maturation process. I think there’s a whole area of innovation that the community, and we at Novell, have to work on, on, “Okay I accept that maturity has to be part of the process for development, and I also accept that I want the innovation. So, maybe we need to put some of our innovation efforts around ways to absorb innovation while maintaining or demonstrating that maturation process of the software.”

And there’s probably opportunities for us to sit back and think about where, and how, could we innovate in a different manner that is in a more mature, sophisticated way that enables these customers to bridge that environment faster inside the world.

And then the last thing that I’ve chatted about in public is, we cannot forget it’s all about the applications for the customer. We just cannot forget that. And in our desire to build great code, I think there’s two things that we have to really focus in on.

So, Linux in and of itself compared to let’s say UNIX, I feel very comfortable that the operating system is outstanding and more than competitively technical. It wins. Now, where the customer, in the embracement and the adoption of it, where we have to help is the tools that help in that management of Linux inside of that piece of it.

So, there’s a tool dimension and then there, as I said, there’s an application dimension and we’ve really got to do a stronger job of embracing that application piece of it because at the end of the day, on the commercial side, we could have a gigantic success if we get the ISVs and we get the application part working. We could also have a gigantic success on the community set of software which would be great. So, we’ve got a wonderful community environment.

However, if you want to get both successes to occur, we’ve got to make that marriage occur out in the market with the community and the customers. If not, we’ll have a great community success and Linux will go down as one of the greatest community innovations, but it may be a marginal commercial success. And, from my point of view, the reason why we’ve got to make it a commercial success is that’s the money that feeds back into the community that allows us to go hire the next ten developers that go back into the community.

There is a direct linkage in the food chain that we all have to accept as part of our life cycle and our existence. We live in the planet Earth and we all play a role in that ecosystem. And this is no different. And the more we can get the customer to funnel money away from our competitors to Linux, and to open source projects, the better off we are. And I think that point of funneling is right around applications because that’s where the problems get solved from a customer’s point of view. And I think it’s around the tools on how we help enable Linux to look richer in front of the customer.

Jim Zemlin: That’s interesting you mention that it’s literally like a sustainable development model obviously with different definitions for development in this case.

Ron Hovsepian: I agree, good analog.

Jim Zemlin: Let’s start with some of the key competitors to Linux aside from Microsoft. Let’s talk about Sun and Solaris and OpenSolaris. Where do you see that platform going? Where do you see OpenSolaris or Sun five years from now?

Ron Hovsepian: They’re trying to strike a very delicate balance between being an open source company and a proprietary company. And what I’ve learned a couple years ago is you can’t do that. You’ve got to dive in the deep end of the pool and understand that you’re going to be an open source company and begin to behave like that.

So, when you look, kind of, factually I believe OpenSolaris has had about 60,000 downloads last time I looked, so that might be dated, but it’s not much more than that over a two-year horizon since they rolled it out. When you look at Linux downloads just last year alone was over two million of just SUSE alone, those are the numbers that I see, just SUSE alone which is huge. So, when I just look at the comparison of the way they’re building their community or not, I think that is probably one of the greatest challenges that faces them as they look at what they want to get done in the marketplace.

I would suggest to the customers and to the community, be careful. The community the way they’ve written their contract as soon as you look at it, you can’t go back and look at Linux. So, I would tell my community friends be very careful when you look at anything around OpenSolaris. It’s a very dangerous contract from my perspective for someone who wants to work on Linux. If you want to just work on Solaris, then okay, fine.

And then the second part of it is around their go-to-market strategy I think OpenSolaris is – become more of a marketing tool to slow down the erosion of Solaris. And I think it’s a logical strategy, it makes sense to me. I don’t think it’s sustainable in front of the customer. It probably would have worked five years ago, seven years ago, but it’s too little, too late. The horse is out of the barn and the Linux horse is looking like Secretariat as it rides down around the rails to victory.

Jim Zemlin: And certainly that’s an important concept for an organization that’s going to invest in a platform. They’re not going to want to replace these every several years. You know, when you make a platform bet you have to – it’s almost like an implicit futures contract, right? You have to count on that platform being around. Do you see out there customers who are saying, “You know, we’re not willing to make greenfield investments in platforms like Solaris.” Are you starting to really see that trust from a futures perspective being eroded?

Ron Hovsepian: I’d actually say it’s slightly different Jim. I actually see customers’ confidence continuing to rise on Linux and comfort and what that is doing is that is supplanting where Solaris and what Solaris’ role is in the market. And the transition over is pretty clean and easy from application right through a skilled training perspective.

You know, the experiences that we’re seeing like at Office Depot where they’re going to do that type of consolidation, that’s all good and that’s coming off of, you know, Sun-type footprints. So, we’re very happy with those kind of transitions from my point of view. And I think we’ll continue to see that, and I see the customer seeing that.

Now, as we move in these big, mission-critical apps, those take a little longer to get internal—meaning customer internal engineering signoffs—so they’re just going to take a little longer in these cycles to get the migrating over. They’re not going to be the quick spots of some edge servers, kind of, where Red Hat, kind of, got itself rolling. And that’s really its sweet spot where we focused on the big mission critical pieces to be that big enterprise play. And that’s where the focus is and that’s in the robustness of the software and the tools that go along with it.

Jim Zemlin: Yes, it’s interesting you mention it like that. You know, people fail to see, you know, when you’re just looking quarter-to-quarter at growth and the marketplace or the number of developers just how once this snowball gets rolling how large it can really be. And it sounds like what you’re seeing at Novell is the beginnings of a very large snowball effect over time where Linux starts to really consolidate a lot of the data center and becomes used not only from a number of organizations or individuals using it, but also in a depth of usage, using it more and more ways throughout their entire organization…

Ron Hovsepian: Yes, no that’s exactly the way to think about it and, you know, factually to backup what you said, you know, we added approximately 4,700 new customers that are big, enterprise-type players into the numbers this year which is great. So, that validates what you’re saying. And then the spread or the depth is the other piece that you then count on occurring in the market. And both of those are happening for SUSE Linux so we’re excited about it.

Jim Zemlin: Yes, that’s impressive and certainly the fruits of that trend will be seen long from now. Let’s talk about with the remainder of our time—and I know we don’t have much time left—some other big trends out there. You’re a guy who has made a career of watching these big technical trends happen, placing bets on them and being very successful as a result.

We’re seeing things like cloud computing emerge. You know, Amazon has their EC2 service. Tons of startups in Silicon Valley are really basing most of their infrastructure on this pay-per-drink model where they, you know, fire up virtual machines on a cloud and as they need excess capacity they’ll fire that up temporarily and then they can draw that down really don’t have to buy machines or build a data center. They can really take advantage of this flexible computing model.

Where do you see Linux playing in that trend, and I might ask, do you believe that is an important trend in computing?

Ron Hovsepian: I absolutely believe it is an important trend. I absolutely believe customers would like it - maximum flexibility - in their platforms. And I absolutely believe clouds are on the horizon. And I mean that in a complimentary way, but it’s also the horizon. So, they’re out in the distance. Customers have to migrate their footprints over and that’s going to take some time in the commercial sector.

Now, I believe there are certain segments, meaning ‘software as a service’ and other segments that are going to grow rapidly using cloud-based computing. I think you have to look at the intersection of the workloads and the use cases that would sit underneath cloud computing. Do I believe Linux is going to play a big role? I absolutely do for two reasons: one, the economics associated with Linux; and two, the flexibility in the compute power that’s underneath that to take advantage of things.

Three, we’ve been working on that type of a capability. One of the reasons why we labored so hard on SUSE Linux Real Time was there’s a very important difference between this effort and what we’ve given back to the community here is a concept of deterministic processing. This is where you need to guarantee that a transaction gets all the way through your system. And we think that type of computing resource is critical and Linux can play a big, big role in doing that. And we’ve got customers now embracing that.

So, when we look at the cloud compute frameworks, we’re very excited about that. We think they’re going to blend virtualization, we think they’re going to blend Real Time capabilities inside of that - will become the underpinnings of what a cloud will be able to do. And you’re also going to have to do some really mundane things.

So, when I mention ZENworks Orchestrator as a tool that brings together those virtualized worlds, you can envision SUSE Linux Real Time sitting at the bottom managing this deterministic processing flow. And then on top of that you would have inside of there the community-based Xen virtualization that would help in the customer do the virtualization of the workloads and the hypervisor. And then on top of that you have to manage that workload and that’s where a ZENworks Orchestrator would play a role.

So, we’re very committed to that part of the market. We think it will come in stages and customers will bite off pieces at a time versus magically turning it on, but there’s some really boring things as I was about to say around how customers will manage it. One of the things that the community is probably not that interested in—maybe not, I don’t want to insult anybody—there is cost accounting and job accounting of virtualized workloads. That’s something that I view as, kind of, pedestrian.

However, for a customer running a cloud center those are going to be paramount and critical because you have to know where you’re charging your compute workloads back to. And that’s something, for example, in the ZENworks Orchestrator we worked on because we knew customers are going to need that. And we found, shall I say, less interest in community efforts around that. And those are the kind of things where we can play a role filling a gap and aftermarket, to use your word, and also see this environment take off.

So, I’m excited about where it’s going. I think it will be measured and thoughtful in terms of what transpires. This problem is like an economic demand and supply problem the customers have been trying to solve for many, many years. And I think for the first time we have all the pieces laying here in the industry and I think Linux is a big piece of that equation because of the flexibility and the component nature of the operating system.

Jim Zemlin: Well, I want to close by asking you an entirely open-ended question, but I want to characterize it in this way. In 2008 we’re going to see a host of new low-cost Linux devices emerge whether it’s platforms like the Asus Eee PC. You know, a sub $400 laptop. We’re going to see more companies like Lenovo, Dell and Hewlett Packard offer Linux desktops preinstalled on both laptops and in enterprise desktop installations.

We’re seeing mobile phone platforms wholesale being created by companies like Google or consortias made up of Motorola, NEC, you know, such as the LiMO Foundation. We’re seeing increases in the data center around virtualization. We’re seeing innovation around power management. We’re really seeing in 2008 in so many segments of the Linux ecosystem breakthrough growth. Where are you seeing this growth…

Ron Hovsepian: This growth.

Jim Zemlin: …and I’d like to, kind of, close by just having you give advice to other companies that are out there who are looking to take advantage of these trends and where you see opportunities around this large growth across the globe in Linux.

Ron Hovsepian: I do see Linux growing. I would look into a couple of key areas. I think the embedded Linux space is going to take off like a rocket. I think there’s just going to be a lot of opportunity there. I think there’s going to be a lot of niche companies that get created there that solve particular vertical industries’ idiosyncrasies whether it’s the telco, whether it’s financial services, whether it’s manufacturing.

And the beauty of Linux is because it – you can modify it and do things to it in a very simple manner is that they’ll be a new opportunity created for a lot of embedded vertical companies which I think will be very interesting in the marketplace.

I also think at a macro level I think some of the fabrics and networks that will support Linux in these compute environments is going to be a very target-rich environment. So, if I were out doing some investing again right now, I would be looking at some of those fabric-type companies because I think that is going to be in the next three to five years become much more into vogue and into demand. And they’ll be based on Linux capabilities and footprints. So, that would be another key area that I would tell people to look at for Linux and open source adoption.

And the last one I’d point to is I think there’s a nice big trend out there for business people to get behind creating more open source applications. Core open source applications on a J2EE framework, I think there’s a lot of business opportunity there. It’s going to take time to emerge, but if I was an investor again I would be looking closely at those companies that serve non- competitive commercial market segments where I could share amongst whether it’s, you know, insurance companies or retailers or whomever, who have areas where they share data right now as well as the opportunity to create public sector non-commercial applications where many different countries or states could share information and share application development.

I think that’s a really exciting new market that’s going to emerge in the next three to five years all based on a Linux stack, all based on nice J2E standards that we want to take advantage of. So, that’s where I would be placing some of my bets in those three categories. I’m very excited about the future that it holds in this market. I think it will add more acceleration to the overall market. And again, everybody should be prepared for plateaus in the Linux and the open source market. Every one of these seven-year cycles that I referred to, these seven to nine year cycles goes through it. There’s the hype before it, then there’s the quick buildup and then there’s a little plateau and then it shoots up again. And then there’s another little plateau and it hits one more time. And then there’s usually the third plateau and that’s where some redefinition happens or it flattens out and we get displaced by another cycle in the market seven, eight years from now.

So, I would tell people to think like that. I would thank them for their innovation and tell them to keep thinking customer and keep thinking community.

Jim Zemlin: Ron, really interesting stuff. I appreciate your time. It sounds like things are going really well other there at Novell. It sounds like you’re one of the folks who has, sort of, experienced growing pains in terms of how to work both within the community and within the industry. And from the conversation we’ve had today it sounds like you’re moving towards a balance there that will be effective for all.

Ron Hovsepian: I’m very excited about where Novell has been and where it’s going to with the community and the customers and I think you appropriately, to draw on your analogy that Linus used that, you know, there’s some maturing that’s going on. We’re maturing as well and understanding what we’ve got to do and what our role is in this bigger ecosystem. And it’s been a great experience so far and I’m very, very excited about the future for the community and the customers.

THE END

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