Novell has announced a major restructuring that the software company's new leader said will position it to grow when US corporations turn back to the Internet in an effort to run their businesses more cheaply and efficiently.
Jack Messman, who again finds himself at the helm of Novell after a short stint as chief executive in the 1980s said that companies now are addressing urgent needs that were neglected during the Y2K compliance push and soon will be following in the footsteps of corporate giant General Electric, which has been slashing costs by using the Web to automate business processes such as procurement.
Brick-and-mortar companies pulled back on technology spending when dot-com rivals hit the skids, but Messman said they can't stay away forever.
"The returns on installing solutions that are based on Internet technology are so high that corporations can't ignore them for long," he said.
"I think we're just six months away from the market turning back up."
Novell -- which was built on software that connects personal computers to networks and networks to the Internet or company intranets -- is shifting its business focus to "solutions" following its purchase of Cambridge Technology Partners, a private information technology consulting firm.
Betting on solutions
Novell's "solutions" are a combination of products and consulting services that address users needs and help them run their businesses more efficiently.
"CEOs don't care about hardware and software products. They want to know what the solution is and what the return on investment is. If you're not solution-oriented you don't get in the door," said Messman, who added that Novell's change in focus will not come at the expense of its products.
"Good products enable good solutions," he said.
Novell's new chief executive is certain to have his hands full. He is taking Novell on a turn that will position it against IBM Global Services, the consulting arm of computer titan IBM and so-called poster child of solutions providers. The strategy shift also comes during a prolonged economic slowdown that has hurt even the best software houses and caused small Internet consultancies such as marchFIRST to flameout.
While smaller consulting firms were hurt the worst when big-spending dot coms hit the skids and spawned the pull-back in tech investment, the sector's leading companies have seen revenues decline 25 percent to 30 percent from a year ago.
During the first quarter ended March 31, Cambridge Technology's revenues were 21 percent lower than last year and the company lost US$21.2 million.
Novell posted losses in the first and second quarters of this year as revenues declined.
Nevertheless, Messman said Novell expects to return to profitability in its fourth quarter. "Both companies have been significantly reducing costs to match the current levels of revenues," he said.
Total pie will grow
On an annualised basis, the combined companies' revenues are about US$1.4 billion. About two-thirds of that now comes from product sales, while the remainder comes from services.
"I think ultimately it will be 50-50. The total pie will grow and services will grow faster and catch up," Messman said.
Messman, who had been Cambridge Technology's chief executive, will work from in the company's Boston-area offices.
Former Novell CEO Eric Schmidt will remain chairman of the board. He also will become Novell's "chief strategist" and chairman of the board at Google, an Internet search-engine company, a Novell spokesman said.
Messman, who was hired in 1999 to turn around Cambridge Technologies, said he jumped back into technology from energy (he was chief executive of Union Pacific Resources Group, an oil and gas exploration and production company) as oil prices were climbing out of the doldrums and technology's bubble was bursting.
"My timing couldn't have been worse," he joked before returning to the subject at hand.
"I've spent most of my career doing turnarounds. I know how to do them. There are great opportunities out there."
