Round 1: Linux and Dell's Battle Plan

Rob Enderle

Dell has picked the old Microsoft alternative Novell as its primary weapon. Novell had once been a true contender for Microsoft's crown but had fallen on hard times largely due to an inability to bring out their own next generation OS, and the lack of profit in SuSe Linux hasn't helped them much.


Novell, unlike most other vendors in the Linux space, have done desktop applications in the past and their core product, NetWare, had been sort of a bridge product between servers and desktops.


Dell has said they would rather use Apple, but Apple won't license, so this was the best of what was left. Novell had worked with Dell successfully before and has what appears to be the best enterprise Linux offering, particularly now that they are partnered with Microsoft for what's incredibly important to Windows-aligned Dell, Windows interoperability.


The Problem with Linux


The core issue with Linux is it really isn't where it needs to be as a Windows replacement anymore than it was for a NetWare replacement. There are simply too many migration issues right now, but there is a chance that can be addressed if the resources from both Dell and Novell are utilized and companies want to move badly enough.


The bigger and more troubling issue is that Linux isn't as profitable as Windows on the desktop. This is because people seem to want related products discounted down below what Dell's own savings is when Linux is used. Part of what Dell is trying to fix is a margin problem, and if Linux machines generate less profit, the more Dell sells the worse the problem gets.


There are three reasons for this: Dell can't leverage the existing Microsoft support structure and the financial volume sales incentives that come with a Microsoft deal are more lucrative than Novell can possibly offer because Linux starts out so much cheaper and it is virtually impossible to raise Linux prices. A large chunk of the Linux advocates believe, and fight to assure, that Linux be free or close to it. Finally, there is a group trying to change the Linux license into something that companies like Dell may not be able to accept, and there is even a question whether this change will allow Novell to continue to sell Linux. This last is being fought and fought hard but it does put a cloud over the effort.


As you can see, Dell is struggling with how to deliver this solution. If they do it traditionally they will most certainly lose money, so they are making systems "Linux Ready" and leaving the imaging, and responsibility for service, up to the buyer or the partner (in this case Novell). This isn't what the market is actually looking for, even though the products are different, IT buyers want the same experience, and that will be a problem. But if the choice is to do it the way the buyer wants and lose money or do it in a way that ensures margins, the last CEO is gone because he couldn't maintain margins; Michael Dell's primary purpose is to make Dell successful again as measured by profitability and revenue, so the choice is clear.


The approach is creative, but it won't scale and the problem isn't Dell; the problem is core to Linux, not because of the code, but because of the economic model that surrounds it.


Next we'll talk about Apple's Battle Plan.

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