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Other Barriers to Growth

Another major obstacle to company growth was the lack of standard hardware and software in the PC and LAN market. Amidst the petty fiefdoms of an immature marketplace, how would tiny Novell rise to a position of leadership? The strategy for overcoming this was a noble if somewhat chancy vision that would require enormous energy to implement (as will be seen starting on p. 112 below): Hardware independence.

Yet another barrier was the lack of sales channels to bring NetWare to the customers who would ultimately buy and use the LAN. Sales channels are how a product gets from a provider to a user. Opening channels was and still is a huge task; when you have a totally new product, figuring out who will become a sales channel is as much of a challenge as finding out who will be a customer. Besides sales to distributors, resellers, and systems integrators, Ray was working on deals with retail computer stores and with original equipment manufacturers (OEMs).

Novell’s growth was also limited by the dearth of software application programs—word processing, databases, accounting spreadsheet programs, and so on—that took advantage of the NetWare LAN environment.

In the early ’80s most PC applications were designed for use on individual PCs and some were copy-protected. Some of the simpler applications for single users, for example word processing and spreadsheet programs, could be used without too much trouble on a network. But the high-end applications, such as databases and programming tools, needed to be customized first, because data would be corrupted if more than one user on a network tried to use the application at the same time.

There were also questions of cost, licensing, and convenience. LAN users wanted to install one version of the application on the file server that all PCs on the network could access, but that was not always possible. Until software programs adapted to NetWare LANs became widely available, users were limited in the multi-user kinds of things they could do with their Novell networks.

Finally, money was a problem. Like every rapidly growing business, Novell had an ongoing need for capital infusions. Cash was needed to pay for the parts and overhead necessary to fill ever-growing orders. This cash could be tied up for months before payment was received for the shipments. Until Novell attained a critical mass of orders, it would need regular additions of capital from outside sources.

Where Angels Fear to Tread

It was not as though Ray and his team had started in 1983 with a careful plan to solve their marketing, development, and financing problems. The employees just threw themselves at the job of moving product with all the energy and enthusiasm of excited amateurs—that’s why Ray had picked them. The mission of growing Novell and the industry was clear, but little else was obvious in the way of strategy or tactics. They were all grunts—if the day’s progress through the granite was measured by inches instead of by miles, that was all right. They didn’t know how impossible their task was.

Judy reflected on the early days:

“We were just naive enough to know that we had a good product. I wasn’t afraid of the competition. I wasn’t afraid of IBM or Microsoft or 3Com. Who were they? They’re just people. You know, they had a lot of money, but so what? If we were telling the truth and we had a really good product and people needed it, then I could communicate it to them.”

The years from 1983 to 1985 were the years of steady, dogged labor when the groundwork was laid for Novell’s future spectacular growth. 1983 was a year of transition from NDSI to the new Ray Noorda company. In 1984 the patterns of work crystallized into policies, programs, and more formal initiatives. In 1985 Ray and his people could see the results of their efforts and the company was primed for a sales explosion.

Educating the Marketplace

To overcome Obstacle 1, differentiating NetWare from its competitors, Novell worked on educating the marketplace—as opposed to merely advertising in the marketplace. SuperSet and Craig were the principal sources of educational information. They explained “file server” versus “disk server” to distributors, resellers, and direct customers. They explained it to software developers. They explained it to other computer companies who were possible strategic partners. They explained it to the press. But for all their efforts, in 1983 and early ’84 the industry as a whole still did not acknowledge the superiority of the file server approach.

File server was the most difficult thing in the world to communicate,” recalled Judy, “and we never could get the point across. We would say, ‘Yes, we’re a file server and this is why we’re a file server, and they’re not—they are a disk server.’ And so we’d get this all straightened out with the editor, and then he would go talk to somebody else, another company. … And they would say, ‘Yes, we have a file server [too].’ And so then the editor would [write], ‘Yes, these two products are file servers.’ And they were completely different kinds of products.”

Then one day in September 1984 the heavens opened and the revelation was handed down to the mortals below. Dale explained:

The big break for Novell was when IBM endorsed Microsoft’s PC LAN v1.0, an early [file-server-based] LAN product. Until that point, Novell was fighting an incessant battle with 20 other small manufacturers about whether file server or disk server technology was a better technology.

When IBM did that, all of a sudden the 20 other companies who had been trying to sell disk servers withered up and blew away. Almost all of those, those that didn’t go bankrupt, within a couple of months came and started buying Novell stuff and selling it, because IBM had now spoken. The giant had said: “We will have file servers. We will not have disk servers.”

So Novell found itself on the side of the angels, or even the gods.

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