to Cyreenik book index

Evolving beyond S-Net

The New “Open” PC World

As the LAN concept evolved to include making larger networks and interconnecting many networks, other needs appeared that would be better served by other architectures. Novell had a hard choice to face: How was it going to expand its market beyond S-Net?

The decision to market the software component apart from Novell’s hardware required a leap of faith. For one thing, all the company’s money came from sales of the S-Net system, which was mostly hardware, and other hardware items like network interface cards (NICs). The only thing really unique about S-Net was the software operating system. If other companies could buy NetWare, wouldn’t that kill off Novell’s lucrative hardware sales—and therefore Novell? Wouldn’t Novell be shooting itself in the foot by OEMing NetWare?

One of the most passionate and articulate advocates of unbundling the NetWare operating system from the S-Net product was Craig. In working with PCs of the late ’70s, he had seen how their manufacturers could use third parties to leverage sales of their products, like the Apple II and the IBM PC.

The Apple II did very well in the pre-IBM PC world because it was a very open system. The design specs for its bus and monitor program were well known, so third parties could come in and build boards to their heart’s content. In that period you could do more things with an Apple II than you could with a CP/M machine, even though there might be more power in the CP/M machine. Variety was definitely the Apple II forte and that’s why it sold so well.

When Apple came out with the Apple III they closed up the bus. And when they shipped the Lisa they kept it closed. And when they came out with the Macintosh it was still closed. The people swelling the ranks of the growing Apple Computer Corp. fell in love with their sexy new graphic and mouse-oriented operating system and lost track of the importance of an open hardware system.

But Phil Estridge, who pioneered IBM’s PC business, did not. As IBM rushed to bring its entry into the personal computer marketplace he talked to a lot of ComputerLand retailers and other people. One of the things that became very clear to him was that the open bus was an important selling tool. Technologically the successor to the Apple II was the IBM PC, not the Macintosh, because both were open systems. Third parties who had worked and developed on Apple II looked for the next machine to go on to, and most often they went to the IBM PC rather than the Apple III or the Lisa or the Mac because none of those were open systems.

Craig brought this open systems vision to Novell: When you’re playing in the PC world the ability to let other people play with you is of paramount importance. This was also SuperSet’s vision, and Ray picked up on it quickly.

Novell’s weak position in 1983 reinforced the concept—leveraging sales of your product off the backs of your competitors was the only practical way for a small company to attain market acceptance in a short period of time. A year in the high tech computer industry is like a decade in more traditional industries, and if a company fails to make an impact on its market quickly its hour may pass, dooming it to second-rate status or extinction as its competitors gobble up market share. Craig called the game of strategic alliances “corporate jujitsu”: The successful player would turn the force of its opponents to its own advantage. In the years to come Ray and Craig would prove themselves masters of corporate jujitsu.

An Evolution Begins

In 1983 Novell began to evolve from thinking of itself as a LAN systems company (hardware/software) to thinking of itself as a LAN operating system (software) company. It would continue to manufacture and sell hardware as a way of promoting the software—and as a way of surviving, because software sales were nonexistent in 1983—but the strategy for growth would focus on the software that ran the network hardware.

Dale described the reasoning that led Ray to take Novell down the software track from 1982 to ’84.

The hardware independence business came about because there was an incredible proliferation of small companies who were selling lots and lots of hardware solutions and Novell was just one in a crowd.

The thing that made us a little different was that we owned our own software. And it ran better than most of the other software offerings that people were making right then.

Corvus, Nestar, TeleVideo—there was a huge number of them, and a big number of these people ended up becoming Novell OEMs. Most of those people started as Novell competitors. There were 30 or 40 different companies who were all trying to push PC networking solutions. Most of them had proprietary network hardware, had proprietary board plug-ins, and proprietary software.

And that’s why we went hardware independent. We looked at it and said, “You know, our hardware is not really that cost-effective. Let’s face it, guys, we’ve got some problems. But if we could leverage off our software then every time one of our competitors makes a sale we get a little money. That will keep us alive.”


By the end of 1983, Novell was trying to market the NetWare Operating System independently of its S-Net LAN. This effort entailed:

(“Porting” means moving software from one computer architecture to another. A small part of that process is making a communications “port” attaching the two systems so that files can be transferred.)

With help from Ray and SuperSet, Craig was the principal evangelist for NetWare. (“Evangelist” is a term applied by Apple Computer in the ’80s to its marketing and developer relations people. Their job was not merely to sell and persuade but to spread the gospel.) The effort really got underway in 1984.

Support for this concept was far from universal within Novell. Jim Bills pointed out as late as 1986 that “Novell makes more money selling its hardware than it does its software. If we’re going to keep growing we can’t abandon the hardware until the software can carry the load.”

Harry concurred. “It’s a good concept, but it can’t happen too quickly.”

And there were a lot of engineers who felt it was a good idea as long as they could keep improving and releasing new versions of S‑Net and the 68B file server.

If Novell was a bit unsure about unbundling NetWare software from its hardware, its competitors were even more skeptical. Judy remembered how resistant the companies were to OEMing NetWare.

And by that time we had figured out that the only way to really be successful was to be in every distribution channel and to be on everybody’s hardware product. And so we had put together this campaign that … internally it was called Project Piranha because we were just going to eat up everything. And it was to port the software over to everybody else’s hardware.

I had gone on trips with the two of them [Ray and Craig] to try to explain to these people what the product was: That it was a file server, not a disk server, and that it could work on everybody’s hardware. … If they would just dedicate some manpower to it, then they could do it. Then they could have NetWare on their products too!

It was just like talking to a wall. Everybody was so territorial and protecting everything they had already come up with. They didn’t want to cooperate. It was a really immature industry, and no one could see how big it could really be.

Other companies didn’t see how they would benefit by helping to proliferate Novell’s LAN operating system. In classic computer industry style, they were still trying to deliver a total solution. And it was by no means clear to anyone at that point that NetWare was a superior technology or one that would win wide market acceptance.

The industry’s lack of interest in Novell did not deter Craig; he proselytized relentlessly.

In April 1984, after weeks of negotiations, Novell lined up its first OEM customer, based in Atlanta, Georgia. Shortly after, a second agreement was made with Gateway Communications, the company Ray owned a piece of. Others followed. Judy remembered:

We went from one and then two, you know, it was really slowly on the third one, and then we had six. It was thrilling. You know, there are certain moments in the history of Novell where you’re struggling, struggling, struggling—and all of a sudden you have six OEMs! … That was a big, big break.

The next six OEM customers were Sperry Corporation, Quadram Corporation, TeleVideo Systems, Texas Instruments, North Star Computers, and Santa Clara Systems. The breakthrough had come through a combination of diligent work and the felicitous support of IBM for the file server technology of the PC LAN v1.0. As Dale noted, after the IBM announcement NetWare looked a lot better to Novell’s larger competitors who had placed losing bets on the doomed disk server operating systems.

to Cyreenik book index