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Seeing the Dark Side

Is Novell Cooperating or Defecting?

Manufacturers, distributors, and retailers in all lines of business must cooperate to get product to the customer. But cooperation adds substantial cost, so it is worthwhile only if it makes the total of everyone’s profit much bigger than it would otherwise be. Some organizations instead reach out to capture a larger piece of what the end user pays for product. Some manufacturers “go direct” to retailers or customers, some distributors start manufacturing, some retailers buy up or create a “captive distributor”. Their risk in grasping these opportunities is that other players will see them as a defector—someone who is no longer cooperating—and in return they will no longer be cooperated with.

From the beginning Novell distributors and resellers didn’t buy the NetWare Center concept, and they had good reason to be fearful of it. In the distributors’ and resellers’ eyes, every direct sale Novell made was a lost opportunity for them. There was grousing. Novell could not afford to be seen as a defector, and Harry hit the road to do some hand-holding. He had to show that the NetWare Center concept was in fact not defecting against the other sales channels. His remarks at one of these explanatory seminars were reported in the next issue of LAN Times (Apr/May 86, pp. 48-49):

“We want to make it much easier to deal with Novell. … So the idea of the NetWare Center is to put our product, our people, our technical knowledge in the field, and get closer to our dealers and distributors.

“Originally we thought we’d have seven locations worldwide. I believe now there will be at least 10 and possibly more.”

Harry dangled the systems integration services before resellers:

“The NetWare Centers are going to be squarely in the middle of the systems business, and as such will require more specialists. … The systems engineer can be almost anything. He is generally a person that works with major end users, sits down, talks with them, finds out what their needs and requirements are, and configures the system for them. He is a consultant, he can be industry specific, he can be product specific.”

Regional inventories and assembly will shorten order delivery times for resellers:

“The NetWare Center operations people will be doing systems integration and testing—almost what we call assembly. … Each NetWare Center’s goal is to be able to ship products within 48 hours of receiving an order.”

Resellers can bring customers to the centers for product demonstrations:

“Each NetWare Center will have a product demonstration center where customers may observe our products, and receive operations demonstrations and educational classroom experience. Education is becoming a much larger portion of Novell sales as we grow.”

Armstrong concluded by reassuring his audience that these centers were really in everyone’s best interest:

“The number one purpose of the NetWare Centers and ourselves is to provide excellent customer service.”

In 1985 Novell’s channel partners grudgingly accepted the Centers. They had no choice, and perfect happiness always eludes distributors and resellers in any industry.

According to the article, Harry also gave some idea of the major role the centers were expected to play in the future of Novell:

Armstrong expects the centers to be accounting for 50% of Novell sales by the year’s end [1986]. [This would hardly have been reassuring to resellers!]

On the personnel side, Armstrong estimates that the number of NetWare Center employees located outside of the home base in Orem will equal the number at the corporate office.

By the end of the year, he projects that 80–90% of all products in the centers will be Novell products, with non-Novell products being such items as uninterrupted power supplies (UPS), terminals, software application programs and communication boards.

There will also be an authorized Novell product catalog, which will include all Novell products and the approved non-Novell products sold at the NetWare Centers. Non-Novell products listed in the catalog will be peripherals selected and provided to enhance Novell systems. It will be the first time non-Novell products are included in a Novell products listing.

Red Flags Are Waved within Novell as Well

Not every member of Ray’s management team was as enthusiastic about the NetWare Centers as Harry. Craig and Ron both had misgivings, primarily because it seemed to get Novell deeper into low-margin hardware. The NetWare Centers concept became part of the old hardware vs. software argument. As Craig recalled:

I didn’t care if they sold hardware; I just wanted to get out of the mentality that was where our revenue was going to come from. I didn’t care if they used hardware as a means to move software as long as it was understood that software was what we were after.

That is why I never tried to stop it. Not because it took a long time for it [the phase-out of hardware] to happen but that the mentality needed to change, which it did. We were motivating people to sell software, and that was really clear that was where our bread and butter was.

It was tiring having to fight the same battles over and over again—having to remind the same people of what had been discussed and keeping them on track. For Craig, personally, it was also a bit disheartening to see Harry taking the lead in the centers.

Ron was frustrated at the importance of the role the centers were cut out to play. He had been pleading with Ray to add more staff to key administrative areas such as accounting, information systems, and human resources. Ray was a brick wall. Now plans were being made to double the staff—and all those new bodies would be in the field!

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