Novell To Boost Margins

Novell is set to drive additional profit margins to partners as part of a plan to significantly increase sales of Linux solutions.

The margin incentives, which are being finalized, will revolve around specific market play opportunities for partners, including moving clients from other platforms such as Windows NT and upgrade campaigns to move the Novell NetWare and Red Hat Linux installed bases to Novell Linux products, sources said.

In an exclusive interview with CRN, Novell Chairman and CEO Jack Messman said the company aims to beat Microsoft by putting more margin in partners' pockets. "In the past, we erred on the side of giving more margin to the customer when, in fact, the channel is probably a more important part of the decision-making process than the customer."

Novell executives would not detail how the company would package the additional margins for its partners or when the program will be formally launched.

The initiative comes as Microsoft steps up its bid to get partners to move NetWare customers to the Windows platform by providing additional financial incentives.

In addition to upping margins, Novell has recently inked deals with four specialty distributors, including D&H Distributing, as part of a multimillion-dollar initiative to get more VARs to sell Linux solutions. The just-signed D&H deal follows deals with Avnet, Alternative Technology and Bell Microproducts, said Mark Hardardt, vice president and general manager of partners and channels at Novell, Waltham, Mass.

In addition, Novell is inking a distribution pact with Agilysys and is in talks with Synnex, Hardardt said. "2005 is a significant uptick [in partner spending] for us in the broad partner community," he said.

Novell partners applauded the additional margins.

"This is going to help," said Lesley Taufer, president of Boulder Corp., a Novell Platinum partner in Boulder, Colo. "Messman is right. This is going to make it easier for sales reps who are pounding the pavement and educating customers in a highly consultative sale. If those reps are going to do that, they want to know the margin is going to be there." Taufer expects to see double-digit Linux sales and services growth this year.

Mont Phelps, CEO of Netivity Solutions, a partner in Waltham, said the additional margins should help since Linux is targeted at price-conscious customers.

"If Novell is going to help with that, it is huge," Phelps said. "They are really listening to partners. Messman understands that the channel has a big influence on what goes on in the marketplace."

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