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Microsoft, Novell See Profits in Partnership

Two years ago, Microsoft and Novell inked a landmark deal on patents and Linux-to-Windows interoperability. According to Microsoft and Novell, it's a deal that has shown dramatic momentum in its second year, with a triple digit percentage increase in customers for a total tally of more than 200 customers.

As part of the deal, Microsoft resells Novell SUSE Linux Enterprise Server subscriptions to customers. It's a partnership that has raised some questions about the impact of the deal on the wider Linux ecosystem. With its second anniversary in hand, Microsoft and Novell are out to try and prove that they now have solid customer momentum.

"I was surprised at the number of over 200 customers, so I actually went back and double checked it just to make sure," Susan Heystee, General Manager for Global Strategic Alliances at Novell told InternetNews.com. "That represents over 250 percent growth in terms of the number of customers that are part of the partnership which is really great. A real positive surprise has been the great customer momentum."

Heystee claimed that, including the customers from the first year of the partnership, there are now just over 270 companies in total that are customers of the joint Novell-Microsoft partnership.

The financial implications of the deal to both Novell and Microsoft are also substantial, though Microsoft isn't elaborating much.

"From a Microsoft we don't discuss financial implications related to the agreement," Sanjay Sidhu, director of marketing and business development at Microsoft told InternetNews.com. "We can say from a product and customer perspective the collaboration has really helped in terms of meeting customer needs in mixed environments."

The original partnership deal included a $240 million line item for Novell SUSE subscriptions that would be resold by Microsoft. According to Novell's Heystee, 80 percent (or $192 million) of the initial amount has already been invoiced. In August of this year, Microsoft expanded the original deal with an option for up to $100 million more worth of Novell SUSE subscriptions.

"At this point we're really not disclosing anything further on the incremental in terms of the $100 million," Heystee said. "We're now in our quiet period for Q4."

Future moves

As Novell and Microsoft continue to grow their partnership into it third year of maturity they are also adding new tools to the mix. One of them is a new Novell support offer for Red Hat Enterprise Linux users that was announced last week.

The new Red Hat offer includes up to two years of support for Red Hat while the customer migrates to a Novell Linux operating system. It's an offer that is also now being made available by way of the Microsoft partnership. Both Microsoft and Novell however denied that the new support offer would result in a shift in their sales strategy.

"In terms of helping customers migrate from Red Hat, it would be based on our existing sales model of pro-actively reaching out to enterprise customers and educating them on the offering," Microsoft's Sidhu said.

Heystee reiterated Sidhu's point and noted that the Red Hat support offer will not result in a sales model shift and that it's still business as usual.

"We've gone to market for the last two years with a dedicated team and we've been very focused in customers that want to leverage the interoperability," Heystee stated. "We're addressing the interoperability between Linux and Windows, it's not a competitive situation and we've been really successful."

A key part of the success has been the technical collaboration between Novell and Microsoft. As part of the partnership, Linux support for Microsoft's Silverlight is being developed in the Novell led Moonlight effort which is currently in development.

There has also been work done on expanding virtualization support for Linux on Windows. Heterogeneous systems management has also been on the interoperability table. Microsoft System Center Operations Manger 2007 can manage Linux servers.

One item that has not been on the interoperability roadmap to date though is network access control (NAC) between Microsoft NAP (Network Access Protection) and Linux. Novell has its own NAC offering which currently is not interoperable with NAP.

"We don’t have anything additional to announce today," Microsoft's Sidhu said. "In the future if we expand our technical collaboration, we will provide details at that time."