Surfing the High Tech Wave
Chapter Beginning.
The New Man.
Job One:.
The Entrepreneur.
The changing of the guard.
In pursuit of the PC-compatible marketplace.
Who was this man who handled Novell so differently? Why could he accomplish
something with this organization that his five predecessors could not?
Part of the answer lies in his background.
Ray's grandparents, Hendrick and Grace Yff Noorda, were Dutch converts
to the Mormon church. Hendrick and Grace lived in Landsmeer, a suburb of
Amsterdam, with their 11 children. In 1894 their youngest child, Bertus,
was born to them. Hendrick and Grace were both in their 40s.
Hendrick, a laborer by trade, was a devout and active member of the LDS Church. The Netherlands Mission had made numerous converts among the Dutch, and several families had emigrated to Zion, their religious homeland in the far reaches of the American West. In the early 1900s, Hendrick prayed for spiritual guidance, assembled his sons and daughters, and made plans to claim his destiny with his brethren in the promised land.
In 1904, Hendrick and Grace packed their belongings and made the long journey to Utah. They came by steamer to New York through Ellis Island, and then took the Union Pacific to Ogden, Utah. Among their children was their nine-year-old son, Bertus Noorda, the father of Ray Noorda.
All but one of Hendrick and Grace's children left Holland for the States. The large Noorda family was itself a community, with stout sons and young wives and a flock of children. But the Noordas were also embraced by the Dutch Mormons who had preceded them in Utah, and by the LDS Church itself. Although they were 5,000 miles from their native land, the Noordas could feel at home America. Language was no barrier in polyglot Utah, which teemed with European and Asian immigrants; indeed, among their Dutch neighbors, the Noordas could get along quite nicely without uttering a word of English.
Hendrick found work first in the freight department of the Union Pacific Railroad and subsequently as a janitor at the Ogden Wholesale Drug Company. His sons were also employed in non-professional jobs: one was a school custodian; another a shift foreman for Utah Power and Light; one was a railroad inspector; another was a baker. Hendrick got his son Bert a job at the drug store, and Bert spent the next 43 years there as a stock clerk.
On the first day of spring, 1918, Bertus Noorda married Alida Vandenberg, a young woman who had been born in Ogden of Dutch parents. Soon after they were sealed to each other in the LDS Temple in Salt Lake City, Bert was called up for military service.
Ten months after their wedding, the couple's first child, Bert Jr., was born. Other children followed: Marie; Raymond John on June 19, 1924; and Edna. Alida's parents owned a small rental property next door to their own home in Ogden, and they offered this house to their daughter and son-in-law. Ray Noorda grew up as a part of a large extended family that included his maternal and paternal grandparents, numerous aunts and uncles, and dozens of cousins--many of whom lived in the same Ogden neighborhood.
Although Ray's father was a drug store clerk, the Noordas were in many
respects a typical middle class family of the 1920s and 1930s. Bert Noorda
was a scoutmaster and an active member of the LDS Church. Though money
was tight, he was able to provide for his wife and four children even through
the days of the Depression. In 1938, when Ray was 14, Bert and Alida purchased
their home from Alida's parents. In an era when most Americans were renters,
the Noordas were property owners.
In a 1988 interview, Ray told a story about his childhood that was probably part apocryphal and part true. The story serves the same purpose as Lincoln's rail splitter story; that is, the story of the youth demonstrates the virtues of the adult.
Noorda's childhood foreshadowed his future success. By the fourth grade he was CEO of the local playground in Ogden, Utah. At that time the kids ran their own programs and he was asked to organize a softball team for his own age group. First of all, he said, he made sure that the team was there. He figured out that they could win 50 percent of the games if they just had a full team.
Next, Noorda made sure the best players were there. He called them repeatedly, and the night before the game, he also phoned their mothers. He even went as far as to pick them up on his bicycle the next morning and wheel them over to the park. That's when he learned how things got done. The experience made such an impression on him that it became a metaphor for his management style today.
"I'd say more than anything else, it's important to make sure that people get to work and that the best players have extra incentives. Finding the best players has been one of the most important thing in the companies I've been in," explains Noorda.
Ray matriculated at Ogden High School, a few blocks from his home. He played on the varsity baseball team in his junior and senior years. (A year behind him at Ogden High was Brent Scowcroft, who would serve as national security affairs advisory under President Bush.) After graduation in June 1942, he worked briefly as a truck driver for the OUR&D Company. About this time, on a double date, he met Lewena Taylor (called "Tai"--pronounced "Tie"), his future wife. Military service interrupted their courtship, but they corresponded during the four years that elapsed before they met again.
In 1942, Ray joined the US. Navy, following the example of his older brother, Bert Jr., a private first class in the army. On October 14, 1944, Bert was killed in action on Anguar island, one of the Palau Islands near the Philippines. Bert left a widow and a son.
After the war, Ray considered his career options. He had learned about electrical devices in the service, so he decided to continue his education at the University of Utah in Salt Lake City. He pursued his studies from September 1946 till June 1949, when he was graduated with a B.S. degree in electrical engineering with High Honors. He was 25 years old.
In 1949, Ray was accepted into General Electric Company's management training
program, one of the best corporate training programs in the nation. One
August evening in 1950, Ray and Tai eloped and were married in a ceremony
in Salt Lake City.
In his 21 years at GE, Ray progressed from engineer to salesman to founder and manager of the Process Control Division, which used computers to control manufacturing processes. His career required long hours, separations from his family, and frequent relocations. In the 1950s, he was needed on a dam project in Tennessee, and it was months before he could rejoin his family. A position in Boston called, so the Noordas packed up and moved. In the early sixties, Ray and his family lived in Phoenix; subsequently they moved to southern California when the Process Control Division office opened there.
Ever thrifty, Ray and Tai postponed much in the early years of their marriage until they felt more financially secure. One of the things they postponed was children. In 1956, Christopher [or John?], their first child, was born. Four others followed: Daughter; daughter; Evan [Alan]; and Andy. Devout Mormons, Ray and Tai raised their children in the LDS Church.
People who know Ray today sometimes wonder how such an eccentric, freewheeling deal maker could have survived and risen in a large corporation like GE. "The thing that absolutely amazes me," said Ron Eliason, former chief financial officer at Novell, "is that this independent, maverick personality was able to take 21 years of big corporate life. I find that almost hard to believe."
According to Ray, GE gave him his first taste of entrepreneurship and his first opportunities to build businesses. "GE was an entrepreneurship company--still is," he said. "When I was with the company, I was involved with several start-ups . . . . They were started as a new business plan with some level of capability for new people to take the business to a size that was at that time identified as a true 100 percent profit-and-loss organization with its own management, its own market, its own authority under restriction, of course, in General Electric to grow as it could.
"[I] saw a whole lot of that. And the phases it would typically go through: an engineer would start the idea; a marketeer would then recognize the value of that idea and help grow it. And as it developed in strength, typically a manufacturing person . . . would come in to help the business grow, get the cost of manufacturing products down, making sure that the quality was a very fundamental part of the business. And generally speaking a marketing man might come in and be the manager of that company.
"And finally, in our company in General Electric, we used to call it the `milking phase.' That means that the business is mature. It may even die because there are technologies perhaps that would supersede it. And so, people at the financial level--they're really good at this. They're great `cow milkers.' They came in to make sure that all the costs got under control as you started to harvest the results of this and that people were motivated heavily towards high productivity. Compete as long as you could, but don't count on anything forever . . . .
"Within General Electric, in the 21 years I was there, I watched about 15 businesses--and participated in some of them--come into growth, develop to maturity level, get into harvest level, [and] go out at the business level or get merged into another department. It's a continuous cycle of entrepreneurship that exists."
Ray moved into using computers for process control. Process control is the art and science of controlling a manufacturing process such as making steel, making paper or even cooking an egg. Ever since the industrial revolution began, a lot of workers have earned their living looking at gauges and turning valves when the gage readings moved out of tolerance. Process control can be pretty mindless work, so inventors have tried to automate it whenever possible. A thermostat is an example of an automated process control. In the sixties computer costs were down enough that it was possible in theory to use computers to watch gages and turn valves more economically than people. Ray was one of the pioneers in turning that theory into practice.
Ray started developing process control for automated steel mills and ended his career at GE in their Charlottesville facility as General Manager of Manufacturing Automation Business. As his work changed, his responsibilities changed as well. He moved from technical, to sales, to marketing, and finally to general management.
As he built the Process Control Division, Ray became convinced that he could do for other companies what he was doing for GE. He had the know-how. He had the contacts in the computer industry. He had a little money put by from years of saving. So when an opportunity arose in 1970, Ray left GE to become an entrepreneur. He was 46 years old, and he was the sole support of his wife and five children, ages 5 through 13.
Working for Ray at GE in Phoenix were a number of people who would later play a role in the Novell story. Jack Davis, a marketing guy who worked as an account rep for GE, was the principal founder of Novell Data Systems. Sherril Harmon, Joe Maroney, Reid Clark were also GE Phoenix people.
Among Ray's employees at GE was an ambitious young man named Jay Kear. Kear entered GE at age 22, progressed through a number of technical support and sales positions, and left in 1967 to become director of marketing for a software company. A year later he landed a job as vice president of marketing for Digital Industries, and a year after that, in 1969, he was offered a job as VP of sales and marketing at General Automation. He was 32 years old.
General Automation was founded in 1967 by two former employees of a company
called Decision Control, Inc. (subsequently Varian Data Systems). An engineer
named Larry Goshorn and a marketing guy named Burt Yale developed a line
of computer products that served as the basis of industrial and commercial
automation systems. GA sold its systems both directly and also to original
equipment manufacturers (OEMs) to be included in their systems. Their systems
were designed to solve automation problems similar to those addressed by
the products of GE's Process Control Division.
General Automation products were selling well, but expenses were running out of control. By 1970, although the company showed sales of $5 million, it was $5 million in the red. Jay Kear suggested they bring his old boss, Ray Noorda, into the company as a consultant to do some troubleshooting.
"It was an engineer who started the company," said Ray. "He got off track in a couple of cases. He started using too much money. The company got into what I call the Fourth E* problem . . . and basically had to have some help. At that time I was leaving General Electric and was invited to come into the company and help out. [*Ray identifies five stages in the morale of companies, each stage beginning with the letter "e". The five stages are: Enthusiasm; Excitement; Exuberance; Euphoria; and Extinction. Euphoria is the "Fourth E" problem that blinds management and leads to Extinction, the "Fifth E."]
"It was a difficult situation to come into--one that I learned an immense, literally a treasure, of experience from. It was a very good experience for me, even though at the end it seemed as though it was difficult."
Ray left GE in 1970 and began as a full-time consultant for General Automation. Larry Goshorn, the founder and president, was impressed with Noorda and decided to bring him on as a company officer, so in May 1971, Ray was named Executive Vice President of GA.
At General Electric, Ray had the resources of a vast multinational corporation behind him. At General Automation, he said, "there was nothing behind me. I had a board, but I didn't have any money."
In 1971, GA doubled its sales to $10.6 million in sales and for the first time in its history showed a net profit ($3,000) instead of a net loss. By the end of fiscal 1972, GA's sales had increased 51% to $16 million with net income of $1.56 million. Sales doubled again from 1972 to 1973 ($16 million to $30.4 million), and the directors made Ray president (in December 1973). Sales doubled yet again from 1973 to 1974 ($30.4 million to $61.4 million). Those figures made General Automation the fourth largest minicomputer company in the world.
But then crisis struck hard. A new generation of products with a silicon-on-saphire CPU at their heart never appeared. The silicon-on-saphire technology was fast, but turned out not to be commercially feasible. Adding to that problem was a deep recession. Spending in the automotive, factory and electronics markets that were GA's core nose-dived. Sales sank by $5.5 million (9 percent) in 1975. Net income, which reached a high of $4.3 million in 1974, plunged to a loss of $4.1 million in 1975. This crisis precipitated a fierce management struggle between Larry Goshorn and his outside directors, who were backing Ray. Ray left the company in October 1975.
In retrospect, General Automation appears to have been an ideal training ground for the future president of Novell. The experiences of both companies are typical of the experiences of many young electronics businesses. Booming sales created havoc in GA's corporate and physical structure. Several major facility expansions were necessary. The closely held company went public in 1971, its fourth year of business. It acquired other companies every year from 1971 through 1974, and it expanded its international operations, which in 1975 accounted for 29 percent of total sales.
Rapid sales growth is surely the greatest test of a manager. A flood of money and orders stresses every part of a successful company, and many managers cope simply by throwing money at problems. Others, like Ray Noorda, try to focus on key issues and ignore the rest.
One anecdote illustrates the chaos that Ray and the other key people had to wrestle with at General Automation. When Burt Yale, one of GA's founders, had a heart attack and left the company, the international operations he supervised got a little out of control. Ray and Jay Kear invited their old GE colleague Jack Davis to have breakfast with them at the Howard Johnson's in downtown Anaheim. They offered Jack a job; asked him to put things right in international. Jack said yes and packed his bags.
"The guys in Europe had been running totally out of control," said Davis. "They had nobody that they had to report to. They were sick and gone. I got over there and found a guy in France, an American expatriate, building a new home. He hadn't been in the office more than half a dozen times in the last six months. He left a message with his secretary to call him if anybody needed him."
Looking back on GA, Ray considered the company typical of entrepreneurial ventures. "The same principle applies every time: A little too much money; a little too much euphoric attitude towards the market opportunity; a little over-expenditure here or there. And before long the company is running out of control, morale is gone, and the incentive for making it improve is dissipated."
In Ray's four and a half years at GA, sales increased 1000 percent, and the company had been taken public.
In December 1975, two months after he left General Automation, Ray became
a consultant for System Industries, a manufacturer of disk storage systems
based in Sunnyvale, Calif. The company had been founded five years earlier
(1970) by Edwin V.W. Zschau, whom Ray described as "perhaps the best
educated man in the Bay area, a doctorate in both business administration
as well as in mathematics and physics." Zschau was assistant professor
of management science at the Stanford University Graduate School of Business
from 1964 to 1969. In 1970, with financial backing from three venture capital
firms (Brentwood Associates, DSV Associates, and California Northwest Fund,
Inc.), Zschau set up Systems Industries. In March 1971, the company shipped
its first disk storage system.
The central processing units of early minicomputers had very limited memories--a 1969 minicomputer may have had 4,000 bytes of random access memory (RAM) compared to millions of bytes in today's PCs. This meant that the supporting storage devices, such as tape drives and the recently developed disk drives, had to carry a lot more of the load in typical data processing. Whole programs were rarely put into RAM at the same time. They would be broken into parts that would "overlay" each other (replace each other in RAM) as they were needed. The part of the program that wasn't being used would be stored on a disk. Software applications such as accounting and word processing programs were routinely handled this way as were the data bases containing information. Extensive use of overlaying made disk performance just as important as CPU performance in determining overall system performance.
A disk storage system would consist of a disk controller (printed circuit board); software enhancements (programming commands that worked with the minicomputer operating system); cabling and connecting hardware; and the disk drive. The disk drive might be a removable cartridge or pack or--after 1979--a "Winchester" drive, where the disk is permanently sealed within the drive. (The Winchester name evolved from the fact that the first such drives were called 30-30's while they were being developed at IBM.)
Every minicomputer needed at least one disk storage system. In the 1970s, a significant number of companies were hooking up additional storage systems to the same computer or to multiple computers, to speed access to data and to provide a system back-up should the primary storage system fail. This concept of "system fault tolerance"--compensating for potential faults in the storage system by creating redundant systems--also contributed to the demand for storage systems.
The proliferation of minicomputers in the 1960s had created a growing need for high performance disk storage systems. Zschau's idea was to bring technological advances in storage systems to the market faster than the competition. In March 1971, Systems Industries shipped its first product--a system incorporating a new 2.5 megabyte disk cartridge drive--to users of DEC and Data General minicomputers. This was several months prior to the release of similar products by DEC and Data General. In 1974, the company shipped storage systems featuring 80 megabyte storage module drives--four years before DEC shipped its similar product.
System Industries started out as a "pilot fish" company swimming around giant minicomputer manufacturers and feeding on their leftovers. DEC and Data General were two of the largest minicomputer manufacturers at the time; their computers accounted for perhaps half of all US. minicomputers. System Industries designed its disk storage systems to work with DEC and Data General minicomputers; it also supported military computers designed by Sperry Corp.'s Univac Division.
Virtually all the company's sales, until 1977, were to OEM customers: manufacturers making computer systems for oil and gas exploration; typesetting operations for newspapers and publishers; office data processing and word processing; engineering operations; military applications; and other process automation markets. System Industries was itself an OEM, because it bought its disk drives from other vendors. The only components the company designed and produced itself were disk controllers; cabling and connections; and software.
"Purely by luck," said Ray, "I became acquainted with the company and was invited to come in and see what I could do to help out because they were shipping about $6 million and losing about $2 million. That's a difficult thing to deal with particularly when there are emotions involved.
"But together we worked the company out of that situation and back into a growth mode. . . . When I left them in 1980, actually, the company was doing about $80 million in annualized sales, profitable enough that the investors decided they could take it public with pride."
For about a year (December 1975 to January 1977), Ray worked as a consultant to the company. In 1976 he was offered a place on the board of directors. In January 1977, he was named chief operating officer. He was subsequently elected president, then president and chief executive officer.
Following a pattern established at GE and General Automation, Ray simultaneously attacked sales, manufacturing, shipping, and expenses. He set higher quotas and spent hours on the telephone making deals. He paced the plant and rode the manufacturing people. He looked over the shoulders of the shipping guys to make sure the product got out the door. He cut budgets, personally reviewed expense reports, and worked to stanch the flow of money. He set a productivity goal in terms of dollars of sales per employee. In 1980, the company achieved $131,000 per employee.
Ray also saw that System Industries' focus on OEM sales was a barrier to growth. The OEM market was too small and too dependent on the ultimate end user markets served by a few key customers. If System Industries was to achieve sales in the $100 million range, it would have to sell its products directly to end users. Ray made plans to change the marketing direction of the company, and development began on a new product--the 9400 series--that would appeal directly to the minicomputer end user. The plan also called for an expansion into international markets and creation of a service and support business.
At the end of Ray's first year (1976), revenues had doubled from about $6 million to $12.1 million. Instead of a net loss of $2 million, the company showed a net income of $703,000. The 162 employees who worked at System Industries felt proud--and relieved--that the company was finally in the black.
In Ray's second year, System Industries still sold almost exclusively to OEM customers, and it was selling systems that had been developed in 1975 and earlier. Development of the 9400 series--designed to operate with DEC PDP-11 software--was in full swing, with a projected ship date of first quarter 1978. At the end of Ray's second year (1977), revenues were up 35 percent, from $12.1 million to $16.4 million. Net income was up 70 percent to $1.2 million.
Ray's third year was a rough one. As the company built a direct sales force in the US. and Europe and expanded its customer service capabilities, technical difficulties caused a delay in the development of the new product line. When the 9400 series finally shipped late in the year, it was nine months late. Consequently, 1978 sales were up just 14 percent over the previous year to $18.7 million, and the company posted a net loss of $1.4 million.
In Ray's final year and a half with the company (1979-80), the engine he had so carefully tuned finally started humming. The transition to an end-user marketing focus was completed. Sales of the 9400 series accounted for nearly half of all system sales, and the customer service revenues almost doubled.
The decision was made to phase out an unprofitable subsidiary business (Silonics) that had manufactured an ink-jet printer. System Industries licensed the technology developed by Silonics but no longer engaged in the manufacture of printers. Ray and others decided the company should focus on its primary storage systems business.
Revenues in 1979 were $25 million, up 33.5 percent over 1978. In 1980, sales increased 51 percent to $37.9 million. When Ray left the company at the end of July 1980, Systems Industries had an installed base of 11,000 systems and was on track to achieve $63 million in 1981. The company went public in September 1980.
In 1980, Ray received $65,255 in salary from Systems Industries, plus an additional $3,100 in personal benefits. His annualized salary was probably in the $110,000 range (Zschau made $146,899, while two vice presidents made $212,782 and $152,076, respectively). Ray seems to have preferred to take most of his compensation in the form of company stock, of which he had conspicuously more than either of the vice presidents who drew higher salaries than he. When Ray left System Industries, he had options to purchase 38,250 shares--2.43 percent of the total shares. Only the founders and the venture capital firms and principals had interests in more shares. Ray's options were worth an estimated $562,656 as of December 1980.
As Ray was winding down his involvement in System Industries, his old colleague
Jack Davis arranged a meeting with him. Jack tried to interest Ray in the
new business he was trying to start.
"[Jack] came to me in the early 80's with a business plan about putting together what ultimately became Novell," said Ray. "I looked at it; I thought it looked like too much too soon, and, more important, the things he was planning on making--terminals, printers, and personal computers--were all rapidly becoming commodity items. These are the kinds of things that are sold mostly on cost and very little on features.
"If these products were going to have to be sold on cost, then why was he manufacturing in Utah? By the early '80's it was quite clear that electronic commodities should be made off-shore. . . .
"Why didn't he see this? Because of the early company personalities: he brought in George Canova and Joe Maroney. George was a technical guy; he wanted to build things. Joe was a production man; he wanted to build things even more than George did. None of these people were marketers; they didn't look carefully at the market and the pricing they would need to compete. So, in picking his early team, Jack more or less locked in his company's destiny as well.
"If Jack and George had done their marketing homework they would have realized that the products they were planning to make would become commodities and therefore very price sensitive. They would then have realized that they couldn't follow the inevitable price declines if they were using US. labor and production facilities: they would have gone offshore for production and concentrated on other things needed that can't be provided from offshore: sales, service, and support."
Ray wished Jack luck but bowed out. Jack called George Canova, and NDSI was born.
In August 1980, Ray joined Boschert, Inc., as chief executive officer.
Boschert, like Systems Industries, was a Silicon Valley company based in
Sunnyvale, Calif. Founded by an engineer named R. Boschert, the company
manufactured power supply systems for computers. When Ray joined, the company
had about 400 employees.
Computer power supplies are critical to the operation of computers. They are the component that turns 110 or 220 volt AC power from the power plug into the 5 and 12 volt DC power that computer IC's require. Power supplies have a reputation among digital circuit engineers for being "black art". The theory is well known, but the practice is subtle. They are part digital and part analog and designing good ones isn't a cookbook procedure. There is a power supply in every piece of equipment that uses IC's and is powered by house current. (Power supplies aren't needed when batteries are used because batteries provide steady DC power.) Power supplies can range from the bulky looking plug thing that fits into the wall socket and recharges your battery-powered electronics, to the shiny sliver box inside your PC-compatible, to giants that supply power for big industrial equipment.
Power supply equipment is hardware, and the manufacture of hardware is a relatively low margin business in the computer industry. Technologically advanced equipment rapidly becomes a commodity. Ray's challenge at Boschert was to find a way to reduce manufacturing costs while continuing to develop technologically advanced products.
"I was in the process of moving Boschert's power supply manufacturing off-shore," said Ray. "Although, I have to admit, I had to do a lot of convincing at Boschert before I got the rest of the organization to see the light."
Ray later described Boschert as follows: "Started by an inventor, an engineer--a wonderful man. Very capable in his own right. Skilled at doing what he does best. Not so skilled as the company began to grow in setting the right course and keeping it on track in accordance with the expectations of the investors. So I had an opportunity to go in there, as a finder really, and found that there was enough good strength there on which to build a growing company."
Less than two and a half years after he joined Boschert, Ray was scouting for new entrepreneurial opportunities. For the 12 years after he left GE, he had devoted most of his energies to building up businesses that other people had started. Now he wanted to try his hand at founding his own company.
In 1987, Ray recalled the circumstances that ultimately led him out of Boschert and into Novell:
I had actually started a business attempting to do some phases of what we are doing here at Novell. My plan was to develop to a typical $50 million to $100 million manufacturing environment [producing] a computer-based system with certain levels of fault tolerance* that would allow me to run 24 hours a day for $250,000 as a system, and I was aimed at doing just that kind of business. [*Fault tolerance is the term used to describe the ability of a computer system to continue operating even in the event of a component failure. Fault tolerance is usually achieved by creating parallel or back-up systems.]
The reason that I had a compelling interest in doing that was that I had run three other companies doing someplace in the $50 million level of business, and to run the business I had to run computer systems which cost about $1 million to maintain any level of security around running the factory without losing time. So I would typically buy two minicomputers, VAXes as it turns out, and put them in hot standby so that if one failed the other one could be switched over as quickly as possible--and it usually took not less than two hours--so that I could continue to run the business.
So in my spirit of entrepreneurship at that time I decided I was not going to run another business that had to pay a million dollars, so I funded and started a company called Reliable Data Systems that was aimed at using a particular technology in a fault tolerant configuration that would allow us to do just that. And we were headed in that direction when the folks who had financed Novell asked me to come over and take a look at it. And when I saw it, I saw a better way to do it. I saw a short term and a long term existence in the business that would provide exactly the same thing that I had started with a different technology in another company. So after a few months it was clear to me that I had to stop that other business and come over and run this one, because it offered a better opportunity for everybody.
Ray saw something in Novell Data Systems that had not been in Jack Davis'
business plan when Jack approached Ray two years earlier: the local area
network. The printers, terminals, and computers that Jack had been interested
in making, Ray had dismissed as low-margin commodity items. But the LAN
intrigued him. Here was a product with a future. Ray looked at the LAN
and saw a business computer system that cost far less than minicomputer
systems. Because of its simplicity and low cost, a business could buy two
of them and achieve fault tolerance. By buying a LAN, a customer could
preserve his investment in his existing stand-alone PCs, and as a business
grew, it could simply add more low-cost PCs to the network.
By distributing processing power over a network of intelligent PCs, the LAN overcame the limitations to growth that minicomputer users eventually ran into. In LANs, each user has his own "smart" PC which processes information. The more PCs you add to the network, the more powerful the network becomes. With minicomputers and disk sharing, by contrast, each user taps into the central processing unit of the host computer via "dumb" terminals, and the more users you hook up to the central processor, the less efficient the computer becomes. As a growing business added users to its minicomputer system, the computer would take longer to process data, and eventually the system would have to be replaced. Ray saw that the LAN could overcome the "planned obsolesce" of the minicomputer.
Another appealing aspect of the LAN was that it harnessed the prevailing technological trends. By 1982 it was clear that there would be a rapid proliferation of PC-compatibles in the 1980s and beyond. Every person or business that owned more than one PC would be a prospect for a LAN.
Finally, the heart of the LAN was a high-margin software product, not a low-margin hardware item, and this appealed to Ray. As software, the network operating system was inexpensive to manufacture, difficult for competitors to steal or emulate, and easily revised or customized. Properly handled, ShareNet could become for LANs what Microsoft's DOS had become for IBM PCs and compatibles: an industry standard.
At the end of November 1982, Ray stopped by the Novell Data Systems booth at Comdex in Las Vegas--a small booth with a wall of new IBM PCs networked with a wall of older CP/M-based micros. He introduced himself to the attractive blonde in the booth--Judy Clark--and said, "I'm interested in your company."
There was one other interesting difference between Novell and the other
companies that Ray had worked with. Novell had already cast out its founders--there
was no Goshorn, Zschau or Boschert left at Novell to later contest his
success, this would be Ray's company from the start.
Chapter Beginning.
The New Man.
Job One:.
The Entrepreneur.
The changing of the guard.
In pursuit of the PC-compatible marketplace.