by Roger White, copyright 2003
Building Marketing Channels and Courting Software developers
Getting Finances and Personnel in place
The Technology Pieces fall in place: Advanced Netware
Building a company mission and Comdex 84
Surfing the high tech wave home (more chapters)
A wide open channel strategy was a natural complement to Ray's emphasis on hardware independence. Novell was a company in a hurry. If it was to succeed in its bid to dominate the market, it would have to push its products out through every available channel.
Judy Clark remembered the drive to get NetWare available anywhere and everywhere:
"Starting at the same time, we started hammering away at every single distribution channel. Because we felt that if we could get NetWare into everybody's hands and everyone selling it, then everybody would have it, then that would increase the market share. . . .
"That was definitely a very, very key [step] to the success of Novell -- of being in all these distribution channels. You could get NetWare anywhere. That was the slogan that we had internally: NetWare Anywhere . . . .
In 1984, Novell opened four sales offices: three in the United States (California, Virginia, Texas) and one in Germany. Ray and Harry Armstrong continued to establish relationships with resellers and distributors, in the U.S. and abroad. By the end of 1984, Novell had 15 US distributors and 15 foreign distributors.
Ray also tried to get national computer retail stores to carry NetWare. In 1984, he succeeded in obtaining agreements with two chains, one was Businessland.
From January 1983 through 1984, about 80 percent of Novell's sales were made to distributors and dealers. By the end of 1984, however, Novell had opened up channels through OEMs and retail chains in addition to making direct sales to major accounts. Two years later, by the end of 1986, only 59 percent of the company's sales had come from distributors, and by the end of 1988 distributors accounted for 55 percent of sales.
Balancing multiple channels is a fine art. Novell got away with courting multiple channels in the early days because no one knew what a PC-based network was -- it had no pre-defined "slot" in the many channels for distributing computer equipment. It wasn't "obviously" a:
It could be any of the above, so a lot of different kinds of businesses were willing to try reselling NetWare.
But there was one channel that all these others knew conflicted with their channel -- that was the "selling direct" channel. Selling direct means having Novell company representatives contact end users directly and try to sell product without using middlepeople.
Everywhere but direct, that isSelling is an expensive process. Half the price of a typical product sold off a retail shelf goes to pay for the selling process. This means that there is always a temptation to internalize the sales effort and collect that revenue as profit rather than hand it off to another organization as a cost. This is the attraction of selling direct. One obstacle to selling direct is that building a salesforce is expensive. Salespeople won't work for peanuts. They'll move. It takes time to recruit and train good salespeople, and salespeople also like impressive surroundings so they can impress customers. All these add cost, and these are upfront costs -- the kind hardest on a fast-growing company. Distributors are important to the sales channels because they are adept at taking a trained and in-place sales force and redirecting it rapidly from one product to another. They off-load part of the burden of maintaining a sales force from the manufacturer. Direct sales is not only expensive to establish it makes a statement to the other channels. Many of those channels, for good reason, see direct sales as such a hazard that they won't cooperate if a manufacturer is "going direct". They see those direct sales people as "cutting in" or "skimming the cream" off the business. Still, with half the price of a product going to the selling process, there's a continuing temptation to internalize more of that revenue stream, and Ray was not immune that temptation The issue of selling direct was controversial all through Novell's history. It is the heart of the NetWare Centers controversy that gets covered in a later chapter.
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Another strategic initiative begun in 1984 was to persuade independent software developers to write NetWare-compatible application programs. Ray and the team came up with the DIO ("Do It Once") NetWare Affiliates Program. The idea was that developers could save themselves a lot of trouble by supporting NetWare. By "doing it once" (writing a NetWare-compatible program), developers would in effect have supported all the popular LAN hardware systems, because NetWare was hardware independent and would work on all the major LAN systems. Novell would give third party developers the tools and information they needed to write for NetWare.
Developers were concerned that LANs would cause their sales to drop. This would happen if single users stopped buying individual copies of software and shared one copy with many users on their LAN. To allay these concerns, Novell created NetWare/MUSLS (Multi-User Software Licensing System). MUSLS provided copy protection and usage restriction mechanisms for NetWare-compatible LAN applications. MUSLS controlled the number of users that could access a program on the network and helped prevent piracy. Most importantly, it helped overcome developer objections to supporting NetWare.
In February 1984, Ray and company attended SofCon in New Orleans, a trade show where software developers could exhibit their products. Novell did not exhibit but had a hospitality suite. Developers were invited to come to the suite to hear about the DIO Program.
"There were 30 companies . . . none of the big companies came," Judy Clark recalled. "There were all these little tiny developers -- really obscure companies. They were just anxious to get their software running on anybody's hardware and compatible with any kind of operating system. If anybody would listen to them, they were thrilled. . . .
"Some of them, they came in suspicious and wanted to know why we were going to give them this software and hardware and what did they have to do for it. And then they went away understanding the value in it. We had a great response."
One of the developers that came to the hospitality suite was SoftCraft, a little company out of Austin, Texas, owned by Doug and Nancy Woodward. SoftCraft was pushing a data base program called Btrieve. The Woodwards understood Novell's vision of the LAN industry and enthusiastically agreed to support NetWare. Their relationship with Novell grew closer over the years, and in 1987, SoftCraft was acquired by its former partner.
Another early developer to become a NetWare Affiliate was Cosmos Incorporated, a company based in Seattle and devoted to moving the Pick operating system environment to the personal computer world. After working with Novell for several months, Steve Kruse, director of marketing for Cosmos, praised the DIO Program: "Novell's approach to the LAN market has been interesting and in some ways revolutionary. They have not only shown that the real key to local area networking is software, but Novell has made the market much easier for vendors to enter. I like being able to do the development work once and have my package running immediately on all the major LAN systems."
By the end of 1984, about 100 software development companies were participating in the DIO Program, and Novell estimated that as many as 1,000* multi-user application programs were NetWare-compatible. [*Source: Form S-1. In the first issue of LAN Times, the number of applications is estimated at 500.]
Building Marketing Channels and Courting Software developers
Getting Finances and Personnel in place
The Technology Pieces fall in place: Advanced Netware
Building a company mission and Comdex 84
Surfing the high tech wave home (more chapters)