Novell Inc. is the world's largest networking software company and, with 1996 revenues of nearly $1.4 billion, the world's fifth-largest software company. With headquarters in Provo, Utah, Novell Inc. has more than 5,800 employees in over 40 countries. The Japanese subsidiary, Novell KK, was established in 1990.

Shigechika Takeuchi, the new president of Novell KK, has worked in the computer industry for about 30 years. He started his career with Toshiba as a computer design engineer, and during the next two decades served in managerial positions in Japan, the US, and Europe.

Takeuchi left Toshiba to join Apple Japan in 1989. During his five years as president, the company's market share grew from less than 1% to nearly 15%. He left Apple in 1994 to become president of Hewlett Packard Japan. (See our December 1995 issue for an interview with Takeuchi conducted during his tenure as HP Japan president.)

This interview was conducted in April 1997, about two months after Takeuchi assumed his post as president of Novell KK.

Novell:
Refocusing on Core Strengths

interviewed by Wm. Auckerman

Shigechika Takeuchi: Novell is trying to make the transition from a total software company back to the original idea of a network software company. It's a very difficult transition. We are having some struggle, but I feel we can successfully make the change within a year or so.

How important is the Japanese market for Novell, and how successful?

Takeuchi: Today, Novell's total business is around $1.6 billion. The expectation for Japan is around 15% to 20% of that total.

Unfortunately, our current business level is not that high; Japan is a little less than 10% of Novell's worldwide business. We don't release the revenue information for each subsidiary publicly, but percentage-wise that's about our size.

How big is Novell KK?

Takeuchi: Today, we have 240 permanent employees. More than 50% are on the engineering side: development and technical support. Those are our key resources.

How would you describe the relationship between the head office and Novell KK?

Takeuchi: In the past up until the end of January the relationship between Novell Inc. and Novell KK has been very independent. Even though we are selling the same products, our marketing strategy, support, sales channels those kinds of plans have been made independently. On one side, that's very good. But on the other side, it makes it difficult to move quickly as a global company.

What I want to do, though, is create a global team, with Novell KK more like a team member of the global Novell. In the last meeting with [Novell Inc. president and CEO] Joe Marengi's team, I clearly mentioned that, and other countries' and headquarters' support managers were very supportive of the idea.

You say the Japan office has been independent. Do you employ different sales and marketing strategies than in the US?

Takeuchi: Our strategies may differ, but the purpose is not to be different. It is because of Japanese business customs.

What we'd like to offer in Japan is the same level of support, the same level of education and training programs. For example, Novell has been providing a customer support program using a global network, providing 24-hour-per-day support to customers. But our Japanese customers cannot be supported by English or other languages. And database itself is language driven; we have an English database, but not a Japanese database. So, because of those kind of limitations, we couldn't provide 24-hour, high-quality support in Japan. But now, between Novell KK and Novell Inc., we are preparing to offer such support for Japanese customers.

Regarding product localization: Is there a time lag between introduction of the English and Japanese versions of your products?

Takeuchi: Today, the time lag for some products is up to one year; for other products, three to six months. But I don't think that customers can wait for such a long time.

It is because of the past independency that I mentioned. We would develop the English version, then start development of the Japanese-language version, so it took a very long time. Also, independency didn't provide for good teamwork between the US and Japan. Novell Japan was not seen as a part of the team, but more as a kind of distributor.

That was the situation in the past. Now, we are implementing Japanese version development as part of global system development concurrent development between the United States and Japan. I don't think we can create the necessary environment in three or six months, but within a year or so you will see much closer introduction dates, probably about three months.

Do you target any products specifically at the Japanese market?

Takeuchi: At the moment, we do not have plans to introduce Japanese-only products. What we need to do today is to create the infrastructure for global development.

But after we create such an environment, my understanding with Joe Marengi is that if some kind of unique product is necessary for the Japanese market, then why not? So, when the time comes, it is possible we will provide Japan-originated products.

What are your major market segments in Japan?

Takeuchi: In the past, in Japan, our NetWare products were very popular in small to medium-size companies. In the United Sates, it was not just the small and medium-size companies; the larger corporations have been using NetWare products for their network environment management. Today in Japan, based on NDS [Novell Directory Services] technology, we are seeing more and more big corporations starting to use our products. Gradually, with products like Intranetware, large corporations such as Tokyo Denryoku and Fuji Xerox have started to become our major customers.

Another important customer segment is the common carriers, like NTT. Not just in Japan, but globally, carriers like AT&T, British Telecom, and Deutsche Telekom have started to implement network connect services in order to provide Virtual Private Networks for small to medium-size companies.

Novell has long been known for NetWare. What are some of today's major products?

Takeuchi: Today, still based on NetWare, we have developed a product not for the local area network, but rather for the Internet and intranet operating system, called IntranetWare. That is the major product for Japan.

But we've started to market some other products this year. One is a groupware product, called GroupWise. In the United States, the market share is almost equal between Lotus Notes and GroupWise, but in Japan, GroupWise is not really launched yet. On April 25 we will introduce GroupWise 5.1J, which will include Oracle's Network Computer connection.

A third product is ManageWise, which can provide remote management of the Internet or intranet. And a fourth product is like the network connect services, which I mentioned for the common carriers; that is based on NDS, so NDS itself is the fourth product for us.

Another product, which we have not released yet, is called "Border Services." Besides country borders, a border exists between networks. Between two intranets, there is a border; when you have intranet-to-intranet communication through the Internet, then there are two borders. In such an environment, issues like network performance, security, and stability are becoming more and more important.

What we are creating is software that provides a performance improvement, a high level of security, and a high level of stability for professional use of the Internet. In the US, we will start to support those areas from early summer. In Japan, we'll start to provide Border Services before the end of the year.

You mentioned Oracle. Can you comment briefly on Novell's recent tie-up with Oracle ?

Takeuchi: It's not just with Oracle. I like to provide freedom of choice, and today's Japanese computer industry is a kind of monopoly. Or, at least, that's the image, one created by the media, and even by the industry and by end users. But nobody wants to see a monopolistic environment; everybody wants to have more choice.

I'd like to provide freedom of choice, and that can be done by Novell, Oracle, Lotus, Netscape, and Sun Microsystems those are global companies. Plus, in Japan, JustSystem is providing a kind of groupware, and Ichitaro. Using this kind of team, I'd like to create freedom of choice for the users. That's what I'm hoping to see for the next two years or so.

One of the starting points is that Oracle and Novell can provide not just a PC environment, but the Network Computer and PC environment together using the Internet or intranet environment. Plus, by using Oracle's database management system with Novell products, I believe that we can provide much higher performance and more stable transaction application systems. That is the next step.

Also, Oracle is using NDS so that users don't have to log into each server. When the user logs into a multi-server network, they don't have to worry about where a database is; the network can automatically find the proper database and provide the result. Most of today's environments cannot support this; the user has to log into the network, then they have to remember where the specific data is, and then log into the particular database server and find the result. That's not really a network environment; its kind of an extension of the current computer system.

Based on Oracle's endorsement of NDS, we can provide a simpler and better environment to our customers. The kind of system we used to call a client-server system, we can call such an environment a client-network computer system. That's the kind of environment we'd like to provide.

In March, Novell announced a strategic agreement with Netscape to deliver intranet and extranet solutions. Please tell us a bit about the new Novonyx joint venture?

Takeuchi: On the US side, we are still waiting for approval from the FTC, so we still don't yet have a real company. But Novonyx will provide a high-performance groupware type of environment that will be natively connected into IntranetWare. That is the key product, and will be the first product. After that, based on Netscape server technologies, Novonyx will provide native-type products for IntranetWare.

At the moment, we do not have any plan to set up a branch of Novonyx in Japan. I believe that Novonyx products will be distributed through the Netscape and Novell distribution channels in Japan.

Also in March, Novell announced that it has licensed the Project Studio Java development technology from Sun Microsystems for integration with future versions of IntranetWare. What benefits will this provide for intranet/extranet users?

Takeuchi: Basically, it will offer an easier application development environment for developers. Today, IntranetWare itself does not really provide an application development environment. We have the so-called NLM development environment, but that kind of environment is not hardware independent.

Java provides hardware-independent application development, plus you can transport or send the application itself through the Internet. Based on that, the application development environment will become significantly simpler than today's situation. Before the end of this year, we will provide a development kit and other types of applet class libraries through a licensing between Sun Microsystems and Novell.

Who are some of Novell's OEM partners in Japan?

Takeuchi: Our relationship is very strong with Fujitsu. One reason is that Fujitsu is implementing our NDS onto their own Unix for the DS-90 servers. They are fully committed to the Novell Directory Services. The NEC and Hitachi relationships are very strong, of course; NEC is strong in the PC server area. And Toshiba is one of our shareholders, so that relationship is very close.

Who are your major competitors in Japan?

Takeuchi: For directory services, there aren't any significant competitors yet. I hope that we can create the de facto standard for directory services in Japan. So not really competing; rather, we need to have a team. That is what I'm expecting.

Regarding the network operating system, of course Microsoft is a very serious competitor. But Microsoft's product is from the application to the network, while our product goes a different direction, from networking to the application. So I don't think we can compare apple to apple. If a customer is focused on the application itself, they might choose Microsoft products. But if the customer needs a network-based environment, then I believe that Novell products are better suited.

In the groupware area, of course Lotus is a competitor. But our presence in Japan is very low, so I don't think we should be compared with each other. Again, the difference is that with Lotus, the customer's needs have to be implemented or customized into Notes. Our product is based on messaging, and the messaging environment is already given. That is the difference between Notes and GroupWise, so we like to promote our product in a different manner.

What are your market share goals for the year 2000 ?

Takeuchi: In general, what I would like to see is Novell number one or number two in each product area. That may be a 15% or so market share, but numbers don't make sense without identifying a specific area.

What do you see as the major driving forces in today's networking industry?

Takeuchi: Technology is important, but especially in Japan how we can present the technology seems to be more important than the technology itself. I believe that is very important, but users should understand and select their systems based on their own needs, not just based on the trends.

From the technology point of view, for instance, commercial usage of the Internet started just a couple of years ago. We have just begun to solve some limited technology concerns. For example, the Internet is created for everybody to use. That means security is not important. But when we use the Internet for commercial purposes, security is very important, and stability is also very important. Those areas of technology will become much more important.

Another area is performance. Today, the line itself, the bandwidth, is still not a serious problem. But within two or three years, the usage of the capacity will grow significantly, and physically we will see limitations. So how effectively we can utilize the bandwidth will become another important area.

From the functionality point of view, the Internet itself is not really an effective business communication tool. Go and access some kind of database that is the basic idea. But if we want to provide information to potential customers, then we want to do more than just passively wait on requests for our information. Rather, we want to "push" our information or data to other people. That kind of technology will be important for commercial usage.

How has the network operating system market changed in past few years?

Takeuchi: For the past couple of years, the network operating system basically has been seen as under the local area network environment, which means in one facility. That is not really an open or standard environment; anyone can create a local area network with their own technology.

But as the Internet becomes popular, the basic issue for a network operating system is not proprietary; an open and standard architecture is necessary, especially in the protocol area. So TCP/IP is the standard, even for the network operating system. That is why we have changed our product from NetWare to IntranetWare. Today, "open and standard" is the key. This has changed the networking industry significantly.

And what's in store for the future?

Takeuchi: In the next few years, we may see a merging of application and network control, which will create a more generic type of operating system. That is one possibility, but based on such attempts in mainframe technology in the past, it doesn't seem to work. It's too complicated.

Another alternative is to have modular types of services, like Border Services, or some kind of communication services and such. Those will become modular, and more independent from hardware and proprietary systems. They could be provided into any type of operating system. That might be another direction. But I don't know how we would distribute those kinds of services whether as a product, in a box, or through the network environment. The distribution channel may be different than today.

What is the major way that doing business in Japan differs from doing business in the US?

Takeuchi: The technology itself is the same, but how to communicate such types of technology into the market seems to be very different. If we choose the wrong channel, then even if we have a good technology, it won't be clearly communicated to the marketplace. In Japan, how we can present our message will be very important.

What are your personal objectives for the rest of the decade?

Takeuchi: In Japan, the network environment itself is still not very well understood by the marketplace. I would like to contribute to providing a better understanding, especially for the user environment.

Today's Novell KK is about 250 people. I don't care much about the number of employees here, but I would like to provide an improved working environment for our people, and then create a higher level of management skill, and ultimately a higher level of communication skill with which to provide Novell or other high-technology information to the Japanese community. That's the kind of team I'd like to create.

BrainShare Japan is coming up in mid-June. I understand that this year's event will differ somewhat from previous years?

Takeuchi: Until last year, BrainShare Japan has had two objectives. One was as a developer conference; the other was a kind of annual get-together for the Novell/NetWare community. But this year, we intend to provide just the developer side with engineering-oriented sessions. We'd like to focus on the technology.

So the objective is different. We are expecting a smaller number of professionals rather than a wide range of Novell-related people. There will be about 80 session, focusing on NDS and Java.

In closing, could you please sum up Novell KK's immediate goals?

Takeuchi: Basically, networking and network-oriented products will be our key direction. I don't think we will expand the business with other type of products; network services will be our key.

Based on that, I'd like to provide an "everybody-is-connected" type of environment. When people think of the real networking environment for the future, I'd like them to see Novell's future.

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