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Novell SUSE Linux price cut may target Red Hat's mainframe aspirations

Pam Derringer, News Writer

Novell Inc.'s hefty price cut on SUSE Linux Enterprise for mainframes last month could signal a move to forestall Raleigh, N.C.-based Red Hat

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Inc. from gaining a foothold in that sector of the market, according to an analyst.

Over the past year or two, Red Hat has gotten serious about pursuing the mainframe market, said Joe Clabby, the principal of Yarmouth, Maine-based Clabby Analytics, based on his conversations with IBM sources. Clabby speculated that Novell's price cut is an effort to keep Red Hat out of the mainframe game.

Justin Steinman, Novell's marketing director for open platform solutions, made the same point but phrased it more generally. "We already have 85% of the mainframe market," Steinman said. "We are trying to extend our lead."

Novell tries to maintain mainframe leading edge
Waltham, Mass-based Novell recently cut the cost of SUSE Linux Enterprise by 33% for three-year subscriptions and by 47% for five-year subscriptions running on IBM System z mainframes. The price for subscriptions on smaller machines remains unchanged.

We already have 85% of the mainframe market. We are trying to extend our lead.
Justin Steinman,
marketing director for open platform solutionsNovell Inc.

Novell's SUSE Linux Enterprise is priced significantly higher for mainframes than for other platforms because the operating system has significantly more power and flexibility on the larger machines, Steinman said. Even with the price cut, though, SUSE Linux Enterprise still costs more for the mainframe, but the price reduction makes it "more balanced from an operating system perspective," he said.

Asked for a specific price comparison, Novell Product Marketing Manager Bill Claybrook said that SUSE Linux Enterprise three-year subscriptions for x86s start at $872, while the promotion price for a three-year subscription for IBM System z starts at $20,999. But the latter can be replicated into multiple copies virtually and sustain a far greater workload, so any true comparison of price alongside features is difficult.

Steinman said Novell sees "huge demand for Linux on the mainframe," which is reflected in a growing percentage of its own revenues from mainframe customers, he said. The Novell marketing director declined to specify its percentage of actual or projected revenues from mainframe sales but said he expects mainframes to continue to be a "growth opportunity" for Novell.

"IBM wouldn't have invested money for a new mainframe if sales were declining," Steinman said. "For a lot of large or consolidating companies, mainframes make a lot of sense."

Clabby said Novell understood the market potential of the mainframe a lot earlier than Red Hat, built all the sophisticated drivers to run the underlying hardware and created a tight package for mainframes. Now that Red Hat has pursued the market as well, Novell decided to cut its margins to make it difficult for Red Hat to compete, he said.

The timing couldn't be better for business customers, some of whom have been slow to recognize the value of Linux on the mainframe. Other than Novell's lower pricing, they can take advantage of specialty processors that IBM introduced several years ago, Clabby said. Collectively, the discounted Novell pricing and the less expensive processors make it "very attractive" to deploy Linux on mainframes, even if most businesses don't understand this, he said.

IBM said its Integrated Facility for Linux, or IFL, special processors are an "attractively priced" way to add power specifically for Linux at no additional charge on System z platforms. The alternative, Logical Partitions (LPARs), for other processors are more costly.

Mainframes are often considered too expensive compared with the purchase of midrange computer systems but mainframes have higher reliability, availability and security and take less staff to manage, making the total cost of ownership a lot more attractive, Clabby said.

Nationally, mainframe sales were projected as flat two years ago but grew 5% in 2006, he said. In 2007, sales slowed because businesses were waiting for IBM to introduce its new z10 model at the end of December, but sales should be growing strongly again now, he said. The big challenge for mainframes is to improve their image and to adapt to running modern, Java-based workloads, he said.

Nick Carr, Red Hat's director of industry relations, said Red Hat is seeing a "rapidly growing demand for Red Hat Enterprise Linux on the mainframe" but has not made a specific effort to dislodge Novell from the mainframe market.

"We've been seeing customer demand for a single consistent distribution across the entire IT infrastructure, from the smallest x86 server to the largest mainframe," Carr said. "On the technical front, IBM does much of the Linux mainframe development work, so there isn't really a technical bake-off between distributions."

Let us know what you think about the story; email Pam Derringer, News Writer . And check out Enterprise Linux Log.


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