Dell to offer fruits of controversial Microsoft-Novell pact on Linux

May 7, 2007, 4:10 PM UTC
Fortune

Dell (DELL) has become the first “systems-provider” to take advantage of the controversial technological collaboration and intellectual property pact concluded in November between Microsoft (MSFT) and Novell (NOVL), which is a distributor of the Linux operating system. (Here’s the press release.)

Dell’s move will enable corporations that wish to run both Windows and Linux server operating systems side-by-side in their datacenters to go to a single shop for all their hardware, software, and support service needs, while also being assured that Microsoft will not go after them seeking patent royalties. (Microsoft claims that Linux infringes its patents, a claim vigorously disputed by Linux distributors, users, and developers.)

Back in November Microsoft and Novell struck a pioneering tech collab/IP deal out of a recognition that most corporate datacenters today either already run, or would like to run, “heterogeneous” software environments, meaning that some server computers run Windows, while others run Linux, while still others run on Unix or Apple platforms. (See earlier posts on that deal, here and here.) Thanks to so-called virtualization software, which enables a single computer to run multiple operating systems, many companies are now consolidating their computing operations onto many fewer computers, seeking to save tens of millions of dollars in hardware, energy, and even real estate costs. But to do this, the companies must be assured that that their various software platforms will play together nicely, that their computer operators will have integrated systems management tools capable of controlling the diverse platforms, and that there will be tech support people to call upon who have all the expertise and certifications necessary to fix things when they go wrong.

So on November 2, 2006, Novell and Microsoft announced a technological collaboration designed to ensure customers that these interoperability needs and concerns would be addressed. At the same time, the companies also worked out an intellectual property agreement that effectively guaranteed Novell’s Linux customers that they would not have to worry about potential patent suits or patent licensing demands from Microsoft, which claims that Linux infringes its patents. As part of the deal, Novell agreed to pay Microsoft an unspecified percentage of all its Linux subscription revenues. (Linux is so-called free software, written by a loose-knit community of developers, rather than by any single legal entity, and the software is typically available for free download over the Internet. Commercial distributors of Linux, like Novell and industry-leader Red Hat (RHT) , give away the software for free but make their money selling subscription support services.)

The IP part of the Microsoft-Novell deal was enormously controversial within the free and open-source software (FOSS) community, both because that community denies that Linux infringes any patents and because the notion of having to pay for permission to use free software (implicit in the notion of paying patent royalties) is antithetical to the most fundamental principles of free software. The Free Software Foundation, which writes and administers the license that covers key portions of the Linux operating system, is revising that license to forbid any other Linux distributors, like Red Hat, from entering into deals structured the way the Microsoft-Novell pact was. The revised license is expected to take effect in July.

Since the original Microsoft-Novell deal was struck, a number of marquee corporate Linux end-users have signed up for the benefits of the deal, including Credit Suisse, AIG, Deutsche Bank, HSBC, and Wal-Mart Stores, but Dell is the first computer distributor to take advantage of the deal.

Nevertheless, Red Hat has claimed that it has seen no adverse impact on its business from the Novell pact. (Due to an unrelated internal inquiry relating to options backdating, Novell has not filed audited financial statements with the SEC in more than a year.)