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ComputerWire: IT Industry Intelligence

Aggressive price discounts in Novell Inc's directory and identity management business have caused Sun Microsystems Inc an unexpected headache, placing the former network operating system giant on a par with mighty IBM,

writes Gavin Clarke

.

Barbara Gordon, vice president of Sun's software sales, told ComputerWire Friday Novell has joined IBM by becoming "aggressive and competitive" against Sun. Novell is effectively giving away copies of its eDirectory - rival to Sun ONE Directory Server.

Gordon spoke after Santa Clara, California-based Sun announced a $2.3bn second quarter loss on sales that fell 6.2% to $2.9bn. Company chief executive Scott McNealy last week said Sun came under "fierce competitive price pressure" during the quarter.

McNealy did not identify competitors, but Gordon singled out Orem, Utah-based Novell along with long-term rival IBM in directory servers and identity management. Sun is aggressively pushing both, co-founding the Liberty Alliance Project and launching version 6.0 of its Identity Server this month for secure network identity.

Directories and identity management have taken on increased importance, thanks to web services. Vendors like Novell have possessed network directory products like eDirectory for years, but web services has pushed the need for single and secure sign-in to services.

News of Novell's revival is surprising given the company has struggled with a painful three-year campaign of re-invention. Novell initially attempted to move from being a once-proud network operating system giant, who competed against Microsoft Corp's Windows NT with NetWare, into a network infrastructure player but - lately through acquisitions - turned also to web services and consulting.

To seed the market for its products, especially directory and networking servers, Novell last September announced a stunning 90% discount on prices paid by government organizations and a 75% reduction in price for private customers.

Novell followed up aiming directly at Sun's ONE software stack. Customers switching from Sun to eDirectory 8.7 would get 250,000 free licenses and 25,000 DirXML licenses, XML connectors used to synchronize data with Sun's directory, in an offer launched last November.

Directory server is normally priced $2 per user compared to $2 per entry for Sun's directory server. Sun's Identity Server 6.0 is priced $10 per user but volume discounts apply for big customers. A Novell spokesperson said 734 million eDirectory licenses existed as of the December quarter, up from 568 million in the previous quarter.

"It's not that we make that much money from the technology," the spokesperson said. "But it's a platform play."

"Novell are getting into enterprise license offerings," Gordon said.

She added Sun would ensure Novell's success is short lived. Gordon did not provide details, but said: "It's more of a short term blip. We are trying to make sure it's as short as possible."

Competition from IBM, meanwhile, is harder to combat. Gordon said IBM's size meant it could afford to reduce software margins while also offering Directory Server 5.1 and Directory Integrator 5.1 along with hardware and leveraging Global Services.

"IBM is not competing from a product point of view, they are using their size to get there. The differentiator for IBM is they are moving margins around," Gordon said.

IBM dismissed Gordon's claim, saying customers are buying IBM because they trust the company's brand, quality and performance. IBM upped the pressure last year when it began promoting Directory Server, integrated with WebSphere, Tivoli and servers, as a separate product to attract customers who want a stand-alone directory server.

"IBM has had a directory for a long time. We just weren't as obvious in the marketing as a stand-alone directory," IBM directory marketing manager Eric McNeal said.

© ComputerWire

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