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 struggles, 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 both selling the same products, our marketing strategy, support, sales channels - those kinds of plans have been made independently. On one hand, that's very good. But on the other hand, 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 president and CEO] Joe Marengi's team, I clearly mentioned that, and headquarters and other country managers were very supportive of the idea.

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.

The time lag 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 a 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 within 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.

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 States, 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. Products like IntranetWare have attracted such corporations as Tokyo Denryoku and Fuji Xerox.

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 and 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 has not really been 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 an 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 these 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. 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 - these 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 users. That's what I'm hoping to see in the next two years or so.

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 a 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 Netscape and Novell distribution channels in Japan.

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 instead of competing, we need to work as a team [of companies]. 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 make an apple-to-apple comparison. A customer focused on the application itself 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 already exists. That is the difference between Notes and GroupWise.

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

Takeuchi: For the past couple of years, the network operating system basically has been seen as being under the local area network environment, which means in one facility. That is not really an open or standard environment.

But as the Internet becomes popular, the basic issue for a network operating system is [to be] 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.

In what ways does doing business in Japan differ 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 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 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 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 sessions, 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 types 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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