Microsoft CEO Steve Ballmer (right) and Novell CEO Ron Hovsepian at the Nov. 2 press conference in San Francisco announcing a deal to make their software products work more easily together on computers.

A deal between Microsoft Corp. and rival Novell, Inc. to improve the interoperability of their software could reap big rewards – or amount to nothing at all, an analyst says.

"It's hard in the first couple of days after these deals to really know what the impact is going to be," Michael Cherry, an analyst with Kirkland, Wash.-based consultancy Directions On Microsoft, told CBC News Online.

Microsoft CEO Steve Ballmer and Novell CEO Ron Hovsepian on Nov. 2 announced details of a plan to link Windows and Novell's competing SUSE Linux software at a news conference in San Francisco.

Cherry pointed out that a similar technical co-operation agreement two years ago between Microsoft and Sun Microsystems, Inc. of Santa Clara, Calif., has realized no readily observable benefits to either company.

"If you try to measure the impact of that deal, it's still hard," he said. Microsoft echoed the sentiment in an e-mail to CBC News Online about its business, technical and legal alliance, whose net value is $308 million US after the software giant and Novell exchange a series of payments.

"The success of the next major milestones for this agreement and progress management will be measured in a number of ways. First, we need to work together to deliver the technical elements," a Microsoft spokesperson wrote.

"Once developed, the thing we'll measure is simple: sales. We want our customers to choose Novell and Microsoft products in part because they offer customers great choice through strong interoperability."

Months to evaluate

It will be months before analysts will be able to make any reliable assessment of the deal's impact simply because of its scale, Cherry said, using a geopolitical metaphor to explain.

"If the UN slaps sanctions on North Korea today, we can't go there tomorrow and ask if the sanctions are working," he said. "It's too soon."

But the potential benefits lie in the possibilities for the competitors to quickly serve their customers, he suggested.

"The advantage to both companies will come when they have support staff up to speed on each other's products so they can help their customers in a timely fashion and a complete fashion," he said.

If the companies can help their clients solve problems with a readily available answer, that could provide an incentive for businesses to buy Microsoft and Novell software for the peace of mind it would offer.

Interoperability key

Before the deal, Microsoft Windows and Novell's SUSE Linux software were largely incompatible with each other. With the announced agreements in place, both companies have the potential to get their software to run side-by-side on the same computer or server, and to read one another's data files, such as documents.

Many businesses run mixed-software enterprises and spend a great deal of time and money trying to make those systems work with each other, Cherry said. But customers can often get a frustrating runaround when they call Microsoft or a Linux vendor like Novell for help.

"The big issue when they try to get support is they [Microsoft and Novell] point their fingers at the other guy for why it's difficult," he said. Part of the problem is with the nature of the companies' products.

Legal considerations

Microsoft's software falls into a category known as proprietary source. With proprietary source, or closed-source software, the underlying computer code is restricted and guarded by patent and other intellectual property protections.

In contrast, the open source software movement encourages access to the basic code that defines programs built with it. Individuals are then free to add to or modify the software without fear of legal repercussions. Linux is an example of this. SUSE Linux is Novell's version of Linux.

To address this, Microsoft will pay Novell $240 million US to give its customers access to support and maintenance for Novell's SUSE Linux Enterprise Server, Novell disclosed in a filing with the U.S. Securities Exchange Commission on Nov. 7.

Aside from the technical difficulties in making dissimilar software to work together, solutions to the problems are often hamstrung by legal considerations such as fears of patent infringement.

The Microsoft-Novell deal could resolve the legal aspect of the problem, with both companies agreeing that neither will make patent claims against their rivals' customers. The agreements will be in place until at least 2012.

As part of the patent co-operation agreement, Microsoft will give Novell an initial net payment of $108 million US. Similarly, Novell will pay Microsoft at least $40 million US over the duration of the deal so the maker of Windows will not sue Novell's customers for patent infringement.

"We won't assert our patents against individual, non-commercial open source developers" who write code for SUSE Linux, Ballmer pledged at Thursday's news conference. But Cherry does not see the agreements as an ironclad guarantee, irrespective of the companies' best intentions.

"Microsoft and Novell and not going to start anything," he said. But there is nothing to stop a third party from initiating legal action against either or both companies, which could draw them into litigation, Cherry speculated.

Cherry also noted that Microsoft remains free to pursue similar alliances with Novell's open source software competitors, such as market leader Red Hat, Inc., of Raleigh, N.C. "I didn't see anything in this arrangement that provided any level of exclusivity," Cherry said.

Similarly, the deal does not appear to have any impact on the launch or implementation of forthcoming new versions of Microsoft's Windows operating system or other software, he said.

Windows Vista, Office, Exchange to launch Nov. 30

Microsoft CEO Steve Ballmer would not say at the Nov. 2 press conference when the company will launch the latest versions of software for business customers, but the company confirmed to CBC News Online on Friday the programs will roll out on Nov. 30.

The world's largest software maker will launch Windows Vista, the 2007 Office software and Exchange Server 2007 for key business clients, or volume licence holders, at an event at the Nasdaq stock exchange in New York that features Ballmer.

Consumer versions of the software are slated for release on Jan. 30.

In Canada, Phil Sorgen, president of Microsoft Canada, and Antoine Leblond, Microsoft's corporate vice president for the Office productivity program, will showcase the new business software at an event for media and analysts on Nov. 30.

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