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Success from Failure

For every successful high-tech company there are hundreds of failures. Novell is a story of both failure and success. In 1982, Novell Data Systems was a small computer company located in Orem, Utah near the Wasatch Mountains. It had found some success building computer systems for local businesses, but the good times quickly took a downturn. They were soon finding it hard to make payroll, and they had to auction off office furniture to pay their employees. Some of the company's investors called in Ray Noorda to see if he could turn the company around.

Drew MajorThe same year as their demise, four contractors were hired to write software to network CP/M computers to a common "disk-server." The disk-server split up it's hard-drive into virtual drives, one for each of the computers networked to it. Drew Major and the other programmers started working on a new idea for a "file-server." Instead of a private section of the disk, each networked computer would have access to all the files on the server. Then people could share data across the network. There were some problems to work out, like two people simultaneously accessing a file, but Major and the others recognized a big seller.

While they were working at Novell, they saw a demo of the first IBM PCs available in Utah and bought one right away. They saw great potential in the IBM computers, and decided to try out their new ideas on it. They were contract workers at Novell, so they weren't too worried about the eminent layoffs - they could just find other contract work while they worked on their file-server.

Ray Noorda When Noorda toured the business to see if he could save it, he visited with Major and the other contractors and liked what he found . He immediately saw the potential of the file-server. Noorda decided there was something to save, but the business would have to change and drop everything except for Major's file-server.

During the next year, the four contractors (still not full-time employees) worked on their idea and eventually built a network operating system. They called it Novell Netware and shipped it as soon as it was ready. There were lots of bugs in the code, but it was on the market first.

Netware quickly became the dominant networking software for PCs, competing against a weaker operating system packaged with 3Com's ethernet cards. Noorda came up with a novel marketing plan -- essentially flipping 3Com's strategy. Novel began selling ethernet cards at near cost as long as the customer bought Netware to run on their networks. 3Com thought they were being ripped off, but Novel became their biggest customer for ethernet cards. It's a strange business.

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