SUSE: Slow and steady wins the race

I sat down with SUSE CEO, Nils Brauckmann at SUSECon to learn where is the company heading.

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Credit: Swapnil Bhartiya

SUSE is one of the trinities of the Linux world, the other two being Red Hat and Canonical. SUSE is critical to the Linux world as they are among the top contributors to many open source projects including Linux. As someone who monitors the Linux world very closely, I keep a close eye on SUSE.

Most of you may not know, but SUSE is the oldest Linux company that’s still going strong. SUSE was founded in 1992; Linux was announced in 1991.

Being a German company, from the very early days, SUSE’s strengths were in engineering. I can’t say the same about their sales and marketing. The company got acquired by Novell, and while it did get sales and marketing muscles from Novell, it suffered from brand dilution. Although Novell knew that future was open source and Linux, there was an internal conflict between its own proprietary products and SUSE’s open source products. It was the same dilemma that killed Sun Microsystems.

Things took an interesting turn when The Attachmate Group acquired Novell in 2010 and established SUSE as a separate business unit, finally severing ties with Novell. That’s when SUSE started to feel fresh air and freedom and it started to breathe again under the leadership team at Attachmate who understood business around open source.

Fast forward to 2014. The Attachmate Group made a great move and merged with the UK’s less known but very powerful company MicroFocus. Under MicroFocus, SUSE remained an independent business unit and retained its entire leadership team that included Nils Brauckmann, Michael Miller, Ralf Flaxa, Ronald de Jong and Edwin Bowman.

Brauckmann told me in an interview that they had an agreement with the Micro Focus CEO that for SUSE it would mean business continuity. “We continue to go to market as the 'Green Team.' We continue to use the SUSE brand. All of that has remained exactly the same.”

Under Brauckmann, SUSE gained the leadership that it needed and with MicroFocus it gained the much needed financial backing to go back to the market with its feet on full throttle.

With the much needed financial backing and security, SUSE was now able to open its wings and fly again. The company started to grow within MicroFocus. In 2015, Brauckmann was promoted from chairman to CEO of SUSE. He also joined the MicroFocus Board of Directors. Although the promotion was nothing more than a gesture, it reflected the growing value of SUSE within the company.

SUSE started to grow

I met and interviewed Brauckmann last year around the same time where he talked about the growth that the company was enjoying, post MicroFocus merger. Back then I was a bit skeptical of that growth and heavy investment as SUSE was a new acquisition, and MicroFocus was pumping in money. But when I met him again this year at SUSECon in Washington DC, it was abundantly clear that the first Linux company SUSE has returned. It’s really growing.

Brauckmann said that this year the company grew revenues by more than 18 percent and since it’s a publicly traded company he is in the position of giving out numbers, and that’s around $250 million. Yes, it’s nowhere close to Red Hat’s $2 billion annual revenue, but quite impressive for a company that just bounced back after a tumultuous time and survived multiple acquisitions. I actually call SUSE one of the most resilient Linux companies that just doesn’t know how to quit.

The Linux world needed a real tech powerhouse to compete with Red Hat to keep it on its toes. So SUSE’s return is great news for the Linux world.

Where is this growth coming from?

One curiosity I had, was that where this growth is coming from. There are many factors that are playing an active role in this growth, and one, according to Brauckmann is expanding product portfolio, “We are now a provider of Enterprise Linux but also OpenStack infrastructure as a service, software-defined storage, SUSE management (a management tool for Linux service) and all of those product areas are actually growing.”

Brauckmann said that while enterprise Linux remains the core bread earner, OpenStack and SUSE Manager are experiencing the strongest growth, percentage wise.

SUSE had made a calculated bet by joining projects like Cloud Foundry and OpenStack. They are investing in software defined compute, storage and networking. They are using new technologies like Kubernetes while sticking to their core which is enterprise Linux; just the way Red Hat’s empire revolves around RHEL (Red Hat Enterprise Linux). Because the fact is, no matter what you run on top, you are running Linux underneath. And now SUSE is taking their Linux offering a notch higher with MicroOS, a tiny Linux based operating system that’s aimed at cluster computing, containers, and microservices, and will compete with Core OS, Red Hat Atomic and Ubuntu Core.

They are stacking their cards carefully.

Growing footprint in North America

Traditionally, SUSE has been very strong in Europe, especially in government and big enterprise. The company is experiencing growth in all four geographical areas: North America, Europe and Eastern Africa, Latin America, and Asia Pacific and Japan. Interestingly, “the fastest growth last year actually came from North America. The overall revenues growth for SUSE was 18 percent whereas the North America revenue growth last year was 24 percent,” said Brauckmann.

Every time I talk to SUSE, I hear a common theme: ‘instead of building our own entire stack and creating a vendor lock, we work with partners and enable customers to pick and choose whatever technologies they want’. There is a reason for this approach because partners play a huge role in SUSE’s growth. Although SUSE sells its products through different venues: direct sales, partners, channels and public cloud, the biggest contributor to its growth is partners. “If you want to look at the biggest growth in absolute numbers (not percentage wise), then the biggest growth came from OEM and alliance partners,” said Brauckmann.

SUSE’s first technology acquisition

I recall my previous interview with Brauckmann where I asked whether he will increase SUSE’s product portfolio via acquisitions and he danced around that question. But the MicroFocus merger gave SUSE toolsets (that were not available under the private equity of Attachmate Group) and more support to also do targeted technology acquisitions.

At SUSECon they announced their first technology acquisition. SUSE is acquiring openATTIC and it is making the product fully open source. Larry Morris, Sr. Product Manager - Software Defined Storage at SUSE told me in an interview that when SUSE started working with openATTIC they were not fully open source. As they worked with SUSE they moved some assets under GNU GPL. “After acquisition everything will be open source because that’s how we operate, everything will be open source. It will be released under GNU GPL v3,”Morris said.

“For the first time, we realized in order to move faster, sometimes you have to acquire talent from the market instead of building everything organic from within, which takes more time,” Brauckmann said.

What’s more important, yet subtle in this acquisition is that it’s another validation that SUSE is actually grown, so much so that it’s now capable of acquiring technologies and companies. It has evolved from a company that was being acquired and tossed around to a business that’s now acquiring.

And SUSE is about to get more aggressive with acquisitions. “We will do technology acquisitions to strengthen our portfolio and unpin our move into these adjacent markets,” said Brauckmann. We can expect more technology acquisitions or new partnerships from SUSE in OpenStack, networking, application platform services, containers, orchestration...Everything is game for SUSE.

However this acquisition may also worry SUSE partners that the company may start competing with them. “Now, that's an interesting observation, so I will expand my portfolio into new areas but our plan is to hold onto the open, open source principle. So it's perfectly alright for me that my partners take pieces of my technology, of my stack, and build their own stack, and put on top of that their own solutions to build a complete stack and we are servicing only the stack in certain areas,” said Brauckmann.

He stressed that unlike many other companies that build their own stack to lock users in, SUSE will continue to remain ‘open”. “I will have to offer more but I will not force them into my stack,” said Brauckmann.”I will not do that. That opens doors for me, doors for partnership that maybe others don't have, right now.”

Wait, isn’t HPE acquiring MicroFocus and SUSE?

Earlier this year when HPE announced a spin-merger of its Software Business Segment with MicroFocus, some news outlets reported it as an acquisition of SUSE by HPE. Is that true? I asked Brauckmann and he was not happy with those reports.

“It's factually wrong,” Brauckmann said, “What happens is, HPE is spinning out their software assets. As soon as those software assets are spun out, they will be merged with Micro Focus, and the company that survives is called Micro Focus, based in London, headquartered in London. The leader of this merged company, after the spin-out of HP software has happened, is the existing chairman of Micro Focus, Kevin Loosemore. The existing CFO of Micro Focus will be CFO of the new company.

“It is certainly a merger under the ownership and guidance of Micro Focus and not an acquisition of HP, of Micro Focus, or even of SUSE. I'm not sure where it's coming from,” explained Brauckmann. In a nutshell, “SUSE is part of Micro Focus, Micro Focus is acquiring the HPE software assets, SUSE continues to be part of Micro Focus. SUSE is currently managed as an independent business unit. SUSE will continue to be an independent business unit underneath the Micro Focus umbrella.”

What’s next for SUSE?

It’s abundantly clear that SUSE is now in a much stronger position than ever before. SUSE is certainly avoiding the hype and buzzword train and focusing on its core strength: that’s Linux and core components such as OpenStack, Cloud Foundry and containers that are driving the market. SUSE isn’t looking for immediate gains, they are here for a very long race. “The thing is, we are maybe sometimes doing it more pragmatic, or realistic, or maybe you might want to call it slower, not as aggressive as others, but we do it with a plan and a very steady hand,” concluded Brauckmann.

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