Today marks the one-year anniversary of the SUSE Appliance Program. The SUSE Appliance Program is a comprehensive technology and business program that helps software vendors make their applications ready for cloud computing. In the course of one year, we've had more than 82,000 users build more than 415,000 appliances that have been downloaded collectively almost three million times. By any measure, the appliance program has been a major hit.

But I don't want to write today about the success of the appliance program. If you want to read about, you can go here to read the press release or visit our new appliance marketplace, the SUSE Gallery.

What I'm interested in writing about is the disruptive business model that Novell has put in place. With our SUSE Linux Enterprise distribution, Novell holds the second place position in the Linux operating system market. According to IDC estimates, Novell has slightly more than 30% of the market share, and Red Hat, the market leader, has roughly 60% of the market share. Linux, for all intents and purposes, is essentially a commodity operating system, and Red Hat has the leadership position and the brand name recognition. Which leads to the question: "How do I grow my business when I sell Scotts' Tissue, and my competitor sells Kleenex?"

The answer is easy: Change the rules of the game. If you're in second-place, and you don't like to be there, think about how you change the situation you are in. Redefine the market. Redefine the opportunity. Do something disruptive – even if it puts part of your current business model at risk in the short-term – all so you can create game-changing growth in the long-term.

Again, this concept isn't that revolutionary, either. Professor Clayton Christiansen wrote one the business world bibles on this topic over a decade ago, The Innovators' Dilemma. And my friend Scott Anthony has built an entire consulting business called Innosight around this same model. What excites me is that Novell is actually taking a page from this playbook, and we appear to be executing successfully against it.

Here's how it is working for us. For the longest time, operating systems were distributed primarily through independent hardware vendors (IHVs) like HP, IBM, Dell and various "whitebox vendors" running Intel chips. This made sense, because if you were going to buy a big expensive server, then you needed an operating system to run it. As the market leader, Red Hat dominates the hardware channel. It's very difficult to displace an incumbent in a commodity market. Novell can offer additional margin in the channel, but on a basic server subscription sale, a couple points of margin are not always enough incentive for an IHV to tell a customer, "No, you don't want Kleenex. You want to buy facial tissue, and Scotts Tissue is the best."

However, the rise of virtualization and companies like VMware, mean that you can now run multiple operating systems on the same one server, thanks to a technology called a hypervisor. Using a hypervisor also means that the operating system no longer needs to be distributed with the hardware server. A new technology – virtualization – has disrupted the business model of operating system distribution.

That's where the appliance program comes in. Assume for a second that customers buy an operating system (OS) not for the OS itself, but rather for the applications it can run. After all, no one ever wakes up in the morning and says, "Gee, I would like to buy a new operating system today." Rather, they wake up and say, "I need to solve a business intelligence problem. I need to solve a payroll problem." And then they buy an application to address their business problem. Then they buy the operating system to support that application.

Novell's disruptive bet is that the route to market for an operating system in the future will change from the IHV to the ISV (independent software vendor). In a shift that changes twenty years of business practice, people will no longer buy an operating system when they buy their hardware; rather, they will buy the OS when they buy their software. The SUSE Appliance Program is designed to leverage that market shift, by making it easier than ever for ISVs to package an operating system and middleware with their application. Novell not only supplies the appliance assembly tools, but also the tools to maintain and update the appliance once it has been shipped.

Do we have all the answers yet? No we don't. But what we do have is a promising technology – a patent-pending process to build and support customized open source operating systems, and then build integrated software appliances on top of that customized OS. And we have a rapidly growing ecosystem that has been endorsed by folks like VMware, SAP, Adobe, and IBM.

The early returns are in, and there is a lot of momentum – both from application vendors and, more importantly, from paying customers. The challenge for Novell is to continue to execute, and to continue to take chances – even if those chances mean we are putting our traditional channels of distribution at risk. After all, when you're in second place, the only way to move into the lead is to take a calculated risk at the right time with the right tool. With the SUSE Appliance Program, I believe we have the right tool and that now is the right time. We'll see what happens.