Is Sun giving up its future by giving away its software?
Businessweek has a great article on Jonathan Schwartz and his efforts to rebuild Sun in an open-source software mold. Sun is on a rebound, but it's tough to tell if its gains are temporary or are laying the groundwork for a long-term revival.
I get to talk with the company fairly often, and think it's the latter (Jonathan tells me, for example, that Sun's software revenue has been up 13% since it started giving it away). But it's a difficult thing to rebuild a faded brand (just ask IBM, Novell, or any other company that has gone from "Hot" to "Not" to relevant again). Sun is doing better in this, as the article suggests:
Where Schwartz and his critics agree is that Sun's comeback requires more software developers and corporations to adopt Solaris. That boosts the odds that companies will buy machines that run it--servers account for 46% of Sun revenues--or at least Solaris support contracts to get upgrades, phone help, and the like.
For the first time in years, there does seem to be some movement. According to Evans Data, the percentage of developers working with Solaris rose to 3.4% this spring, from 1.8% the year before. There's anecdotal evidence of gains as well. Hot Web 2.0 companies such as Ning, Linked-In, and Twitter are using Solaris.
Sun is banking on a snowball effect in these properties using Sun. If Sun can get them from using LAMP to building on SAMP (Solaris, Apache, MySQL, PHP/Perl/Python), it may have a serious game on its hands. And if it can forestall defections on Wall Street from its Unix to Red Hat's Linux, then it will be a doubly effective move.
One reason that Sun's software strategy may work is because it makes its hardware remain interesting to would-be prospects (or existing customers, like Wall Street financial services firms). But it's still an open question as to whether this is happening:
To really cash in, Sun needs to persuade those folks [downloading its software] to buy its machines, preferably the more profitable ones based on its SPARC chips. In all likelihood, not many will. That puts pressure on Sun to come up with new tricks to maintain its lofty margins. One way is to extend Solaris from servers to other kinds of machines. Sales of a Solaris-based storage device called Thumper jumped from zero to $100 million in the past six months. But that's a drop in the bucket for a $14 billion-a-year company.
In short, the company is moving in the right direction but could it be too little, too late? I don't think so. Jonathan's focus on ubiquity is what Sun needs at this point. It's like the startup bidding for market share. You don't do that by closing off your products. You do that by opening them up so that you get maximum adoption.
Adoption is the first step toward revenue. Jonathan knows this, and so long as he can keep Sun behind him in that goal, he'll do very well for his shareholders.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
