November 30, 2005 8:51 AM PST
Sun to offer more free software
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The software being offered for no cost are the Java Enterprise System set of server middleware, Java development tools and N1 management software. Sun said it will still charge for support.
Sun's Schwartz: 'Volume wins'.
Company president and COO explains why a free and open-souce software model can win out.
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"Free is the lowest barrier to entry for acquiring a product...This is a way to get barriers to go down and revenues to go up," Sun President Jonathan Schwartz said in a conference call. "We're going to be driving for volume first and foremost, then figuring the right service to monetize that volume."
The move will create a single package called the Solaris Enterprise System. It will include Sun's Solaris 10 operating system, PostgreSQL open-source database, the Java Enterprise System server software and tools, Sun N1-branded provisioning and management tools, and Secure Desktop software.
Sun's revamped strategy will help it transform to a services-based software business, but it's not clear that it will lead to big financial successes, Illuminata analyst Jonathan Eunice said. "I have no doubt that Sun can replace current product revenue with services revenue. The question is, how can it gain share, profits and revenue robustly?" he said.
As yet, unlike rivals such as IBM and Microsoft, Sun's software group still hasn't engaged business partners, Eunice said. Partnerships with other software companies and resellers add more products to the mix.
The company is an outsider in the infrastructure software area, a business dominated by IBM, Microsoft, BEA Systems, Oracle and open-source products such as JBoss. Sun has tried for years to boost its software's success through aggressive pricing and acquisitions of companies such as NetDynamics, CenterRun, Pixo and, most recently, SeeBeyond.
Approach to open source
In a statement, Schwartz said that the decision to open-source Java Enterprise System and N1 was a natural next step after the company created an open-source project around Solaris.
"One hundred percent of our customers are deploying Web infrastructures and asking for relief from onerous licenses and system integration activity," Schwartz said.
Sun tipped its hand earlier about its software direction. "Everything that Sun produces will be open source and free," Schwartz said in a September speech.
However, "everything" doesn't mean everything, at least not yet. Sun still has no plans to release as open-source software the core part of Java, called Java Standard Edition and including software such as the virtual machine.
"The Java foundation technology Java SE is not included in open-source," Loiacono said in an interview. Nor is storage management software, but that will eventually be released as open-source software.
Support won't be free, however. "Customers will come to Sun to purchase the licenses, services and support to take full advantage of the benefits Sun software can offer them," Sun said in a statement.
Existing support pricing won't change, Sun said. Customers pay $50 per year, per employee, to use any of six suites of servers software. Alternatively, they can pay $140 per year, per employee, for the entire Java Enterprise Server collection. For example, a company with 1,000 employees would pay $50,000 to use as much of the identity management software as desired, and another $50,000 to add the suite for e-mail, online calendars and contact lists.
"Today customers have the opportunity to use the software free of charge. For that, they will get pointed back to community and forums for support. There's no indemnification, warranty, service and support, break and fix (support)," said John Loiacono, Sun's executive vice president for software. "That's very unacceptable for the vast majority of any customers doing any kind of business-critical deployment."
Pricing isn't the only issue the company faces with its software. With some exceptions such as its identity management package, Sun's server software hasn't been terribly popular despite a lower cost than rival products from IBM and BEA Systems. One core product, the application server that runs Java programs, was already made available for free, and customers with fewer than 100 employees could use the Java Enterprise System for free.
Schwartz said Sun's free application server has become widely used, but acknowledged that the Santa Clara, Calif.-based company has had a challenge finding "the right mechanism to monetize the volume out there."
But he also said Sun has achieved some success with the JES pricing. "It has become roughly a $100 million-a-year business for Sun," he said.
In the last few quarters, Loiacono said, the software subscription model has been increasing deferred revenue, which is money customers are scheduled to pay Sun in the future.
And Sun is hoping the new strategy will carry it into a customer segment it has largely missed so far: small and medium-size businesses known in the industry as SMBs.
Although Sun has offered JES free to small companies since 2003, it hasn't matched the offer with marketing, Loiacono said. Now, in combination with sales channel partners, Sun plans to try to tackle that market with particular subsets of JES.
"Not a lot of SMBs are going to want high-end clustering, but almost every one will be looking at the Web tier," Loiacono said.
About 80 percent of the packages are available for free download today. In December, Sun plans to make the PostgreSQL available, Loiacono said. In the first quarter of 2006 will come Identity management, Sun Ray and Tarentella software. The SeeBeyond software is due to be released for free near the end of the first quarter.
Sun was less forthcoming on the schedule for when the software would become open-source as well, but Loiacono said significant elements will arrive in the first quarter of 2006 and that most current products should be open-source within two years.
"From what we have today, we would assume that within couple years we'll have the majority attacked," Loiacono said, cautioning that any new software acquisitions won't necessarily happen on the same schedule.
Sun can't release software until legal reviews have been completed, but Loiacono said a more significant delay is caused by the time it takes to build a developer community that's interested--either by adopting an existing community or building a new one from scratch.
Sun plans to use its Community Development and Distribution License to cover the server software, Loiacono added, but reserved the option to use a different open-source license if faced with issues the company isn't aware of today.
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