December 17, 2003 12:51 PM PST

Sun plots plan for services business

Sun Microsystems is seeking to generate more revenue by taking what it sees as an unconventional approach to the technology consulting business.

Company executives on Tuesday spelled out Sun's strategy to expand its professional services offerings into a number of new areas, including managed services, utility computing and "knowledge services" for doing remote analysis of corporate data centers.

Sun's services push comes at a time when the company has been under fire from some financial analysts, who argue that Sun should focus on its core server business and scale back investments in emerging technologies.


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The new services, built in part around Sun's multiyear N1 initiative to better manage corporate data centers, will help bring in revenue by making the company's sales force more effective, executives said. Sun plans to grow its services business by 15 percent annually, said Patricia Sueltz, executive vice president of Sun services.

For the fiscal year that ended in June, Sun's services business pulled in $3.6 billion in revenue, a 5 percent increase over the preceding year. In the first fiscal quarter, ended in September, services represented about 37 percent of Sun's overall revenue.

Sueltz said Sun intends to make professional services a more central part of its sales strategy, which historically has been led by its hardware division. But Sun is taking a more technology-centric approach to consulting services than competitors Hewlett-Packard and IBM, she said.

Large consulting companies are structured around employing substantial numbers of technology professionals in custom engagements or large-scale outsourcing deals, Sun executives contend. By contrast, Sun aims to help customers lower the cost of computing by applying its technical expertise in shorter, more focused services jobs, Sueltz said.

"You can't just throw hordes of people at a problem," said Sueltz. "The reason that I'm bullish about Sun is that it's not just about human capital. It is, but it's also about using technology to work for us."

Sun's services play reflects an overall industry trend to lower the cost of information technology operations, but Sun is relying more on technology and automation than others are, said Yankee Group analyst Andy Efstathiou.

"The majority of the cost in IT is in
people--about 80 percent. To lower cost, you have two options: You either go offshore, or you automate processes."
--Andy Efstathiou
Analyst, The Yankee Group
"The majority of the cost in IT is in people--about 80 percent," said Efstathiou. "To lower cost, you have two options: You either go offshore, or you automate processes."

IBM is trying to expand its services and consulting arm into business process outsourcing, where Big Blue will take over entire business processes, such as human resources. Meanwhile, Sun is remaining entirely in technology-related services, Efstathiou noted.

"If IBM is successful, it's a much larger market. But there is an opportunity for Sun from an efficiency standpoint," Efstathiou said. "They're both going in the same direction but with a very different emphasis."

Sun's managed services business, which the company launched earlier this year, is focused on making Sun gear easier to manage and run. The company offers services to update patches, as well as design-related services to ensure that servers are more reliable by having consistent software images, executives explained.

In addition, Sun is eyeing opportunities to remotely monitor and manage Sun gear running in company data centers, executives said. The company has one network operations center in Scotland that's offering limited remote services, which the company would like to expand into a suite of remote services designed to give companies better insight into how to tune their systems.

The idea is to feed performance information from corporate data centers back to Sun, which will collect and analyze the data and make recommendations on how they can improve operations or head off potential problems, said Hal Stern, chief technology office for Sun Services. These "knowledge services" will rely on Sun's N1 software to shuttle management information back to Sun and automate changes in company data centers, he said.

Relying on partners
Sun's services plan relies heavily on partners, rather than trying to create a soup-to-nuts services purveyor. For customers that need services related to application development or Windows systems, Sun is relying on its partner network.

In the area of utility computing, Sun's partnering plan means that at times the company takes a backseat to the lead contractor in a customer deal.

In September, Sun announced an arrangement with ACS, through which ACS will deliver to its customers applications built on Sun gear. Sun announced a similar deal in October with IT services firm SchlumbergerSema to offer outsourced server services.

Sun also introduced a pricing mechanism it calls power units, which breaks up computing power into units that can be measured and paid for on a per-usage basis.

Again drawing a contrast to its competitors, Sueltz said Sun's utility computing approach differs from those of IBM and HP, which offer large-scale outsourcing services as well as variable, or per-usage, pricing mechanisms.

"I understand that people want predictable pricing, but when I talk to CIOs, they want more than that," said Sueltz. "They want control of their cost, their architecture and their future."

That message of control resonated well with one Sun customer in attendance at Tuesday's briefing at Sun's Burlington, Mass. campus.

MLB.com Events Media, which serves up content to major-league baseball Web sites, has been able to maintain and even lower the amount of hardware it uses in its company data center even as traffic has skyrocketed in the past two years, said Justin Shaffer, director of operations at MLB.com.

The company has built its infrastructure around Sun servers and Hitachi storage systems. It leans on Sun services for consulting on a limited basis, rather than contracting with an outside firm to take over operations of the site, Shaffer said.

"IBM, they take over. The problem wouldn't be that I'd be fired for hiring them. But what I don't have is an opportunity to innovate," said Shaffer. "We remain in control of our processes and our architectural decisions."

 

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