Its plan? Attack Red Hat, use control over the operating system and the platform to disrupt competitors' pricing and business models, out-engineer everybody in the x86 space and use an alliance with Microsoft to fight a common enemy: IBM.
Last week in California, I visited two Sun bigwigs: Jonathan Schwartz, president and chief operating officer, and Scott McNealy, chairman and CEO. When Schwartz asked me, "What do you think of Sun?" I gave him an honest answer. "Sun risks becoming the Data General of the decade. The company could easily slide toward becoming a 'zombie'--a lot of cash but no life, staggering and lurching with a fading heartbeat at each step," I said.
Schwartz's comeback was, "You're wrong, and here's why." He then laid out the surprisingly simple and cohesive strategy that Sun will follow in pursuit of a recovery. Here it is, in a stripped-down form.
Sun's view is that Linux is nothing more than Red Hat. The operating system is not about world peace and the charitable work of the world's great programmers. It's like every other operating system ever created: It's about the foibles, greed, mistakes and engineering prowess (or lack thereof) of one vendor--in this case, Red Hat.
Step No. 2: Belittle Red Hat. By collapsing Linux into Red Hat, Sun now has a clear target. It can hammer away at a company, as opposed to waging the impossible task of fighting a social movement. And according to Sun, Red Hat is a very vulnerable target--a company with limited resources, engineering talent, world coverage and capabilities--with potentially serious intellectual-property issues.
When Sun visits billion-dollar companies, it uses an effective line of attack: "You're going to entrust the future of your company to what vendor? A little software player with no proven abilities in the enterprise business? Are you out of your mind?"
Step No. 3: Contrast Sun with Red Hat. Sun has been a trusted, pragmatic partner with its customers for decades. It is going to return to those customers and clearly contrast its long-term relationship with newcomer Red Hat. The company is doing this now with its old Wall Street customers.
Step No. 4: Play up the OS-plus-platform advantage. Sun is playing a very old game here, but it will play it hard. The company is saying that you cannot be a legitimate, long-term player without controlling and harmonizing the operating system and the platform. You must have control over both to offer easy and cost-effective solutions for your customer.
Hewlett-Packard is letting HP-UX die in favor of Red Hat and Windows; IBM is introducing Power systems that don't run AIX; and Dell never had an operating system.
Step No. 5: Disrupt the market with a new pricing model. Sun wants its server pricing to mirror cell phone pricing. When you buy a cell phone, you do two things: One, buy the operating system and the phone together; and two, subscribe to cell services for monthly fees.
Sun is pricing the server the same way--get the server for a very low price or potentially no price, and pay for the maintenance and applications (the value imparted) on a subscription basis. Sun believes that this new pricing model will only be possible for a vendor that sells and integrates the operating system and the platform. It can cross-subsidize between the two.
Step No. 6: Feature customer choice. Sun has dropped all of its stridency around Unix--it is offering choice at the high end and at the low end. It is offering not only Solaris but also Linux and Windows for the operating system. And it is finally offering x86 via the Opteron chip from Advanced Micro Devices.
Step No. 7: Feature engineering. Sun is playing an old game here, too: "My tech is better than yours." It is saying that it will out-engineer not only at the operating-system level with Solaris but also on the hardware front. It is claiming that the new generation of Sparc will have vastly lower power consumption than Itanium and Power while featuring faster throughput and superior multithreading.
On the x86 front, Sun is saying that Opteron--AMD's answer to Intel's Itanium--is superior to what Intel has to offer and that, through its long-term engineering experience, it is going to produce x86 products superior to those of Dell, HP and IBM. Sun claims that engineering remains a distinctive competence of the company--a battleground where it can hammer the competition, especially the low- or no-R&D companies like Dell.
Step No. 8: Feature the Microsoft-Sun deal. The money flowing from Microsoft to Sun will help. But more importantly, watch for Microsoft and Sun to concoct some tough frontal attacks on IBM, their avowed common enemy.
Where the potholes are
I'll say this for Sun: Its strategy is simple and to the point.
The potential stumbles or counters that I can see are:
• A fixation on engineering, not price. Dell will eat Sun for breakfast if the latter doesn't trade off engineering perfection for price. Sun has avoided this trap so far.
• Betrayal by Microsoft. Redmond has been known on a few occasions to play its own self-interest first when it comes to deals. McNealy and Steve Ballmer, his counterpart at Microsoft, are high-emotion cases--their trust and cooperation run the risk of wild up-and-down swings.
• Linux becoming more than Red Hat. If IBM can keep Linux independent of Red Hat, Sun's target will vastly widen, thus blunting its strategy. And, of course, IBM could always acquire Red Hat, yielding instant credibility.
• Engineering risks. The strategy depends on some breakthrough original engineering, such as Sun's chip multithreading project. If Sun can't deliver on the big promises, it will suffer.
I've hung around with many tech zombies in the past, from Wang Laboratories to Prime Computer to Digital Equipment. When I stare into the eyes of the Sun management team, I still see life; this team doesn't look like it's ready to give up or stop trying to compete. Given the strategy and management, I believe that there is a good chance that Sun will be around for a strong third act.
Biography
George Colony is chairman and chief executive officer of Forrester Research.
See more CNET content tagged:
Red Hat Inc., Sun Microsystems Inc., Jonathan Schwartz, pricing, intellectual property
None.
They are comparatively small, but they know what they're doing and they have decent management, and generally good products.
They are fully supportive of open source---they have taken the position that Sun once (in the 80's and early 90's) had in the community, of being the friendliest and most geek friendly of the leading companies.
As a Sun-supporter reading through their strategy, I think that they're well on their way to slow and plainful decline to also-ran status.
Linux in the business world _is_ about IBM (think Peace, Love, and Linux ads) and HP (Whose Linux CTO was the Project Leader of the Debian Project for years).
How the heck did they ever come up with Redhat as something to equate Linux to!?! Still living in the dotcom bubble era where Caldera and RedHat were big players?
Sun should watch out when thinking about downplaying Linux, considering another large linux company -- Novell, backed with a large IBM investment -- rules the not only the Linux desktop, but the Solaris desktop as well - http://wwws.sun.com/software/star/gnome/
"Forrester expects that IBM will build a consortium to pay off SCO -- or buy it outright."
Uh, yeah guys. Whatever.
What Forrester (and apparently Sun, if that article is accurate) don't seem to realize is that all these companies who didn't have a competitive OS (IBM, HP, Dell, Legend Group(China)) now have a common goal of having a $0 OS for their hardware that won't eat away at their margins.
For a hardware and/or services company, it is critical not only to have access to a no-cost operating system, but to defend it vigorously.
IBM couldn't reward SCO with a big payoff as Forrester suggested, because it never was about the few dollars (relatively to IBM's other Linux efforts) SCO wanted from IBM. To do so would have been to pass on the greatest opportunity that ever presented itself to affirm the licenses Linux software is distributed under - thereby insuring that the profit in the computer industry remains in the hardware and services sectors, and not in the now-commoditized software sector.
I cannot understand why the leaders Jonathan Schwartz and Scott McNealy are transfixed on sinking this ship!!!
Their whole RedHat=Linux thing does them more damage than good, new Linux distros are emerging all the time on good long term models and finding nice profits.
They try to make the point that vendor lock in is good as it gives the supplier stability - please people and especially organisations do not have their heads in the sand on these issues anymore. If I was a F500 IT director I would consider this a massive insult. Oh and by the way Redhat is locking everyone in, so they are bad???
I do like Sun, I love their technologies, they brought us Open Office, Java and a lot of Linux was streamlined by them. Their servers have served the planet and aided the lives of almost every being. They are not scared to try new things i.e. 3D desktop.
Their is more potential in today?s IT market than ever before, I mean real potential not hyped up pie in the sky stuff that ultimately did us in after the boom days. Sun will be one of the biggest winners long term if Linux does take off plus they do have the cash to last them through the period and the smarts to re-strategise.
Technology can only move in one direction, so please chaps stop trying to drag things back to when you were profitable and embrace the future, look at Novell and IBM, they reinvented themselves and are well on their way back up.
If the leaders have run out of vision, please honourably step aside and let the sun shine through!
Good luck!
It's convenient for companies like Microsoft and Sun to define Linux as Red Hat in an attempt to marginalize its relevance. But Linux is much more than Red Hat. On the distribution level, we at Novell certainly offer an alternative to Red Hat, both on the server and the desktop. Equally important, companies like IBM, Oracle, HP, and more are putting huge resources behind Linux. The economics of the open source model of development are compelling. The resulting software is high quality. Companies need to adapt to the open source model, not fight it. It's here to stay.
We'd all like to drive high performance sports cars, but when it comes right down to it, no one gets rich living beyond their means. Same applies to businesses. A Honda Civic gets you to work just as well as a Mercedes, and Sun would do well to examine this type of purchase decision making.
- Holy Cow
- by September 21, 2004 2:40 PM PDT
- I just got through reading one story on Sun and how they have 'changed', are more humble now, more responsive to customer needs. Then I read this piece that Sun thinks Linux=Redhat.
- Reply to this comment
-
(12 Comments)This only confirms my suspicions that no one at Sun, at least at the top, really gets it. To confine the reality of Linux to a single vendor is to totally miss the point.
Sun does not realize, even though they have lost money three years running, that I.T. shops don't have the cash to throw around like they used to. We have hopefully learned our lesson and will no longer waste our precious little capital on yet another Sun strategy.
Sun - they used to a player. They have already lost the PR battle, the slow sink down is just a matter of time.