SUN’s SW Story Continues To Be About HW

On November 8, Sun decided it was time to talk to the press and analysts about its busy last 60 days, offering an update on what’s happened in the time since its last briefing during its NetWorld conference in San Francisco in mid-September.

Sun’s Jonathan Schwartz, its VP of Software, noted that it’s been a busy time during which Sun has been:

	rationalizing its software directions
	talking with customers
	rolling out its N1 and Mad Hatter strategies (but not the products, which come later)
	making a major donation of StarOffice to the academic community
	delivering a software service pack
	joining WS-I
	creating new customer portals
	implementing a major Java Card installation in Taiwan

Of course, Sun can’t resist noting that this means they will “increasingly hinder Microsoft’s progress around .NET.”  We’re not sure what they mean by this statement, but Sun loves to rattle its sabers in Microsoft’s direction and it believes that any business it gets must be business Microsoft looses.  Too bad they haven’t heard of GROWING the market rather than settling for trading shares with competitors in a flat market.

What Do Customers Want?

But we think Sun is right when they claim that customers are very focused on TCO and Total Cost of Integration.  We just can’t figure out where they get the prices they base their comparisons on (and, therefore, we believe that the savings they claim are overstated and the prices they intend to charge may be higher than the market will agree to support).

Sun wants to lessen complexity by making all of their products share a unified release cycle and a rationalized pricing strategy.  Sounds good as long as:

1. They can execute – Sun has never been good at delivering even single products on time.  We’re not sure they can manage to do this for whole product families.  At the briefing last week, Sun commented on the fact that some products were, in fact, behind schedule.
   
   

2. Customers want to use the entire Sun stack.  Most customers are pretty independent these days, choosing to mix-and-match, which is the entire reason why open standards and strong interoperability is so important.  Surely Sun, the inventor of Java, knows that.

In February (at its annual analysts briefing), Sun seemed to have decided that it was IBM and not Microsoft who was the competition.  HP (with Microsoft as a Very Important Partner) clearly sees IBM (and not Sun) as the competition.  So we’re curious as to why Sun focuses so strongly on Microsoft.  Is this just the comfort or an old and familiar rivalry or rather an issue of better differentiation because Sun shares the Java/J2EE world with IBM, but Microsoft stands separately in the .NET world?

Interestingly, just as Sun is trying to find a magic single formula for pricing, IBM has decided, with its WebSphere-Express announcement, that multiple formulas may be better (see next story), offering more flexible options for different kinds of customers and different parts of the market.  Sun is hoping that it can have a single pricing scheme that would appeal to customers who want to simplify their cost structures.  Sun is convinced that by doing this they can wrest customers away from Microsoft, frustrated by its higher prices, recent unpopular changes to subscription plan licensing, and the high revenues this has provided Microsoft in a tough economy.

But Sun’s pricing policies can be confusing.  For example, Sun talks about “giving” developers and customers copies of their Application and Portal servers.  In fact, what they give away is limited use copies for development and pilot purposes – production copies for real (volume) environments require paid up licenses.  And pricing for the Mad Hatter workstation remains unresolved, to be announced at some future date.  We still haven’t figured out, based on multiple briefings, emails, and conversations, the basis of its price, but Sun did say that it would be priced at about $2,000 per user per month.  We can’t imagine they meant that, so we are assuming that we’ve misunderstood something again – but then, we frequently seem to misunderstand Sun when it comes to pricing.

(To be fair, Sun intends to bundle Mad Hatter with hardware, software (but it’s mainly Open Source freeware), and support.  We seem to remember, however, that it’s possible to lease a fully supported PC from a service provider like CenterBeam (www.CenterBeam.com) for as little as $350 a month.)

What Does Sun Want To Do?

We think we understand what Sun wants to do.  It would like to use its software – mainly operating systems and middleware plus its StarOffice desktop productivity software and a selection of tools – to accomplish several things:

1. Increase its revenue directly, through software sales
   
   

2. Broaden its brand image from that of a hardware and networking vendor to that of a full systems and solutions vendor
   
   

3. Leverage software to increase its hardware sales, perhaps through sales of its Linux desktops and servers, but always through the sale of its flagship Solaris servers.

It is its devotion to its Solaris product line (and the premium margins these products once delivered) that Sun keeps returning to.  Perhaps if it looked at its software as a separate offering and understood that it needs to be marketable on its own, separately from Sun hardware, they would look at software and software marketing differently.  That might be a good thing.  

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