Sun’s
Software Strategy
Sun
is trying hard to convince both financial and industry analysts that
it now views software as an important component of its business.
You can see that from the number of software-oriented “good
news” announcements Sun puts out these days, usually about wins
for its StarOffice desktop software or its Java Desktop Suite.
For example, Sun recently announced that its German
distributor, Markement, had sold 1 million copies of StarOffice,
both individually and as part of the Java Desktop System.
Recently,
we attended an all-day meeting at Sun’s Boston area office, which
Sun insists was conducted under NDA (although some of the
information we discussed has already appeared in print).
There
are some things we can say that won’t break any confidentiality
agreements.
Sun’s
VP of Software, Jonathan Schwartz, is clearly very serious about the
value of software, particularly the value of software sold under a
disruptive pricing model, to gaining Sun attention and sales.
Given
that Sun has had some difficulty regaining its feet after its losses
in the Internet Bubble (it was one of the big beneficiaries and,
therefore, one of the big losers, when fragile start-ups failed), a
predictable income stream from subscription software sales would be
very attractive. (Sun
is not alone in thinking that.
Microsoft has also tried to move customers closer to that
model, with somewhat limited success.)
The
question is, can Sun (or anyone) succeed at this?
We’d note:
- There seems to be increased interest in buying
software on a subscription basis (as noted recently by IDC).
If that basic market change favors an early mover like
Sun, it could help them with their software plans, but . . .
- Sun has tied its plan to the notion that it’s
selling the software to the WHOLE COMPANY. You pay a relatively low per user fee ($100 for its Java
Enterprise System software, $50 for incremental buyers of its
Java Desktop System), but all the employees count.
That favors companies with few employees but lots of
contractors (they can use the software for free) or lots of
interactive customers (ditto).
It also assumes that you’re (1) starting from scratch
and have no software you’re already using and plan to continue
to use; or (2) you like the Sun software so much that you
don’t mind that you’re paying for all of it but only using
some of it. We
suspect this model may not be for everyone – although it suits
some companies really well.
- Sun isn’t known as a software company.
This isn’t a comment on their software (which I will
leave to those who make detailed feature comparisons), but
rather a comment on the software business. It isn’t clear to me that Sun understands how much is
entailed in migrating users from one desktop to another or
supporting them – or how much integration may be required from
its applications to those organizations already have and must
continue to use. This
doesn’t go way – it just gets more complicated over time,
with upgrades on both sides.
For some companies, this can be a significant revenue
business. For
others, it requires years of building a partner ecosystem.
But you can’t be a software company without it.
- Subscriptions are important not only because they
could move the software market from a one-time sale plus a
maintenance stream market to a subscription revenue market, but
also because if the software-as-a-service market is going to
succeed (that utility computing model again), software needs to
be available on a subscription model.
This is a little bit different.
It probably implies that the subscriber might not be the
actual user, but rather the service provider, buying enough
subscriptions for his service needs, but not for each named
user. That would be
a distinct change for many software companies.
Sun
believes its best opportunities are in new (non Microsoft Office
Suite user) markets and in new non-Windows markets such as Asia,
eastern Europe, Brazil, and Africa.
They’re right, but they’re scarcely alone.
Every systems and software vendor is training his future
plans on those markets. Sun
may find that its natural advantage is smaller than they hoped.
In
the meantime, Sun is working hard to give itself its best chance.
For example, it recently announced that the next update to
StarOffice will include converters that will move macros created in
Microsoft Office to StarOffice, a significant impediment for
sophisticated spreadsheet users.
Sun will also introduce new tools for remotely managing
StarOffice and Java Desktop Systems.
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