|FROM ||Ruben I Safir
|SUBJECT ||Re: [hangout] Will a New Software Strategy Lift the Dark Clouds Over Sun?
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Date: Thu, 18 Sep 2003 19:57:54 -0400
From: Ruben I Safir
Cc: "'hangout -at- nylxs . com'"
Subject: Re: [hangout] Will a New Software Strategy Lift the Dark Clouds Over Sun?
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In-Reply-To: ; from EInker-at-gam.com on Thu, Sep 18, 2003 at 09:03:50 -0400
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I have a patent and copyright on this idea
On 2003.09.18 09:03 "Inker, Evan" wrote:
> It seems like someone overheard our conversation last night....
> FAST FORWARD
> Will a New Software Strategy Lift the Dark Clouds Over Sun?
> Scott McNealy and company are trying to change the business model for
> software and in the process revive Sun's prospects.
> Wednesday, September 17, 2003
> By David Kirkpatrick
> Sun refuses to give up. A new software strategy announced Tuesday represents
> a dramatic departure both for the company and the entire industry.
> Regardless of whether it succeeds for Sun, it's something anyone who pays
> attention to software has to understand. I spoke to Sun software boss
> Jonathan Schwartz about it on Monday afternoon.
> The basics of Sun's announcement have been widely reported, but they include
> offering customers, for $100 per employee per year, something it is calling
> its Java Enterprise System. This includes a full suite of software for
> running a business, especially a large one. The suite includes Sun's Solaris
> operating system, of course, along with an applications server, a full
> e-mail and messaging system, a directory (necessary for managing all the
> users and locations on any network), authentication technology using Java,
> and portal software for running websites for both internal and external
> That is essentially all the software infrastructure a company needs, on top
> of which it can deploy applications like SAP, PeopleSoft, or highly specific
> homegrown programs. As for the price, it is not only radically lower than
> what is typically offered by infrastructure software providers today, but
> the pricing structure itself is radically simplified. Says Schwartz: "If IBM
> charges you $30,000 per CPU for an applications server, and we charge $100
> per employee, then you can save tens of millions of dollars if you're a big
> When I spoke to Schwartz he was speaking in superlatives. "This is the
> demise of the middleware industry," was his first bit of likely hyperbole.
> It went on from there. "We plan to take a $20 billion market and turn it
> into a $3 billion market," said Schwartz. "But in so doing I think we will
> gain a significant amount of share against those who are trying to sell
> hand-tooled middleware." You've got to hand it to this guy-he's glib. "The
> next wave in software is not about directories or e-mail," he adds. "That
> was the last wave. Our pricing puts an exclamation point at the end of that
> sentence. Commoditization is the perfect word. Dell has made great theater
> of the fact that the hardware is commoditized. We think they are half right.
> The whole system is commoditized." All this sounds good but disregards the
> fact that Sun, at present, is an also-ran in enterprise software.
> Still, this is a gutsy move. Marketing and selling enterprise software is a
> complex business, and the industry's practices-including Sun's up until
> now-have historically thrived on that fact to enhance margins. For example,
> every type of software has been priced according to a different variable.
> Directories have been licensed by the entry, identity systems by the
> identity (which is different than an entry), e-mail systems by the mailbox,
> portal software by the number of processors on which the portal is running,
> and file systems by the amount of storage connected to them. It is not
> uncommon, points out Schwartz, for software companies seeking to pump up
> revenue at the end of a quarter to make a surprise auditing visit to a
> customer, hoping to find a need for additional licenses which will give a
> quick boost to revenue. Sun now dispenses with all that.
> Sun will charge simply-based on filings a company makes to the SEC, at least
> for public companies. And to make the pricing even more attractive, Sun
> won't charge anything additional if a company uses the Internet to deliver
> services based on this software to its customers or business
> partners-another major departure from typical industry practice. For
> example, a company can authenticate outsiders, or even grant them mailboxes
> in its e-mail system, for no additional cost.
> The software will run not only on Sun's own proprietary computers, but on
> Intel-based systems as well. That is a huge-and risky-move for Sun. The
> lion's share of the company's revenues are tied in some way to the sale of
> hardware. Those revenues are likely to sink further as Sun lowers its prices
> and moves toward generic Intel hardware to avoid being rendered irrelevant
> by the likes of Dell and Hewlett-Packard. There's no way that Sun will reap
> enough software revenue anytime soon to offset what it will likely lose in
> But does Sun want to become a software company? I put the question to
> Schwartz. After a bit of waffling, he answered: "We are definitely led by
> software and services, and not by boxes. But last time I looked you can't
> execute software without hardware."
> The big architectural argument Sun is making with this strategy is that, as
> software infrastructure becomes commoditized, it makes more sense for
> companies to buy an integrated package that just gets the job done. That way
> they can spend their real effort building distinct applications that run on
> top of the basic package and offer competitive differentiation. Schwartz
> bragged several times in our call about the fact that Gartner rates most of
> the components in Sun's package best of breed. That's critical, because no
> matter how clever the pricing, customers aren't going to buy unless it's
> high quality.
> Cheaper software is clearly something customers want. "The one acronym I've
> heard from enterprises across the planet is TCO," Schwartz says, referring
> to the total cost of ownership of computer systems. "But that term has
> grown. Now [TCO stands for] take consultants out, take complexity out, take
> chance out, or as one customer said to me-take coronaries out." Like I said,
> glib. However, if a company has already purchased, say, IBM's WebSphere
> middleware package, they may hesitate to start over again.
> At the center of the new system is authentication based around Java, the
> software Sun originated which is now used widely with little revenue benefit
> for Sun. The system is written in Java, of course. And all the company's new
> infrastructure presumes and facilitates use of so-called Java smart cards to
> secure the system and protect individuals online. (For more on how business
> is dealing with the problems of security, viruses, and spam, see my story
> "Taking Back the Net"
> www.fortune.com/fortune/techatwork/articles/1,15704,485825,00.html in the
> new issue of FORTUNE.)
> Sun also announced new pricing for PC desktop software-$50 per employee per
> year if the customer also uses the Java Enterprise System-which includes the
> Linux operating system and a full suite of software that mimics Microsoft
> Office. That is another radical move, but one whose success is even more
> unknown given that this type of platform is still relatively rare in
> business. I wouldn't rule out its having an impact, however. Meanwhile, Sun
> also intends to announce this week new lower pricing for servers.
> This is all strong stuff. It's powerful rhetoric from a company that has a
> lot to prove in software. But it's also a strong vision if Sun can really
> execute on it. The great thing for Sun is that even though sales have
> dropped in recent years it still has relationships with just about every
> enterprise that matters, which it can build upon with the new strategy. The
> move will almost certainly force competitors to, if not lower their prices,
> at least do a better job of rationalizing them to customers. These next few
> months will be very interesting in the software business. Sun aims to
> commoditize the software business, but it would take a lot-a whole lot-for
> the entrenched software providers like IBM, BEA, and especially Microsoft to
> even think about anything close to "commoditized" pricing.
> In the last year or so I've wavered several times between expecting Sun to
> thrive again and writing them off. At least this new move shows how scrappy
> these guys remain. I'm creeping back toward the optimists' camp.
> David Kirkpatrick is senior editor for Internet and technology.
> Questions? Comments? E-mail them to me at dkirkpatrick-at-fortunemail.com.
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