Sun Forecasts ‘System’ Commoditization

MENLO PARK, Calif. — Sun Microsystems is again
focusing beyond its hardware and software vendor status toward a Java-fueled
systems strategy, the company said Tuesday.

During its first ever Software Summit, Sun executives reiterated the message
that the Santa Clara, Calif.-based company’s success is closely tied to its
cross-platform programming language. The company said it is counting on
tuning the Java message to developers, CIOs, system administrators and now
consumers with the goal of making the brand a recurring revenue machine.

example, Sun said it looks at the current number of 2 billion employees
worldwide as a potential for Java Enterprise sales. The company’s commercial
deployments of RFID tags even have the potential to capitalize
on an estimated market of $1 trillion by 2012. Sun has also begun addressing
its dominance on the mobile handset market and its early forays onto desktop
systems with its Java Desktop platform.

But Jonathan Schwartz, company vice president of software, began to prime
the revenue pump by referring to Sun’s software strategy in terms previously
only used by telecom providers — phrases like “average revenue per user,”
and “successive use.” The strategy suggests that the company does not fear
the “commoditization” of its hardware and software any more.

“Hardware has become commoditized. Software is becoming commoditized.
Pretty soon the systems network and the services that go with it will be
commoditized as well,” Schwartz said during the press briefing at the Sun
campus here.

Schwartz says the company also finds itself between a low-cost “rock”
like Dell and a complete systems integrator “hard place”
like IBM . To that end, Sun has stepped up its price cuts
and even begun offering
its developers a free V20z server running on an AMD Opteron processor if
they sign up for a three-year subscription price of only $1499 per year.

“We certainly think our strategy will hold up over the long haul,”
Schwartz told We have all of the elements needed to
succeed: hardware, software, service and systems integration.”

Commoditization in the IT industry does not seem to carry the unbearable
connotations it once did. Microsoft chairman and founder
Bill Gates even hinted this week that the evolution of software, hardware
would be so ubiquitous that it would practically be free.

But Microsoft’s position aside, part of Sun’s strategy to move the market
is to offer easy to figure out licensing plans that are based more on the
number of people using it instead of by CPU or by server. Instead, Sun has
taken to offering its Java Enterprise System (JES) for $100 per employee-per
year including service, support and upgrades and has pointed toward a
per-citizen pricing of $20 or less per person-per year for its Java Desktop
System. Schwartz said the company is now considering charging $100 per
box-per year for its N1 Grid solution.

“When you go to Starbucks you don’t think too much about paying $3 or $4
for a coffee drink,” Schwartz said. “But add the number of times you did
that over the course of a week or a month or a year and that number really
ramps up.”

The model may not work in all areas such as for its mobile Java-enabled
games and applications. Schwartz said while Sun would never directly
interfere with a carriers’ relationship with a customer, he did admit that
the company is considering some type of per-download licensing proposition
as a value add for the provider.

Sun said its other hook is Solaris-based systems, which the company says
can cost $1,000 less than comparable Linux systems while offering a more
secure environment. Schwartz said when the company makes its sales calls, it
offers Solaris first, then x86-compatible systems, whether they are
Xeon servers from Intel or Opteron-based boxes from AMD,
and then its Linux boxes. Sun said it would continue to
support the direction of Linux but solely as an OEM vendor using Red Hat or
SUSE Linux distributions.

In the consumer space, Sun has broken out of its handset shell, inking
deals to package its Sun Java Desktop System (JDS) in sub-$300 PCs built by
Microtel and marketed by Wal-Mart as well as similar
package systems being offered by America Online.

“We are seriously considering Wal-Mart now to be the PC supplier for Sun
Microsystems,” Schwartz said. “We also have some 500 pilots of our Java
Desktop System and the Java Enterprise System now running across the world
and North America, which is the most cynical market when it comes to looking
at Microsoft alternatives.”

Schwartz said it will be the consumer marketplace that shows the most
promise at this point as consumers are getting fed up with Microsoft’s
antics. Sun said it has bought a handful of 60-second
television spots that will air during the upcoming NHL Championship
Playoffs. The commercials are targeted to regular Internet consumers by
highlighting Sun’s Java brand on the desktop and elsewhere.

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