You’ll see a press release tomorrow morning, announcing another endorsement for Sun’s linux-based Java Desktop System (JDS), this one from Japan’s Ministry of Economy, Trade and Industry (METI). The savings, improved security, and most of the all – the addition of competitive bidding for PC OS and Office suites – present a welcome change of pace. But Sun’s interest isn’t in just cost compressing the PC industry (although the theater’s awfully enjoyable, and we’re now beloved by procurement officers the world over). Instead, there’s a network client strategy lurking in our approach that I thought I’d help surface.
The strategy starts with an allusion to the marketplace for Java technology enabled mobile phones. I was just reading an internal analysis that says we’ll have racked up 579M (five hundred and seventy five million!) Java enabled phones by the end of this year. We’re on the road to a billion – the fastest growing computing platform the world has ever seen, and by far the largest community Sun’s ever built. You want volume? We got volume.
Now, we’re not a charity business. We’re an $11B company trying to become a $50B company. So what’s the strategy behind investing in runtimes for phones (when I doubt handset royalties will ever reach a billion dollar business)? And how does it relate to our JDS ambitions? Or the set top box industry? It goes like this:
1. Build Volume
2. Enhance Security
3. Drive Open Standards
4. Monetize Infrastructure Innovation
With that in mind, I’ll elaborate on each of these points.
1. Drive volume through affordability. By balancing our investment and revenue plan in such a way that we maximize the affordability of mobile phones – or traditional PCs – we’re doing our part to maximize the number of such devices in the world. If we were trying to harvest $50/phone, there’s no way 60% of 15 year olds in North America would have them (yes, that’s the market penetration of handsets).
Exactly the same pricing theory applies to PCs. Roughly 120 million Windows PCs shipped in the world last year – how large could that grow if the TOTAL software cost declined to $10? $5? $1? Free? We’ll find out. Add in better security, and tremendously popular cross platform migration platforms (like Mozilla Firefox, StarOffice and Java), and the number grows.
But let’s be clear. Do I expect an investment banker at Goldman, Sachs to pick up the Java Desktop System? No. No way. He’s not our target demographic, not a route to make 120 million into 1.2 billion. A call center in Bangalore, a factory in Tennessee, a generation of kids that care more about ringtones than Win32 legacy? Dedicated internet terminals in shopping malls, touch screens in phone booths, the world’s academic environments? There’s a market calling.
2. Focus on security. Java continues to lead the world of downloadable content through its security model and deployment safety – on desktops, servers and phones. It’s that security model that’s powering billions of dollars in consumer spending through gaming and other content downloads for mobile network operators. Security and authentication are fundamental to commerce (and Sarbanes Oxley, but that’s another blog). Why is music download on phones measured in the billions of dollars (vs. the paltry music download business on PCs, even with iTunes)? Because phones are authenticated (with a JavaCard SIM, I’d add). Authentication and convenience fuel commerce.
3. Focus on neutral, open standards. From video streaming to managing network identity, we’re moving aggressively to connect J2ME (the industry’s platform for mobile phones) to J2EE (the industry’s platform for enterprise computing). Why? To leverage the already pervasive J2EE platform, and provide a new outlet for our existing communities to deliver and connect their service offerings. Core to our belief: open source lowers barriers to entry. Open standards drive volumes.
Will phones be application platforms? How could anyone possibly doubt it. And the good news is the carriers all know and appreciate the benefit of roaming. Buy once, pay anywhere. When the internet’s killer apps are becoming eBay, Google, Yahoo and MLB.com (for the majority of the planet, services are the killer apps on PCs, not the desktop publishing days of yore), the growth of a cross platform Java, Firefox and OpenOffice are a leveling force, driving the affordability, security and portability of internet access.
So then, what’s the point of a world filled with cheap, secure and connected devices? It gives Sun the opportunity to…
4. Monetize the resulting demand for infrastucture software, service and hardware. What’s making the net work behind all those connected cell phones, set top boxes, automobiles, airplanes, medical devices, PCs and game machines (I could go on)? The very secure network infrastructure at the core of Sun’s business. Who demands infrastructure of that scale? The network operators (the world’s communications companies – satellite, wireline, mobile, you name it), and the leading services run through those networks (financial services being the most obvious, along with entertainment, media, and every other web service the world’s contemplating for internet deployment, in-house or otherwise).
How big is that infrastructure market? Huge. And it isn’t shrinking. We do billions of dollars in business with those companies, serving the very consumers described above – and our bet is they’ll continue to grow. If you’re going to bet on the value of the network, who better to partner with – rather than compete against – than the network operators and service providers.
Make sense? It should. Razor handles and razor blades – blades go to free, the world needs a lot of handles. Especially safety blades. Are we making money from Java? Does AmEx make money from “free” payment cards? Cingular from free handsets? Of course they do. But they don’t measure that return on card sale revenue, or handsets – they’d be negative margin businesses.
So it’s with great satisfaction that we announce Japan’s Economy, Trade and Industry Ministry has joined ranks with others in China and elsewhere, by announcing their endorsement of our linux-based Java Desktop System. The popularity of the open source movement, coupled with the economics, security and pervasive adoption of the Java platform, puts Sun’s desktop in the pole position to drive new volumes in the PC industry – allowing the same effects now driving Java on cellphones to build momentum on personal computers. Could we have gotten there without linux? Nope, no way. The compatibility of Java, and the diversity and proliferation of the open source community make for a perfect match. And not just on PCs.
Our desktop efforts, and linux product strategy, are well ahead of the cynics in the industry – and are helping us make progress on the globe’s ambitions for a truly cheap PC. We’ve tried working with a few of the larger PC OEMs, but they, unlike WalMart, aren’t all that interested in lowering prices in the PC industry. They’re trying to maintain margins, not make PCs more affordable. Bridge the digital divide? I doubt that’s on Dell’s list of strategic priorities. Hear this: it is certainly on ours. It’s even good for our business.
And before more of the conspiracy theories show up, let me quash (or start) a few of them.
In addition to JDS/linux, yes, we are committed to JDS/Solaris. An open source Solaris, with its security and virtualization infrastructure, is a perfect match for JDS. And as Red Hat’s rhetoric continues to alienate customers and the open source community, we’re finding a welcome audience for bringing an open source Solaris 10 to new markets. Competition is a good thing for the open source movement. Those who truly believe in open source welcome competition – those hiding behind marketing veneer and vendor lock-in hate it.
Yes, we are committed to JDS/Windows – if by that you mean committed to Windows releases of the Java platform, StarOffice, and Mozilla Firefox in JDS – to ensure complete compatibility between the JDS and Windows worlds (and all other worlds in which Mozilla/Java/Star will ship). It’s great watching Mozilla’s and StarOffice’s penetration both rise… it’s unstoppable, in my view.
Yes, we are working with carriers to deploy JDS enabled with carrier SIM cards – delivering the physical security of the cell phone world to the desktop. Stay tuned. To me, this holds great promise to put users and operators back in control of PC security (where the device, content, and sites themselves, must be authenticated).
And finally, yes, we will bring this strategy to open every device that touches the net. Make it affordable, make it secure, connect it to the world – and drive the opportunity that results. We’re making good progress.
To our team in Japan – nice going, folks. That’s MOJO!!
ps. to the writer of this, let me assure you that your last sentence is plain wrong. Please don’t stoop to parroting IBM.