Understanding Sun in Three Easy Steps (1 of 4)

We’ve been making a fair number of announcements recently – on both the product and the partnering front. That’s generated a lot of interest, and a fair number of questions. So I thought I’d take the opportunity to deliver this overview and the upcoming focused discussions on what makes Sun tick in a video format. Let me know if this is useful, or what else we can do to keep you informed via the comment field at the bottom.

We’re approaching the end of our fiscal year, and given all the swirl in the economy, I thought it worthwhile to restate where Sun’s headed as a company, to let customers, partners, employees and investors see and understand where we’re headed. Clarity’s always useful, doubly so in times of uncertainty.

Let me start by joining the chorus of those worried about the global economy. I am routinely talking to customers now partially owned by governments, whose share prices have declined 95% or more, whose balance sheets and basic business models are under extraordinary duress. Like every business, our health is a derivative of our customers’, and to that end, we’ve got our challenges – sure, innovation loves a crisis, but only after customers have stepped out from under their desks.

The glass isn’t only half empty. I’m also seeing customers who’ve never had it better, from media startups and telecommunications firms, to government agencies flush with new funding – but they’re certainly a cheerful minority.

Sun is privileged to have an exceptionally strong balance sheet, over $3 billion in cash, and a nearly two decade history of generating positive cash flow. We’ve also got a set of technologies and people that continue to play an ever more vital role in the economy. Sun’s products help companies grow and help them consolidate, and they help governments stimulate the economy, as well. From building bridges to automating health care, government stimulus will undoubtedly drive technology investment, and we’re well positioned to participate globally.

Which is all to say, I’m neither worried about the role information technology will play in the economy, nor am I worried about the relevance of Sun’s offerings. I’m not worried about the future, I’m focused on its arrival date.

So I’m going to divide my comments on Sun’s future into three or four blog entries, of which this is the first. You’re going to see an accelerating series of announcements over the coming year, from amplifying our open source storage offerings, to building out an equivalent portfolio of products in the networking space; from the addition of new and potentially surprising Solaris and MySQL OEM’s, to our newest cloud offerings and startup programs. I want to put all this in context, to be as clear as possible about our priorities and market approach, and help everyone understand both the parts and the sum of the parts.

Let’s get on with it.

In my view, we have a very simple business – when I talk about Sun, I talk about us needing to do “only three things.”

1. Recruit every developer on earth to use our software or services.

This is a strategic activity, not a financial one, so don’t look for revenue here. I’ll devote an entire entry to understanding the motivations and mechanisms driving technology adoption, and to discussing the varied audiences we target. As the head of developer technologies from a very large customer said to me last week over dinner, “I haven’t visited Sun in five years, but all of a sudden you seem to matter to my developers.” I’ll help parse that statement in my next entry.

2. Deliver the world’s most compelling commercial offerings – focused primarily, but not exclusively, on deployers of the technologies whose adoption we’re driving.

Our software and service products target those that find free to be a more expensive alternative than commercially supported, for whom the cost of downtime exceeds the price of a commercial license. That’s a small fraction of the planet, but it’s a lucrative one. On the systems side of the house, our products reach across rack and blade servers, storage and networking systems – basically, everything to power the cloud.

I’ll talk about the reliance this business has on developers to drive differentiation, and gross margin dollars, and the competitive advantage such reliance creates as we broaden our market offerings into storage and networking.

3. Execute the world’s most effective selling/service connection between 1. and 2.

I spend a lot of time talking publicly about the first two points, and very little talking about this last one – in part, because it’s been a work in progress, and because the scale of our sales/services channel has been one of our biggest strategic challenges.

But the ordering matters – our first financial priority is to generate free cash flow; our first strategic priority is to grow our available market. When they’re in sync, as I believe we are in our Open Storage business right now, you have to beat us in the free software community and then again in front of paying customers. That’s a tough combination, especially if you’re a proprietary storage vendor that pretends to like free software, so long as it doesn’t compete with your products.

As you know, simplicity takes a lot of engineering, so it’s easy to say “just three things,” but I’m not in any way suggesting these tasks are easily accomplished. But our intent is to create, promote, and commercialize the highest quality network innovations. Innovations that captivate developers, and deployers.

To understand Sun, you have to understand both, you have to see what drives our financial performance, as well as read our financial statements. Absent both perspectives, you’ll miss the bigger picture, the bigger threat, or the bigger opportunity.

With this as a backdrop, you should expect me to focus on the points enumerated above in the next few blogs entries. Focusing on today’s market, and – independent of the economic slowdown – on tomorrow’s.

Thanks for reading.

(YouTube version of video here)


Filed under General

27 responses to “Understanding Sun in Three Easy Steps (1 of 4)

  1. Video blogging the way you do is great, very informative and personal, thanks!
    Remember that you speak to a global audience and that there are quite some people out there who are not native English speakers. Please, next time, speak a bit slower 😉
    Other than that, thanks again!

  2. Dave Lightman

    Shouting at JBODs this video isn’t.

  3. Carolyn A. Colborn

    As someone with increasing difficulty reading, in addition to the larger font in your blog, I appreciate your video. Now that I’ve upgraded my computer, no more swimming under water on the video front. 🙂
    @Sandro the video almost exactly reiterates the written blog, with the exception, around (4:47), after “As you know, simplicity takes a lot of engineering, “:
    “… as someone recently pointed out to me, it takes a lot more effort to write a short blog than a long blog, so I’ll apologize in advance for the lengths of this.”
    Back to Jonathan, echo. I have always found it takes longer to be brief. Thanks, Jonathan, for continuing to provide clarity in understanding Sun.

  4. Jon

    Got the tweet! Nice video. It’s also nice to hear you reassure us that Sun is being proactive in these areas and telling us about it…not just letting us wonder. A little more weight behind MySql would be nice.

  5. Peedy

    One of the top CEO’s today! While not a commercial customer, im loving OpenSolaris.

  6. Andrew Ball

    I would love to see this in Ogg/Theora format, not least because I can’t play YouTube videos.

  7. Andrew, that’s odd. Wish I could help but you left out your environment. Just going on the odds, try clicking-off your FlashBlock, or use the Linux 64-bit Player. You should be able to view what others view.

  8. As always, this post was quite informative, except the video part which I could not view, do remember, not all platforms support video in the browser, especially, not all support Flash in any way.

  9. Johnathan,
    like Sandro Me too I’d like to suggest speaking slower. I’m not a native speaker and although I understand your wording quite well I still need some microseconds to realy translate it to German (normally I need some hours to "think in English").
    I appreciate very much that your speech is almost completely available in textual form – but I even appreciate more watching and listening to you 🙂
    Good point too: The video is on YouTube 🙂
    Looking forward to your next video post!
    Thanks for talking.

  10. Iwan Rahabok

    Thank you for clarifying what Sun is.
    Could you provide explanation on how Black Box, JES, StorageTek fit into it?

  11. re: #3 fix marketing. About time – your people are good at selling to very large customers at discounts but ignore the hundreds of thousands of mid range customers whose needs your products can meet extremely well.
    Let me re-iterate the obvious: the guy with $250K to spend on IT doesn’t want SPARC, mySQL, Sun Ray, or Solaris – he wants to write one check, to one company, and never hear about computers again. Make that possible – and you’ll outsell everybody else in that market.
    You’ve got the products, you’ve got the people (except in sales, of course), and it’s not that hard – so go do it already, ok?

  12. Mark Halverson

    As an investor in Sun, I read most everything Sun puts out, hoping to gain insight into the company’s grand plan for survival, market share and profitability. I very much liked the video and look forward to future video blogs. While the info per se is is the accompanying text, the video presents a face and voice that makes it all seem more real.

  13. Ivan

    Do YOU use Solaris, Jonathan?
    Oh, I guess I know the answer.
    Now you tell me, why should I?

  14. W. Wayne Liauh

    I am at least the third poster to "advise" on the English part. Both previous posters made a very good point. But I want to add that, when I was a member of Exxon’s China delegation team, one of the most useful advises I gave to my colleagues was to take a quick browse of the English textbooks Chinese locals use in high schools. You’ll be very surprised to find that English is truly an international language if you try to stick to a fundamental set of vocabulary–and speak a little bit slower. 🙂

  15. john Madison

    If you want developers make top end developer workstations that run all the software. That way developers can get the latest greatest hardware without having to roll their own.
    Great video, appreciate the information.

  16. Does Sun plan to offer software-as-a-service solutions to small businesses and enterprises, or simply the raw computing and storage systems in on-demand fashion (a la Amazon Web Services)? I’m still a bit unclear on who the different targets markets are for Sun.
    I work for a company that provides cloud storage services, delivering simple, powerful management tools for getting data into the cloud and moving it around. Are we a partner, a customer, a competitor?

  17. Jose Roman

    I like the videos and I think is a good way to comunicate all about Sun strategy, more now than ever we need to be informed.

  18. jk

    With all due respect, these blog entries about the company are downright depressing. As a former employee (and shareholder), a competitor, and now a customer of Sun, the state the company is in is pretty bad from my view and I’m just not seeing the vision you are laying out and it depresses me to say that Sun has no future. I just don’t understand what the company wants to be.
    Let me try to describe what I see. In my view, Sun has essentially become the Radio Shack of the computer vendor world. Have you been to Radio Shack lately? Pretty empty in terms of store traffic, no? And the place is full of parts like solder, wires, chips, and batteries. Now unless you are a hardcore geek, how many people go there to buy the parts necessary to build what they want, which is a radio or a TV? And who buys a Radio Shack branded radio or TV? Most people I know goto Best Buy or some other retailer that sells them a name brand, purpose built, and easy to use TV or radio.
    I argue that Sun is a giant "parts" company. You have a product line that has a ton of parts that people can buy to put together some good things. Take one of your numerous servers (with names that could double as a SKU product number), install Solaris, attach storage, install MySQL, and I have a database. But why build the TV myself? But Sun comes to me and says, "wait.. you can buy professional services from us and we’ll do it for you!". Well, that’s like me going into Radio Shack and hiring the store employee to put together a TV for me with the parts that I just bought. Doesn’t make sense, does it?
    In my humble opinion, the next leap forward for this company is to become an appliance vendor. You have all the parts. You have the hardware, the software stack, and the necessary brainpower to build a really great TV. Case in point, Amber Road. It’s the first ray of hope that I saw that told me maybe they finally get it. It took a bunch of engineers to literally break away from the company to come up with a complete appliance solution that I can buy and run without having to engineer it myself. As a customer, I don’t have the resources anymore to build systems anymore. That’s why we have relied on appliances like Blue Coat for proxy and Netapp for NFS. Easy to deploy, run, and support. Amber Road does this and it has a kicker, great diagnostics. That’s the differentiator.
    Build your customers a MySQL appliance, a GlassFish appliance, a LDAP appliance, etc… I don’t care it uses SPARC or X86, whichever one fits best. Do you care of the glass film on your LCD TV comes from Samsung or LG? As long as the picture and the quality is good, who cares, right? Build an ecosystem around the management interface with Dtrace diagnostics and it’s a winner. EVERY software product you have should go through a review to see if it’s a candidate for a possible appliance. And when I say an appliance, I do not want the "messy solder joints" showing as if it was just put together with spare parts. It should look and feel like something purpose built. And no, it shouldn’t be done through professional services.
    I’m not here to just bash the company nor do I purport to know exactly what is going on at the company. I left Sun on good terms and I still have friends there that I want to see do well. I just felt the need to respond as a shareholder and as a customer.

  19. Yesterday I received an invitation from Amazon to fill out a short survey asking about my perceptions of their SimpleDB cloud service. It was a well-designed survey, and I gave them a bunch of useful answers. As an Amazon EC2 users, I love the fact that it’s a simple monthly fee with a detailed (and cheap) cost breakdown, and that I’ve NEVER had to (or wanted to) speak with anyone at Amazon to get it working. The real kicker for me is their obsessive determination to make it as easy as possible for me to use Amazon EC2, S3, etc. They really care about the user (read "developer/deployer") experience. IMHO, Amazon are your real competition, and the present-day masters of your points 1, 2, and 3. I really hope to see something very hot coming from your CommunityOne announcements.

  20. nr

    I do not understand your argument regarding the "giant parts company" .
    Delivering standardized packages? That might work for some customers but not for everyone. And Your TV assemble kit is a very bad example. That would mean the customer would have to assemble his server (motherboard, memory, cpu,…) and storage (midplane, disks,…) first before he can even install Solaris.
    The customer goes to his sales person and is talking about his needs, requirements and about his budget. Every customer has different needs and different requirements. It’s like you going to Best Buy and buying a home theater system. You need a TV, you need a DVD/BluRay Player and maybe you want to have a Surround System. You tell the Best Buy sales person you have $10,000 to spend. Maybe you end with a Sharp 52" LCD TV, a Playstation 3 as BluRay Player (because you also want to have a system for video and music streaming and everything works out of the box … it’s an appliance ;-)) and the Bose Lifesytle Surround System. And your brand of choice for the HDMI- and Toslink Cable is Monster Cable. Now you can install everything by yourself or you can set up an appointment with the guys from Magnolia and they will install and configure your home theater system for you.
    And that is exactly what Sun does. Sun provides almost everything a customer needs. Example: Customer wants to have a T5440 Server using OpenSolaris 2008.11 and Sun xVM (and/or Solaris zoning), he goes with the Sun StorageTek 2540 Array for the MySQL database, uses a SunStorage 7210 for the home directories / file sharing, etc. and Sun StorageTek SL48 with Sun StorageTek Enterprise Backup Software. Now he can choose to set up and configure everything by himself or he can get support from Professional Services and they take care of everything (sounds similar to buying a home theater system at Best Buy, does it?).
    Amber Road is a good product since it’s a well-thought-out NAS appliance. But you can’t convert everything into a appliance.
    Next time you go to best buy they just offer home theater bundles. You can choose between five bundles. Since these bundles work as appliance nothing can be changed. You just need a TV and a blue ray player? Sorry … you have to but the surround system because it’s included in the bundle. Oh … you do like the brand of the sound system and the dvd player from bundle 5 but you want to have another TV because it doesn’t fit in your room? Sorry … not possible … it’s a bundle.

  21. I found this blog interesting, and it has me waiting to see and hear what else Mr. Schwartz has to say about Sun products and services. Although I am not a Solaris user or Sun hardware user, I have recently purchased a couple copies of Sun’s "Core Java volume I – Fundamentals", due to my recent interest in Java-based software development (great book by the way – meaty and well written; no fluff).
    I have watched Sun and contemplated Java-development for a long time, and have patiently waited for something to convince me to invest time and resources into learning and training some of my developers in Java. What finally got my attention is Sun’s new JavaFX product, coupled with the latest NetBeans 6.5 IDE, and the ability to use existing Java libraries from within JavaFx / NetBeans. I finally see the potential to create cross-platform Java applications that look exceptional and deliver robust functionality.
    The bottom line is that Sun has my attention, and I consider them "in the game" against players like Microsoft. Now, I have also been looking at investing in their stock, just in case they do start taking off as others notice their products. But, I can not help wondering how much money Sun will make from various licensing deals related to Java/JavaFx, and certainly the Core Java books I purchased are not going to keep Sun in business without more substantial product sales. I do find their hardware options a bit confusing, and not always price-competitive for apples-to-apples comparison to servers from SuperMicro or similar. But, I see potential, and with the right marketing push, I can see Sun becoming a more substantial player in servers as well as software and services.

  22. Rene U.

    @jk: I totally agree with you that Sun would do well to have more end-to-end appliances like Amber Road, like a general purpose Solaris/GlassFish/MySQL appliance for deploying, managing and updating web apps with Amber Road-like diagnostics and update maintenance. Or ZFS-based NAS appliances for homes, small businesses, and enterprises. No shell access necessary; just simple browser-based management. And let there be VirtualBox sandbox versions of these for developers to try out for free (with shell access so they can look under the hood and maybe do some custom mods to contribute back to the community).
    These won’t serve all of Sun’s potential customers, but they could serve a lot of it. For everyone else, Professional Services and Support are needed. Your analogy to Best Buy didn’t mention the Geek Squad, which is of course their own version of Professional Services as recognition of this fact.
    So I would say Sun should expand on both appliances and Professional Services to meet generalized or specialized customer requirements, respectively, with Support available to cover all of it. It could be win-win all around.

  23. jk

    You sound like a satisfied customer who likes to have the flexibility to customize your deployments and you are perfectly willing to let your sales rep and SE to suggest what to purchase and construct with your company’s money. As a shareholder, I ask you to please continue what you are doing! By all means give Sun the business in that fashion. It’s what my firm did back in the mid 90’s when we were flush with cash and Sun’s stock was in the 80’s.
    For the rest of us where our staffing levels have been cut in half (or worse), budgets slashed, and the demands of the business have gone up in terms of speed to deployment and so forth, this model of working with computer systems does not work anymore. Moreover, the type of transaction that you’re describing where it requires a deep dive and resources to plan and execute is typically a one time non-recurring sale, even if it might be worth a good amount of money. Why is that important? Because of precisely what Jonathan himself has said in terms of Sun’s #1 financial priority, which is free cash FLOW. I capitalize FLOW because the company needs to start generating recurring sales of products that can carry a good margin.
    The majority of our firm’s computing needs does NOT start with users requesting this type of server, this type of storage, and this kind of clustering software. It starts with them asking for a service. A database instance, an application server instance, more application accounts, etc… Most of my peers at other similar firms and myself included do not have the staff to engineer, construct, deploy, and monitor all these systems and we don’t have the budget to hire professional services or consultants to do that work for us. My proposal for Sun to lead with solutions based on integrated appliances dramatically helps us with this problem.
    Let’s use a database for instance. We test it once, we figure out what our capacity needs are, we purchase the MySQL appliance model that fits that capacity need, and we deploy. With a common management interface with DTrace based monitoring, we can figure out quickly where the performance issues are (there are always perf issues…). Even better is that if I purchase Amber Road to host the storage for that database, this common management interface can reach down into the storage level to give me the full picture on diagnostics and performance. The benefit to Sun here is that when my capacity limits are reached, I can quickly order another appliance (without doing the testing, planning for deployment, etc.. that delays the sales cycle) and plug it in and I’m done. And all of it is managed by SA’s that are trained on a single management framework. This spurs recurring sales.
    What I am proposing is also NOT bundling. It is delivering purpose built systems that I don’t need to think about engineering. I’m not saying that they should completely abandon the sales of individual servers and software. And building an ecosystem around a common management interface with the ability to pinpoint issues among these appliances incentivizes the customer to buy other types of appliances. There are certainly customers like yourselves that would want to have the flexibility to construct what you need. Considering the state of Sun, every customer and sale is important. But I argue that this type of customer and sale is a smaller fraction of the type of customer base that Sun needs to attract.

  24. benr

    Great vlog entry. Can’t wait for the rest!

  25. Thanks Jonathan. As a company focused on OpenStorage providing ZFS based solutions ourselves, I am still surprised at how much of the world does not get what is pretty obvious I think in the valley — the ONLY WAY to get to market cost effectively these days is through some combination of open free solutions and proprietary extension. In short, open source is really the only option for cost effective enterprise penetration. Plus it is right thing to do too.

  26. Johannes

    Great Blog !!

  27. Hi Jonathan,
    In 1998 I was involved in building Harrods Online as Chief Architect (employed by Harrods). We used a heavily Netscape based stack, using both Netscape Web Server and Netscape Application Server. And at the time Netscape had over 56% of the Enterprise Web Server market-share as well as being some of the best available technologies at hand.
    Both of these technologies were available under free to use licenses from Netscape, with payment for support on top. Well I have to tell you in three years running this stack in production we never once paid for support, not a bean, nada, not on Christmas day, not on any day. Why? Because these were such stable technologies performing in their core capabilities that we knew from direct experience that very little would go wrong and because we architected a fully redundant and highly-available architecture based around horizontal scaling, network load-balancing, and avoiding session persistence where possible.
    Looking back I would have liked to have paid Netscape something, even a token amount, because they were a great company, sadly missed, and perhaps if they’d been able to generate more revenues they’d still be with us. However this was a completely economic based business decision so we didn’t. Of course Sun eventually acquired these technologies through the iPlanet Alliance and we were able to integrate some of the innovation, robustness and domain knowledge into our own technologies.
    I really wish at the time MySQL had been available, because we wouldn’t have had to pay Oracle either (our biggest license cost outside of Vignette, which was a core component). And before you ask, no, Harrods Online never went down because of any of the Netscape components, if anything by far the biggest problem areas were Vignette (esoteric, overtly Vignette specialised skill set required) and Oracle (connectivity to Vignette, Netscape, the other technologies we used, a number of content version issues, and it’s applicability as a web-scale technology). I know that some of these issues in these technologies have been resolved, but in both cases this was true then.
    What’s cracking is that Sun has some of the best Architecture Services for Open Source deployments, especially large-scale implementations. Sun have a genuine sweet spot in the three areas needed to get these to work in the most cost efficient manner: Open Source Software (low barriers to entry, low barriers to exit, ease of availability, applicability to function), cost effective and highly price performant Hardware (Servers and Storage, both Open Source and Open Standards based), and the Professional and Managed Services needed to tie it all together and ensure operational effectiveness.
    Frankly, I suppose we were ahead of the pack in many ways at Harrods Online, because the architectural principles used there are precursors of the one’s you’d see in a modern web-tier architectures, such as Flickr or Delicious. I know that if I was building that now not only would we have a near on 100% Open Source stack, but I’d also be looking at how I could offload some of our costs (especially in terms of low level and non-functionally focused skills and technologies) by utilising a Cloud Computing based infrastructure and platform provider.
    All the best,

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