Selling the Downturn: Schwartz and the Silver Lining

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As the slowdown begins to tickle the Internet economy, voices from unlikely places are grappling with the “opportunity” the possible worldwide depression presents for the tech industry. Steve Ballmer is on a barnstorming tour about Microsoft’s move into what he temporarily calls the Windows Cloud OS> IBM is busy opening 13 cloud computing centers around the world. And Jonathan Schwartz has slathered lipstick all over what purports to be an internal memo that he then decided to release as a blog post. My guess, jaundiced as it may be in the wake of a month of Palin/McCain bottom-is-up sideways speak, is that the memo was always designed primarily for the public.

Innovation loves a crisis, says Jonathan, and he suggests how open source took advantage of the Tech Bubble Bust to insert itself into challenged proprietary niches. After running through Sun’s current position in database (MySQL), storage (ZFS with OpenStorage) OS (OpenSolaris), virtualization (xVM), and so on, he drives it home with this odd construction:

Imagine if our portfolio had been this strong when the dot com bubble burst – we’d have swept the floor, and been in a dramatically different spot.

So what is Jonathan saying – that the last time they were in this boat, they blew it, and that’s why they are going to nail it this time? No, that wouldn’t be the message he’s trying to send to his troops. Instead, he might be saying that the price pressure of an open source strategy will drive customers in, cement ongoing relationships, and upsell the new combined base to the synergies of Sun’s virtualization platform across OS, storage, identity services, and OS.

There’s more than a little McMessaging here: We missed it last time, but now we’re positioned to clean up the mess. But what about Microsoft’s freeware rumblings in the virtualization arena, or Cisco’s plans to bake similar value into the routers that form the foundational layer of network services. Schwartz emerged from Sun’s revenue collapse after the Internet bubble with a series of ahead-of-the-curve strategies that correctly predicted and modeled Google’s leveraging of open source dynamics. But Microsoft and others may be cashing in on Jonathan’s insight.

The question now becomes: What insight does Schwartz bring now to the conversation with customers. If they are, as he writes, under stress, and therefore “open to change”, what combination of leading edge hardware and system integration of virtualization will produce immediate results in a climate where Sun’s focus on financial services is likely to be challenged by a wave of mergers, buyouts, and outright collapses. Schwartz and Sun have blazed a trail to the cloud computing enterprise, but now they have to defend themselves against having done perhaps too good a job of turning the market toward the new reality.

We don’t get the benefit of internal responses to Jonathan’s memo, but comments on the blog post suggest concern that Sun sales is not necessarily aligned with Jonathan’s goals.

You might want to check that your sales force is actually pushing the new Sun technology, as opposed to pushing super-expensive legacy technology. For sure, I know of current cases where Sun sales people are pushing expensive disk arrays rather than ZFS on cheap disk; and VMWare (which costs more than the server itself) rather than xVM; and… well you get the picture.

Jonathan makes a good case when he says, “Now’s the time our customers will be most open to change.” But he faces a tougher sell inside Sun, similar to the ones he’s slogged through with his open sourcing of Solaris and Java. Perhaps the sound of approaching competitors singing the same song will light the fire under his troops.

  • Alan Hustoran

    Everyone knows Schwartz is just making up the crisis, there is no such thing, it’s just a stupid marketing trick to get people to pay attention to his dumb “open source” strategy. He should go back to focusing on workstations.

  • Alan Hustoran

    Everyone knows Schwartz is just making up the crisis, there is no such thing, it’s just a stupid marketing trick to get people to pay attention to his dumb “open source” strategy. He should go back to focusing on workstations.

  • eCurmudgeon

    Sorry, but at this point, Sun’s only realistic option is to start winding things down in an orderly fashion. Sell the hardware/storage business to Fujitsu, the Java division to IBM or Oracle, and the remaining software bits to Red Hat or Novell.

    Sun’s primary focus at this point should be migrating DTrace and ZFS to Linux, and working with existing customers to transition off Solaris as a prelude to a hand-off to Red Hat.

  • eCurmudgeon

    Sorry, but at this point, Sun’s only realistic option is to start winding things down in an orderly fashion. Sell the hardware/storage business to Fujitsu, the Java division to IBM or Oracle, and the remaining software bits to Red Hat or Novell.

    Sun’s primary focus at this point should be migrating DTrace and ZFS to Linux, and working with existing customers to transition off Solaris as a prelude to a hand-off to Red Hat.

  • Bret Phillin

    To eCurmudgeon… right, a $14 billion dollar company with hundreds of millions in profits, and an amazing portfolio of technical assets (not to mention patents) needs to wind down because… ?

    The company that oughta’ wind down is Red Hat. I’m just stunned customers pay for that crap when they could run Oracle’s clone for nothing.

  • Bret Phillin

    To eCurmudgeon… right, a $14 billion dollar company with hundreds of millions in profits, and an amazing portfolio of technical assets (not to mention patents) needs to wind down because… ?

    The company that oughta’ wind down is Red Hat. I’m just stunned customers pay for that crap when they could run Oracle’s clone for nothing.

  • http://www.1938media.com Loren Feldman

    The minute he took KKR money Sun was finished.

  • http://www.1938media.com Loren Feldman

    The minute he took KKR money Sun was finished.

  • eCurmudgeon

    “right, a $14 billion dollar company with hundreds of millions in profits, and an amazing portfolio of technical assets (not to mention patents) needs to wind down because… ?”

    Because they’re in very real danger of being bypassed by most of the market, and it makes more sense to liquidate now while there’s a modicum of value left, rather than waiting for the inexorable slide to zero.

    The first question I’d ask is how much of Sun’s sales are to new customers, rather than to existing ones? How much of their sales are of SPARC-based hardware? How much of their sales are systems running Solaris? I suspect the answers to those questions are less than we might think.

    The biggest problem for Sun is, no matter how good Solaris/OpenSolaris might be of an operating system, no matter how good their x86 boxes (for example, the “Thumper” storage server) are, customers want cheap, understandable and easily supported. Which means Linux on commodity “white-box” hardware. How many Solaris experts do you know? Especially when compared to the size of the Linux developer base?

    Same thing goes for software. Simple and easily understandable (i.e. PHP, Rails, etc.) wins over complex and difficult. Even if Java may ultimately be a better technical solution, it’s faster and cheaper to write in Rails, and deal with problems later (i.e. Twitter).

    It also doesn’t help that their recent inverse stock split and ticker symbol change doesn’t necessarily inspire confidence in the investor community, or that the most common reaction to meeting with their ponytailed CEO is one of “Is there a grown-up here I can talk to?”.

    And most importantly, the reason Sun needs to call it a day is in order to release their highly-skilled engineering and software people into the wild, in order to help seed the next generation of technology startups. A more nobler purpose, in my opinion, than being a manufacturer of boutique systems to a rapidly-dwindling user base…

  • eCurmudgeon

    “right, a $14 billion dollar company with hundreds of millions in profits, and an amazing portfolio of technical assets (not to mention patents) needs to wind down because… ?”

    Because they’re in very real danger of being bypassed by most of the market, and it makes more sense to liquidate now while there’s a modicum of value left, rather than waiting for the inexorable slide to zero.

    The first question I’d ask is how much of Sun’s sales are to new customers, rather than to existing ones? How much of their sales are of SPARC-based hardware? How much of their sales are systems running Solaris? I suspect the answers to those questions are less than we might think.

    The biggest problem for Sun is, no matter how good Solaris/OpenSolaris might be of an operating system, no matter how good their x86 boxes (for example, the “Thumper” storage server) are, customers want cheap, understandable and easily supported. Which means Linux on commodity “white-box” hardware. How many Solaris experts do you know? Especially when compared to the size of the Linux developer base?

    Same thing goes for software. Simple and easily understandable (i.e. PHP, Rails, etc.) wins over complex and difficult. Even if Java may ultimately be a better technical solution, it’s faster and cheaper to write in Rails, and deal with problems later (i.e. Twitter).

    It also doesn’t help that their recent inverse stock split and ticker symbol change doesn’t necessarily inspire confidence in the investor community, or that the most common reaction to meeting with their ponytailed CEO is one of “Is there a grown-up here I can talk to?”.

    And most importantly, the reason Sun needs to call it a day is in order to release their highly-skilled engineering and software people into the wild, in order to help seed the next generation of technology startups. A more nobler purpose, in my opinion, than being a manufacturer of boutique systems to a rapidly-dwindling user base…

  • Bret Phillin

    eCurmugdeon – by your logic, Microsoft is dead, Oracle is dead, IBM is dead, SAP is dead, everyone except a group of cherubic Facebook Scrabulous devs perishes in a long winter of despair because your roommate bought a whitebox.

    You should take a walk through my employer – we are migrating acres of Oracle installed base to MySQL, and looking to do the same with NetApp to ZFS. We’re not looking at JQuery or Mongrel, we’re looking at 10’s of millions of dollars to Sun for enterprise infrastructure. So again, why are they the past? I can find Solaris experts everywhere on earth, just like Java and MySQL expertise.

    You should look up from your laptop every once in a while, you might see the future. (And as best I understand, Twitter’s an utter disaster from an availability perspective – you might want to look to eBay or Google instead).

    You sound an awful lot like an IBM employee. Are you one?

  • Bret Phillin

    eCurmugdeon – by your logic, Microsoft is dead, Oracle is dead, IBM is dead, SAP is dead, everyone except a group of cherubic Facebook Scrabulous devs perishes in a long winter of despair because your roommate bought a whitebox.

    You should take a walk through my employer – we are migrating acres of Oracle installed base to MySQL, and looking to do the same with NetApp to ZFS. We’re not looking at JQuery or Mongrel, we’re looking at 10’s of millions of dollars to Sun for enterprise infrastructure. So again, why are they the past? I can find Solaris experts everywhere on earth, just like Java and MySQL expertise.

    You should look up from your laptop every once in a while, you might see the future. (And as best I understand, Twitter’s an utter disaster from an availability perspective – you might want to look to eBay or Google instead).

    You sound an awful lot like an IBM employee. Are you one?

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