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.

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