Phipps to lead Sun Open Technologies Practice

Simon Phipps, is taking on a new role at Sun:

“It’s not an especially closely-kept secret but I’ve now moved from Sun’s software group and taken the Chief Open Source Officer role over to a newly-formed team reporting more directly to the CEO and working on Sun’s relationships with communities globally.”

Simon will lead the Sun Open Technologies Practice, with particular focus on standards and open source.  I must confess that I don’t know how Sun dealt with this before, but open standards and open source are so tightly linked in my mind.  So, it’s good to see both efforts headed up by the same team.

While most of the comments on Simon’s blog were congratulatory, Roy Schestowitz had the following to say:

“Why put a positive spin in intellectual monopolies at all? Is it because Sun /already/ has a portfolio, i.e. fences against competition?”

Simon responded:

“Hi Roy. That’s just the way the world outside the FOSS communities speaks. My intent is to work from this new position to change that world, but one doesn’t usually win by alienating them on day one :-)

Everyone else: Thanks for the warm wishes.”

True, alienating isn’t called for until day 3 ;-)  Anywho, good luck with the new role Simon.

 

Who would buy Sun?

Ashlee Vance has an interesting article on the future prospects for Sun Microsystems now that its market cap is $7.7B.  Sun needs to maintain at least a $10B market cap to remain a potential holding of large cap funds.  If Sun’s market cap slips below $10B for too long, large cap funds holding Sun will have to sell and thereby cause a further drop in Sun’s market cap.  With short interest growing from 25 million shares to 57 million shares over the past month, compared to a 3 months trading volume of 17 million, the sharks are definitely circling.

On the other hand, Sun has over $2.5B of cash on hand which should allow them to ride out the storm.  This is especially true when you consider free cash flow has ranged from $137 million to $467 million over the past year.  (i.e. Sun is making more from operations than they are spending, so they won’t burn through the $2.5B in cash just yet.)

Ashlee suggests that Fujitsu would be a good candidate to merge with Sun.  I wouldn’t have considered Fujitsu. But Ashlee makes great points about the R&D culture of Fujitsu & worldwide reach and customer preference of the combined company.

But what about the other leading IT players?  Would any of them make a move for Sun?

• IBM? Unlikely, there would be huge overlap in hardware and software product lines
• Oracle? Unlikely, they wouldn’t want to get into the lower margin hardware business, and there would be large overlap in software portfolios
• Microsoft? Unlikely due to corporate culture, although the combined Java + .NET, Solaris + Windows, OSS + Proprietary would be pretty compelling from a customer choice standpoint
• Accenture? Unlikely, they wouldn’t want to be tied to one vendor’s hardware and software
• Red Hat? Unlikely, too much overlap in the software product lines
• HP? Maybe, there would definitely be overlap from a hardware standpoint, but the ability to drive Sun’s software into more shops via the new HP+EDS could be interesting; remember that HP has a history with open source, from Linux to products such as JBoss….

In the end, my money is on Sun remaining independent.  But, rumors of Sun seeking a replacement for Jonathan (as per Ashlee’s article) concern me enough not to put my money on any outcome.

What about you? What do you think lies ahead for Sun?

 

Yes, Sun should compete against Linux

When I read Dana’s post about leaving Jonathan & Sun alone, I couldn’t help but side with Dana. But then I read Amanda McPherson (Marketing director at the Linux Foundation) original post and now I’m torn. Then I read comments on Amanda’s blog from Sun employees, and I’m even more confused. (BTW, I urge you to read Amanda’s post…she makes some great points).

The core of this discussion boils down to whether it is “okay” for Sun to compete against Linux with OpenSolaris. I have written in the past that I believe it is perfectly valid for Sun, or any company to compete with Linux or any OSS project/product. I am a fan of competition. I believe it helps all parties raise their game.

How is the OpenSolaris vs. Linux discussion different from MuleSource vs. WSO2, JBoss App Server vs. Apache Geronimo or JasperSoft vs. Pentaho, etc?

In the past, Mike Dolan (a fellow IBMer) commented that the issue isn’t whether Sun should compete, but why they don’t collaborate:

“Instead of “competition”, think about what could happen if Sun worked proactively and in a contributory manner to help fight “Bug #1″? (See Ubuntu bug database…). If Sun’s so relevant and its technologies are so great, why waste time fighting a community that consists of HP, IBM, Dell, Oracle, SAP, Cisco, Google, BEA, and thousands of others? Why not join in that community and provide your value-add? In my opinion, competing for OS lock-in is “so 90’s” (as my youngest sister would say)…”

I can’t argue with Mike from a pure “OSS religion” standpoint. But, regardless of what Sun wants us to believe, pragmatism is behind their OpenSolaris vs. Linux strategy more than “OSS religion”. Few vendors would be able to walk away from the significant revenue that Solaris drives to Sun. And remember, Linux grew largely at the expense of Unix (Solaris was the #1 Unix OS vendor). It’s a tough position for Sun to be in…..especially since they want OSS to spell SUN.

Personally, I encourage Sun to continue competing against Linux. Let the market decide.

 

Sun’s Utopia?

Cote is at Sun’s analyst event and has two posts that caught my attention.

Cote writes:

“Sun’s story is the same and more eloquent than ever: telcos will accept open-think finally, emerging markets will leap-frog over using closed, hegemonic technology for their IT build-up preferring open, flexible nirvanas, and the tried and true cash-pipe of 1st world enterprise data-centers will see that the combo of Solaris & those perfect looking aluminum-cased boxes are what running data-centers deserve to be like.

….

The Sun faithful believe this utopia-bet so much so that they bristle at calling it such. To the Sun faithful, they’re betting on inevitability, the march of time. They’re no doubt practicing the phrase “I told you so” in the shower every morning.

That is the Sun ethos in a nutshell.”

Do you think Sun’s utopia bet is going to pay off? (Obviously I have my views, but I just found out my new neighbor is VP of Software Sales in Canada…so I’ll hold my tongue.)

 

MySQL Co. Not Big Enough for Some Customers?

Jonathan has a nice post with additional explanations on the MySQL deal, seeing as one or two folks have questioned it. (Note that the second link is for your amusement via Sun’s Simon Phipps blog).

Jonathan writes:

“Where are the revenue synergies?

The more interesting question is “where aren’t the synergies?” Wherever MySQL is deployed, whether the user is paying for software support or not, a server will be purchased, along with a storage device, networking infrastructure - and over time, support services on high value open platforms. Last I checked, we have products in almost all those categories.

In addition, the single biggest impediment to MySQL’s growth wasn’t the feature set of their technology - which is perfectly married to planetary scale in the on-line/web world. The biggest impediment was that some traditional enterprises wanted a Fortune 500 vendor (”someone in a Gartner magic quadrant”) to provide enterprise support. Good news, we can augment MySQL’s great service team with an extraordinary set of service professionals across the planet - and provide global mission critical support to the biggest businesses on earth.”

I can understand the part about synergies for Sun.  But I’m confused that Sun, and/or MySQL believe that the major impediment to MySQL growth was that MySQL wasn’t a big enough vendor to offer enterprise support.

Huh? I guess Red Hat didn’t get that memo. Could something other than vendor size be relevant to a customer’s willingness to pay for enterprise support once an OSS product gets as ubiquitous as MySQL?

 

More thoughts on Sun & MySQL

First off, kudos to Sun for valuing MySQL at this price. The deal represents ~36% of Sun’s Cash & Cash Equivalents (of $2.7B) on hand at the end of their last quarter (Sept. 2007). But considering how cheap debt is these days, Sun could probably fund a portion of the deal through cheap debt.

A reader commented on BEA and MySQL being founded in the same year, but BEA being sold for 8x more than MySQL. True, but BEA has ~$1.5B in revenue versus ~$60M for MySQL. When you take revenue into account, MySQL secured 3x more in acquisition price for every dollar of revenue than did BEA. OSS vendors must be sleeping with dollar signs in their eyes tonight….

Alex Fletcher has a few thoughts on the deal. I found this one most interesting:

“MySQL should help to stimulate the relevance of Sun’s tooling and Enterprise Application Infrastructure. Look no further than Oracle for an example of leveraging market share in the database market to cross-sell middleware.”

Ahh, if only that were true Alex ;-) Oracle has had a really strong position in the DB market for decades, but next to no position in middleware market outside of DBs, (since DBs are a part of the middleware market). This all changed when Oracle got serious about applications. Also, let’s not forget that customers only buy into cross-sell situations if the product being cross-sold is something the customer would have considered. So, I don’t think you can compare Oracle’s strategy/results with Sun’s prospects.

Prediction of why Sun bought MySQL: Look up in the sky, it’s a bird, it’s a plane, no, it’s a MySQL db on a Sun cloud. (This idea comes from Cote).

The fact that Amazon has been so successful with EC2/S3 should be keeping Sun (and IBM) execs up at night. The Cloud computing opportunity is Sun and IBM’s to lose. By acquiring MySQL, Sun gets access to arguably the database of choice for cloud deployments. I’ll be watching with interest to see if Sun invests in MySQL capabilities that are optimized for cloud/virtualized environments.

Thoughts?

 

From Free to Cash

Here are three points from Tim Bray’s recent post. They very relevant to OSS. (I added the numbers to delineate his points):

[1] Getting started should be free: Also, it shouldn’t take more than a few days.

[2] Some popular tools will be Open Source: Which raises a question: would you rather provide the popular OSS tools, or compete with them?

Now, monetizing OSS is hard. But on the other hand, monetizing software is hard, always has been. And doing it while you’re competing with Open Source is especially hard.

[3] To make money, give things away: Or as this pony-tailed executive I know says: “Monetization at the point of value.”

There are two kinds of people in the world: those who might do business with you, and those who never will. For the second group, you lose nothing by letting them grab your stuff for free.

The first group is more interesting. On one hand you have the risk that they’ll go ahead and use your product or service without ever paying a penny for licensing or support or indemnification or whatever. On the other, there’s the risk that if you make them pay up front, they’ll try something else that is free-to-try and it’ll be good enough.

Very insightful. Give customers something free that is easy to get started with. Wait for the customers who would likely do business with you to follow through with that intent. And hey, if these customers buy commercial licenses, that’s cool. Don’t sweat the customers who will never pay for ‘value’.

 

The Internet May Be a Sucky Customer to Base Decisions

Back in the day, Sun was riding high as a result of its success with Dot Coms. It was all going to be different; brick and mortar customers were laggards that “didn’t get it”, the future was in the hands of Dot Coms. Sun bet on the dot coms and well, you know the rest.

It’s important to revisit that before validating strategies based on “Internet companies” of today.

Jonathan reports the following and Matt uses it to validate his beliefs that OSS is the only way forward and that the support-based business model rocks:

“We held an event a few weeks ago to which we invited a broad spectrum of such customers, one room filled with CTO’s from some of the world’s largest on-line companies (whose brands nearly everyone would recognize - the internet as a social phenomena is in full swing);”

“Not a single company in the CTO room paid for software.”

“In contrast, not a single company in the CIO room allowed free software without a commercial support contract. Not one. Validating the notion that for more mature/diverse companies, the cost of downtime dwarfs the cost of a support contract.”

It’s surprising that Sun/Matt believes that the support business model is vindicated using this information from “Internet CTOs”. I say this considering Red Hat, JBoss and MySQL, the 3 best known OSS brands/companies have all shifted away from a support business model. These vendors are selling software, they may call it something else, but in the words of some British guy, “would a rose by any other name be less tasty?”

 

Sun’s $1M grant to Sun’s FOSS Communities

Simon (Chief OSS Officer at Sun) talks about Sun’s $1 million dollar grant to Sun controlled FOSS communities.

Net/net: Sun will take $1M and divide it amongst six Sun owned/controlled FOSS communities. The communities will propose how to use the cash to award contributors. Sun will approve these proposals with modifications as required. The program seeks to reward innovation.

Simon states:

“Sun will be announcing a multi-year award program in support of fostering innovation and advancing open source within our open source communities.

….

This year’s participants include OpenSolaris, GlassFish, OpenJDK, OpenSPARC, NetBeans, and OpenOffice.org.”

Yes, the 6 OSS communities are Sun owned/controlled projects. This shouldn’t be a surprise. Sun is a business, and it’s their legal duty to improve returns for shareholders.

I’m not sure why a vendor would have to pay OSS developers to contribute to a project if (A) doing so is not already part of their day job, or (B) the developers isn’t getting more benefit out of the project than they are inputting. I’m all for hiring the top contributors to a given project if they aren’t already paid to work on the project.

This seems awfully like an attempt to use cash to drive interest around projects that may need more interest. Does anyone remember Red Hat/JBoss, MySQL, or other leading OSS vendors doing something similar? I can’t, but I don’t know/remember everything.

The only obvious point, as highlighted by the announcement in Bangalore, is that this cash could help attract developers from emerging countries into Sun controlled OSS projects. But the following statement from Simon suggests that the awards will go to current community members.

“We are wanting to recognise and reward innovation, which we fully expect to come mainly from existing community members including the many already employed to work on software (though not Sun employees since Sun is the sponsor of the awards). It’s about sharing the wealth.”

Maybe I’m over thinking things and it’s “just about sharing the wealth”. Stranger things have happened :-)

 

Sun & Software

Matt Asay & Larry Dignan question whether Sun can grow. Matt believes that Sun needs a stronger software story in order to grow. Sun grew 1% YTY in the most recent quarter. Yay for open sourcing everything?!?

Sun has great hardware products. Their main revenue generating software successes have come from software that is tightly linked to driving more hardware sales. Solaris and Sun’s storage software are examples of this point. Like Sun, HP has great hardware products. Sure, HP does some software, but at the end of the day, the software (like OpenView) is tightly linked to driving more hardware sales. Sun is more like HP than its willing to accept just yet.

Sun’s revenues are over $3B a quarter (~$14B for the year). Sun would need an additional $300M/quarter of software business to show 10% growth. Even if Sun swallowed Red Hat tomorrow, Red Hat’s ~$500M in revenue would result in 3.4% revenue growth for Sun. One could argue that additional software could drive additional server revenue for Sun. It could, but customers have decoupled their software and server purchase decisions years ago, so there is no guarantee.

The future for Sun isn’t in a stronger software story. Sun has never had a strong software story. While open sourcing everything makes for great PR, OSS hasn’t and won’t drive significant (near or long term) revenue for Sun. Do the math…sorry, it had to be said.

The best advice for Sun is to focus on what they’re good at. Servers and storage.