CRN Interview: Jonathan Schwartz, Executive VP of Software, Sun Microsystems

CRN: Orion seems like a good proposition for customers that are reviewing previous licenses or ones that don't currently have a huge IT investment. What's the proposition for people who have invested considerably in a competing technology?

Schwartz: Everyone who invests a lot, no matter what, pays 22 percent of what they invested again every year. It's called maintenance. We priced Orion to aim squarely at the maintenance revenue being generated by our competitors, which is how we got to an analysis that yielded [that] a [full] Orion license would be less than simply the maintenance in support of most of the app servers that are out there. While you're correct in assuming decisions tend to get made on an episodic basis, that episode is called maintenance renewal, and we can intercept that as well as Greenfield projects, and deliver an overwhelming value.

CRN: What about the cost of migrating the system over to Orion?

Schwartz: Well, if it's not worth it to the customer, then we will fail. I think we've been very careful in studying the opportunity to believe that at $100 per employee we can save millions and millions of dollars for customers who are otherwise hooked on incredibly expensive hand-tooled middleware.

I haven't heard a response yet from IBM or Microsoft. I believe it's because they are befuddled. They can't respond. My response to whatever Microsoft says is the following: We will offer our product at $50 a desktop or at whatever Microsoft's last quote was to their customers divided by two. We will give people a $5 per employee discount or a $50 per desktop discount for moving off a Linux mistake or a Windows purchase.

CRN: What do you mean a 'Linux mistake?'

Schwartz: Everyone in the marketplace seems to believe that if you build a bucket of parts then you can deliver it and if it has a user interface it is a desktop. We have spent hundreds of man-years building an integrated desktop which, if you saw the demo, it's beautiful, it's gorgeous, and that took a huge amount of work. The other guys are just kind of assembling open-source crap and saying, "Hey, we're done."

CRN: [Sun Chairman and CEO] Scott McNealy said that it's a dirty little secret that it wasn't that hard to integrate the products together for your desktop.

Schwartz: He doesn't see the fact that we had to build StarOffice, we had to build Mozilla, we had to build J2SE. Of course it doesn't look hard to Scott, he has to run a 35,000-person company. Why don't you go ask Curtis Sasaki [Sun's vice president of engineering, desktop solutions] if it was hard.

CRN: But there still is a perception that Sun is not a software company. Solution providers have told me that some customers don't even know Sun has software. How do you overcome that?

Schwartz: This is beginning to solve that, obviously.

CRN: But what about customers who think that if they didn't even know Sun had software, how good could it possibly be?

Schwartz: Well, when it comes in their next Solaris update, all of it, we think they'll notice.

CRN: What if they're not running Solaris?

Schwartz: Well then we have some work to do. And that's in part why the price is set as it is, because we can get the industry to notice. When we set the price, what we had to do was as follows. Use a metric that was worldwide and understood. It spanned languages, it spanned industries and employees. And [choose] a price that got us above the din, and the din was the yearly maintenance crunch of hand-tooled middleware. $100 per employee targets both of those issues. I don't know how much more dramatic we could be recrafting what we're doing. I was talking to one of the industry analysts who said, 'I think your competitors are just going to respond.'

CRN: Do you expect that?

Schwartz: Not for a year, and I'll tell you why. What we had to do at Sun was take 3,500 people and put them on one product. Just think about that. You name me another company that has 3,500 people working on one product, because it took a little bit of management change to make that happen. No. 2, we had to turn it into a single part number. So if you have any complexity in your business system, it will take you about what it took us--nine months. We had to create a partner strategy, which is where we got to less than 1,000 employees is partner-only. That took engagement from the partner sales force and the legal teams to build the partnering agreement. We modified the compensation of the sales force, which was rolled out very quietly on July 1. We basically gave them a multiplier for selling software, anywhere from 2 1/2 to 5 times more compensation. And then we did a good nine months of analysis on the impact of infinite right to use on Sun's systems business. For a competitor to respond? Join the fun.

CRN: Sun's partners are going to be a big part of the success of your software strategy, but I've heard that the training and education for them has been sporadic. There hasn't been a widespread effort.

Schwartz: I agree. You're a big part of that. You talk to that marketplace. So by our talking to you, we're talking to that marketplace. We're trying to get the awareness out.

CRN: But I can't train them on how to use it. What are you doing as far as that goes?

Schwartz: We're starting by creating market opportunity. Those VARs and resellers and partners that have been decimated by Microsoft's decision to go direct, and the impact of Dell, and [Hewlett-Packard's] decision to go direct, now have a safe harbor, and it's called Sun Microsystems. And they can sell Intel hardware or they can sell SPARC hardware. They can sell the systems and platforms knowing full well Sun will be there to back them up but not take their business. We have made a very studied analysis of the partner marketplace to know full well the pain that Microsoft and Dell are causing them, so we will start by creating a compelling value proposition. Then we'll just go do the basic education. It's not a marathon, it's a sprint. I wish I could buy every billboard on Route 101 [in Silicon Valley] and every ad on your magazine and others. Sadly, my budget is not that large for things like that. I think we start from a fundamental premise [to] create a value proposition. That's got to be at the foundation of anything we do with partners.

CRN: You're trying to create market opportunity, but where are the partner programs? You have been beating the drum on this for a while ...

Schwartz: But we just announced.

CRN: You've been talking about it and partners have known about it.

Schwartz: But we couldn't implement a program if people didn't have anything to sell.

CRN: But you have sold it already, too, through partners.

Schwartz: We have done hand-crafted licensing with four or five companies who basically said give us the license or [else]. Look, I'm going to Europe in two weeks to do a big partner conference, I'm doing partners wherever I can because I think they play a big role in this.

CRN: Generally what I hear from partners is positive. But they still say Sun is great with its vision but not the execution.

Schwartz: That's what's kind of upsetting. What we announced is the result of execution.

CRN: I think they mean execution in the market.

Schwartz: We have 90 deals in the queue as of yesterday before we announced. Thirty are from customers that have never done business with Sun before. That means a third of our business is new opportunities.

CRN: When do you expect this will start to affect Sun's revenue?

Schwartz: I can't predict. I suck at it like anybody else.

CRN: That's what the big question for everyone is: 'Is Sun going to get some serious software revenue out of this?' I'm sure you're hearing that.

Schwartz: With the global IT industry in decline ...

CRN: Some might say it's on the upswing.

Schwartz: Have you seen evidence of that? I think it's a shared perception that the global IT industry is in a little bit of hurt. The one message I hear from customers more than any other is, 'tell me how I can save money.' Now we have a way for them to decrease their budget and buy from Sun. That has never been the case before. So if they made a mistake in migrating toward Linux on the server, if they've made a mistake on migrating toward XP on the client, we can give them an easy and smooth transition onto us. My expectation is that this will cause a wave of interest. I can't say a wave of demand, for a number of different reasons, the least of which is, none of us are particularly effective at predicting demand. ... I actually view this as the most credible alternative to Microsoft and the most credible alternative to whatever is happening with Linux on the server.