Sun's Fowler: Rising Sales

While Hewlett-Packard, Dell and IBM are the recognized leaders of the X86 server market, one player has surprisingly begun to gain ground. Since introducing its line of X86 servers, Sun MicrosyStems has been making solid inroads against the established players. Editor in Chief Michael Vizard talked with John Fowler, executive vice president of Sun's Network Systems Group, about the vendor's alliance with Advanced Micro Devices and its new subscription-based pricing model.

CRN: What types of new server products can we expect to see from Sun?

FOWLER: The Network Systems Group is going to do a couple of things. Obviously, we're building a product line based on x86, but we're also going to work on how these systems integrate using networking and systems management. So what we've been shipping is an Intel two-way server and AMD Opteron two- and four-way servers and now workstations. In the second quarter of the calendar year, we were just shipping two-way servers, which were the Opteron and Intel servers. The Opteron servers sold extremely well in the quarter.

And then this quarter, the third quarter, we started shipping the four-way server and the one- and two-way workstations. During the course of the year we'll be filling out the product line with an eight-way server, a blade server and a network application switch.

CRN: Are the blades and eight-way servers going to be based on AMD or Intel or both?

FOWLER: They will be based on AMD. Our primary focus is on AMD. We still have an Intel two-way product, but we're putting most of our energy into products based on AMD. This is for a couple of reasons. One of them is we have a very strong strategic relationship with AMD, which gives us all sorts of access to engineering information and favorable pricing and co-marketing, etc. But the other thing is, frankly, with AMD we can build one- through eight-way systems with the same architecture and same chipset, which really lowers our R&D costs. The Opteron also outperforms the Intel by a fairly wide margin, even the new Nacona system from Intel.

CRN: How are SPARC-based server sales going?

FOWLER: During the course of [our fiscal year ending June 30], we experienced a very dramatic rise in unit volume shipments. That was primarily driven by SPARC. So SPARC has enjoyed a resurgence in unit volume in popularity, and then in our fourth quarter we not only rose in unit volume but also rose in revenue for the first time in a while.

CRN: What's driving the resurgence in SPARC?

FOWLER: The SPARC guys have refreshed their whole product line with UltraSPARC 4. And so a new operating system release is coming, which is the biggest release we've probably had in a decade. It has tremendous capability in terms of resource management, security and performance. Our Wall Street customers in particular are seeing huge performance gains.

CRN: How are x86-based server sales?

FOWLER: What we've mostly seen so far is that we have customers who have chosen x86 for portions of their business, so they're not choosing between SPARC and x86. They've already chosen x86 because of Linux or because of price/performance at the low end. And so this is enabling us to bid on business that formerly was only serviced by some combination of Dell, HP and IBM. The x86 server market is $20 billion per year and so what we can now do is try and get a chunk of that.

CRN: How does Sun's subscription-based pricing model work, and how do the guys in the channel need to adjust to it?

FOWLER: There are several variations of the subscription-based pricing model. We have several products including, for example, developer products by which you subscribe to the developer software service and in that you get a free workstation or a free server; obviously it's positioned as free; it's subscription price. And from a channel standpoint, partners get discount points and promotionals in order to go sell the product.

But in particular for the channel, one of the reasons we were doing subscriptions is that a subscription represents a longer-term relationship than just a sales transaction. So whenever you sell a subscription, you have an opportunity in that relationship to sell additional products and additional services. We also sell a variety of our hardware products this way.