Despite Java's 'Ubiquity,' Sun's Financial Benefit From Technology Remains Unclear

But what he didn't explain fully in his opening keynote at the JavaOne 2004 conference--something that has been a big question mark for the beleaguered systems vendor since Java's inception in 1995--was how Java and its related applications are contributing positively to Sun's own revenue stream.

There were few surprises in Schwartz's keynote, the first of several during JavaOne's weeklong run in San Francisco. As expected, he unveiled the release of Java Studio Creator, a visual drag-and-drop tool for building Java applications, aimed at corporate developers; and revealed Sun's plans to open-source its Project Looking Glass, a next-generation, Java-based desktop operating system interface, and related technologies such as Java 3D.

He also, with the help of Sun Executive Vice President John Loiacono and a stuffed Tigger doll, introduced the final release of J2SE 1.5, the code-named Tiger release of the standard for building desktop Java applications.

Schwartz, who previously led Sun's software division before being promoted to his current role in April, outlined a host of new applications that are contributing to the "ubiquity" of Java, which he characterized as a $110 billion-per-year IT spending opportunity. All of these applications represent new revenue opportunities not only for Sun, but for developers, solution providers, vendors and carriers to provide network infrastructure to support the applications, he said.

"This is an economy that is accelerating as the network is accelerating into the farthest corners of the world," Schwartz said. "The way we get it to grow faster is to build it into application environments that are nontraditional."

Some of the "nontraditional" applications demonstrated were a new, Java-based medical system from a company called MedicTouch that records telemetry activity through a cell phone, and a new communications tool from Canadian company QNext that enables live video chatting through a traditional instant-messaging interface by leveraging Java.

In fact, innovations in client-side Java applications were a dominant theme of Schwartz's talk and where he said many of the new wave of Java applications are being born. "Clients are back," Schwartz proclaimed.

Schwartz said that several years ago, the dominance of one vendor--that is, Microsoft--in the desktop operating system market discouraged competitors from leveraging Java to build compelling alternatives. Now, with the explosion of Java particularly in the mobile space and the Tiger release of J2SE and its performance enhancements, there is an opportunity to use Java to innovate on various client-side devices again.

"People continue to invest in this idea that if you build a platform that runs across everything, if you're building a mobile application, you're going to write in Java," Schwartz said. "Why? Because it gives you the broadest reach in the broadest marketplace. If you're an enterprise developer or a consumer application developer and you're not developing in Java, you're going to miss the market because the market will run across a diversity of devices."

While few will dispute that Java has been an enormously successful technology for network-based applications, Sun has been one of the less profitable benefactors of that success. The company has always struggled to monetize its Java investment, and has seen competitors BEA Systems, IBM and Oracle win more market share in the hotly contested Java application server market.

Though Sun has made some interesting packaging choices recently by offering subscriptions for bundles of Java software with the Java Enterprise System and the Java desktop system, the Santa Clara, Calif.-based company continues to derive most of its revenue from its traditional business--hardware.

That scenario isn't likely to change anytime soon, as even Schwartz will admit. In a post-keynote Q&A session, he said that Sun will benefit from the revenue opportunity created by new Java applications on a range of networked devices by providing the infrastructure to support the networks running those applications.

"Consumers will put demands on the network that require large-scale infrastructure," Schwartz said. "The largest opportunity for Sun will be in delivering that large-scale infrastructure."

But at the same time, Sun is pondering a contradictory strategy to emulate wireless carriers by giving hardware away for free or for a very low price with subscriptions for services, Schwartz said. In his keynote, he proposed the idea of offering a developer subscription and an Opteron-based Sun server on eBay with a reserve price of $1 or 50 cents, and allowing developers to decide how much they would pay for such a package.

While the idea might have been introduced for shock value, it's clear that Sun is open to any and all suggestions of how it might persuade customers to purchase products and services from the company. "Providing more options to customers makes Sun easier to do business with," Schwartz said.

And while Sun tries to come up with its own ways to win new customers and make money to return the company to profitability, Sun executives certainly won't discourage partners and competitors from coming up with new and better ways to proliferate Java in the marketplace. Quoting Sun co-founder Bill Joy, Schwartz said, "Innovation happens elsewhere," reiterating the notion that the Java ecosystem is far more important to Sun that Sun's sole investment in the technology.

"Why has such an incredible amount of innovation taken place [on cell phones]?" Schwartz asked. "Because the competition has been absolutely brutal."

By continuing to promote this kind of competition in the Java market, new ideas will continue flourish, and with those new ideas will come new opportunities for revenue, he said. Whether Sun will leverage those opportunities to turn a profit in the near term is still anybody's guess.