Breakfast In The Valley
Sun Vows Fight For Workstations
By Jim DeTar
electronicnews.com
An interview at Electronic News' San Jose headquarters, Masood Jabbar, president of Sun Microsystems' Computer Systems Division
In an interview at Electronic News' San Jose headquarters, Masood Jabbar, recently appointed president of Sun Microsystems' Computer Systems Division (CSD), revealed that Sun is currently launching a series of initiatives to drive a wedge for Sun in the Windows 95/NT workstation/ server markets.
According to Jabbar, Sun Microsystems Inc. overall is operating at a 50 percent gross margin, and has been for the last four quarters.
"We are the only company, other than Dell, that has consistently grown in double-(digit) revenue and double-digit profits for the past 16 quarters. And why is that happening? Because we have a very clear message to our customers and to our organization.
We Are The Alternative
"We are the alternative. Not only are we the alternative, we are a superior alternative to other paradigms in terms of opening it up; and that's the reason why you're seeing what you're seeing out there."
Jabbar vows that he is going to "take back" the share of the workstation market lost to Compaq, Dell and other companies using Intel-compatible processors and the Microsoft Windows NT operating system, as well as his traditional rivals Silicon Graphics Inc. (SGI) and Hewlett-Packard.
He concedes, however, that the Wintel duo have a near lock on the PC market which gives them a significant advantage in the workstation market.
Jabbar said that the cornerstone of his strategy is to wrest market share from these companies by cutting costs and prices, and by entering new markets such as the redundant systems market currently dominated by Compaq/Tandem.
"The priorities for Computer Systems are as follows: I will grow my division faster than any of my competitors. So I'm putting that stake in the ground, have given that goal to my organization of close to 13,000 people. Everybody understands that.
"I am going to retake-to take back-the workstation market."
Martin Gosler, senior analyst, desktop market, for market research firm In-Stat, commented that Windows NT servers are less expensive than their Unix counterparts, accounting in part for the increasing acceptance of Windows NT workstations.
"What's happened is Wintel servers have begun to take hold in the market. They are less expensive and, once Windows 2000 comes out, they will begin to approach the utility of Unix workstations with the reliability of standard processors and extremely competitive prices. We project over time the Wintel workstations will take more of the market share.
"What's holding up a lot of NT is the release of Windows 2000. When that is fully functional, there will be some real competition between Unix and Windows NT. Unix will always have the high end of the market but as time goes on more and more Windows systems will proliferate."
AOL Pact A Boon
Sun's recent agreement to join with Netscape and AOL gives it yet a stronger position in the enterprise server market, Gosler said.
"Sun is linked now with AOL and Netscape. That's kind of a dream come true for Sun because since they developed Java they will have that platform with outstanding servers and workstations to move forward. The agreement they just signed with AOL presumes they will provide servers to AOL. Assuming this agreement just concluded goes through, they will do well," In-Stat's Gosler added.
One of the weapons Jabbar will employ in his campaign to "take back" the workstation market is pricing. He said he intends to make Sun the most competitive company in the market in terms of pricing.
"I'm going to be very aggressive on price. I already am. And the beauty of it is, we actually make more money on our workstations than a comparable Compaq workstation.
"Why? Because I don't owe any royalties to anybody. If you take a look at who makes money in this business, other than Microsoft and Intel, there are not very many people who make a lot of money in the PC business, high-end or low-end. I don't owe anybody any royalties, so that's why I can put that claim out there, take that profit."
Having committed to being a price leader, the second priority on his agenda is to bring the company in line more with the realities of an Intel/Microsoft dominated market.
"Most of my customers have a heterogeneous environment, and I've got to find a way to interoperate with them," Jabbar said.
As part of this new willingness to recognize the customer's right to choose the Wintel option, Jabbar said Sun has licensed a Windows NT 4.0 kernel through AT&T Advanced Server for Unix.
"We have gone and licensed from AT&T the NT 4.0 services layer. It's not NT 4.0, the entire OS; there's a service layer that sits on top of 4.0 that allows you to authenticate, that gives you access to directory services, gives you an access for shared services.
"We were doing a pretty good job of servicing an NT client from a Solaris server, but it was very hard to co-exist in the NT-dominated server environment, and drop a Solaris server in there, because we could not authenticate off a Solaris server. But this technology allows us to do that. So now, for example, I have large customers that had over 800 NT domain servers. By dropping a Solaris server in there, we can cut that (number) in at least half," Jabbar claimed.
He said that one of Sun's strengths is the ability to run multiple applications, thereby allowing the elimination of servers. "NT today doesn't run multiple services on a single server; it doesn't run multiple applications on a single server. Well, that's what we do best, OK?"
Despite having licensed the Windows 4.0 services layer, Jabbar still contends that Windows is not an open platform, saying that Sun's platform is every bit as open, if not more so.
Tom Henkel, senior analyst, Unix servers, at Gartner Group noted that Sun has been doing well but said he sees potentially serious flaws in its current strategy including this reluctance to support Windows NT.
"Sun has certainly been doing very well in the past several years, particularly in the enterprise server arena. They have gained market share on HP, particularly at the high end, and become one of the top two Unix variants, the other being HP. In 1993, Sun was primarily a workstation company with no presence in the enterprise market.
Key Concerns
"There are a couple of key areas that concern me, though. One is that while Sun is doing very well, with strong ISV enthusiasm, one of the things that scares me is I think back to Digital in the 1986-'87 time frame. Digital was having blowout quarters, with its stock flying high. It's a similar picture with Sun, a healthy company being fueled by its ultra-enterprise server family.
"None of the other families at Sun is strong enough to pick up the slack if something happens to the enterprise server. Either through self-impact or changing market conditions, pain is going to become quick and severe for Sun if that happens.
"A second issue is Windows NT. Sun has been less than enthusiastic about supporting Windows NT. A couple of months ago Sun announced support for AT&T Advanced Server for Unix. But Sun has no capability to fully support Windows NT. AT&T Advanced Server doesn't support NT 5.0 or 5.X. Another important factor is, unlike Sun's competitors like IBM or HP, Sun doesn't have any relationship with Microsoft, unless you call court appearances a relationship.
Jabbar said he is currently taking two actions he is convinced will make Sun more competitive in the workstation market. The first is a large deployment of Oracle's database software.
"As we speak, I am deploying Oracle's largest implementation on the planet inside Sun, for my business. This project is called SunPeak. And this is our version of the ERP (enterprise resource planning) with Publish and Subscribe technology. We have the information highway, where we have real-time information."
Sun began rolling out the huge implementation last month and will gradually ramp it to include Sun's entire Computer Systems Division.
"We'll start off with 2,500 users, and these are dedicated users, and we'll scale up to almost everybody in the company touching it. We have 26,000 employees now. That gives us a very good infrastructure to build efficiency within the company.
"The second thing we're doing is 'e-Sun,' where I'm going to essentially hook up the entire supply chain and the order-management or the order-entry side, to take a lot of the cost out and lower our cycle times. And we're revamping our shop-floor systems through manufacturing efficiencies and efficiencies in our order-processing and order-management side. So that's a huge effort that is going on."
Jabbar said that his goal is to shave two points from expense costs. The program will be rolled out over the next two years. Jabbar admitted that Sun's relatively high current profit margins will not be indefinitely sustainable.
"I'm planning that they are not sustainable. I'm planning to have my margins come down. And, in order to provide good return to the shareholder, I've got to find money elsewhere."
Another priority that Jabbar has established is to increase Sun's presence in the workgroup server area. This is a place where the company was not even a contender three years ago. "And today, in the UNIX space, we are (the) number one workgroup server. But more importantly, in the overall workgroup-server market, we are number four today. That's a huge market."
The emerging electronic commerce market is not only one that Sun is targeting but, according to Jabbar, a segment in which it has already established a dominant position.
"I want people to know that when they are thinking of an e-commerce solution, there isn't a better platform than Sun, notwithstanding IBM's e-business ads."
"In the e-commerce area, the top five ISPs (Internet service providers) in this space derive more than 80 percent of their revenue on our platform. As I said, notwithstanding IBM's e-business ads, we are the number one e-commerce platform out there. I don't think a lot of people know that. That's a best-kept secret."
In order to get the message out that it holds a strong position in e-commerce, the company is this month kicking off an elaborate marketing campaign, Jabbar said.
3-D is also a central element in Sun's workstation strategy as the gaming, desktop presentation and Internet markets burgeon. Sun is continuing to evolve its Java 3D technology to that end.
"We've got, in our instruction set, a very robust graphics capability, with VIS and Sparc-UltraSparc-visual instruction sets. And-the road map that I have for graphics-nobody even comes close.
Sun Driving Visualization?
"I think you will see Sun driving visualization, texture mapping, to a whole new level. The total UNIX workstation market is not growing, as you very well know. Why are we growing? Because we are taking market share away from the SGI's (Silicon Graphics Inc.'s) of the world."
"Anybody can license Java 3D. The APIs are all exposed. The implementation is our advantage."
Profiling Sun's Systems Operations
Sun Microsystems Computer Systems Group (CSG):
President: Masood Jabbar, a 25 year industry veteran. Jabbar has responsibility for all aspects of developing, manufacturing, marketing and selling the Sparc workstations and servers. Joined Sun in 1986 and has held a number of senior management positions including VP of finance and planning for Sun's field organization, director of marketing for the U.S. organization and general manager for the Interactive Products Group
Prior to Sun he was employed at Xerox where he worked in product, corporate and field organizations. He holds an MBA, an MA in international management from the American Graduate School of International Management, and a BA in economics and statistics from the University of Punjab, Pakistan
Number of employees: approximately 13,000 (of an estimated 26,000 total employed by Sun)
Headquarters: Palo Alto, Calif.
Described as: the last standing fully integrated computing company adding its own value at the chip, operating system and systems levels
Cash position: nearly $1 billion in the bank
Focus: CSG provides network computing systems including workstations, servers and thin clients
The movement of Intel into the workstation market in recent years has not thrown fear into the heart of Sun yet, Jabbar said. He didn't use the well-worn industry phrase that he "welcomes the competition." However, he compared the two architectures, saying that Sparc continues to be one of the strongest platforms for desktop systems.
"Andy Grove has said that Merced, to become fully deployed on the desktop, will take, what, eight to ten years? Do something in my lifetime!
"Do I worry about Merced? Yes. But I'll worry about it when I see it. Nobody's seen it yet. I've already shipped over a million 64-bit microprocessors, you know, and I know how hard it is, and I know how hard Intel is finding it. So you've got to give us some credit in terms of what we have been able to execute."
Jabbar contends that Hewlett-Packard's position in the workstation market has been hurt by Intel's decision to delay introduction of Merced from the original mid-1999 target date until the year 2000.
"Why do you see HP running all these UNIX ads? Because they bet the ranch on NT or Merced and all of a sudden they are hurt because their customers don't take them seriously about their future direction; because they've already made a statement, declared where they want to be. They've got a huge budget now for UNIX ads."
The storage market also provides significant opportunity for Sun, according to Jabbar.
"We just announced in September that we will provide storage for NT devices as well as Solaris, so we are executing on an open-storage strategy. We have interoperability with MVS, with the mainframe environment, with HP-UX, with NT, and with Solaris, so that about covers it.
"I don't know if I want to spend a lot of money trying to hook up to everything else, because it's expensive to test and make sure that data sharing is possible." Sun buys disks from other companies and sells them in RAID (redundant array of inexpensive disks) systems.
Jabbar also said that Sun intends to challenge fault tolerant systems makers like Tandem head-on as well as by adding fault-tolerance features into Sun workstations. Sun counts among its current telecommunications customers Alcatel and Fujitsu, Lucent and Ericsson.
"We are taking some of that technology and putting it into our core platform, some of it. And then some of it is truly, truly fault-tolerant, you know. This is seven 9's: 99.99999 percent uptime."
Sun's drive into the redundant systems market is primarily targeted toward the telecommunications companies for now.
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