November 15, 1999
Heavyweight Bout
Sun Microsystems and Microsoft slug it out
in a debate over the future of computing
By DON CLARK
Sun Microsystems Inc. has long been a thorn in Microsoft Corp.'s side.
More than any other computer maker, Sun has
resisted using Microsoft software and
promoted a series of technologies to reduce
customers' dependence on the Redmond,
Wash., giant.
The two companies, for example, are locked in a legal battle prompted by
a contract to license Java, the Sun programming language that can be used
to create software that doesn't require Microsoft Windows. Sun, based in
Palo Alto, Calif., also backs the idea of network computers' desktop
alternatives to personal computers that run Java programs delivered over
the Internet.
Until recently, Microsoft has gotten the better of the argument. Java
software still isn't widely used on desktop machines. Network computers
fell victim to low-priced PCs and even simpler computer terminals.
Lately, however, Sun's rhetoric has been lining up with a new marketplace
reality: More companies are shifting applications software from PCs to
server computers connected to the Internet. That's good for Sun, since its
servers and variants of the Unix operating system are often used to run
Web sites and host other programs.
Microsoft, of course, also sells its Windows NT or forthcoming Windows
2000 operating systems for servers, and has products such as Windows
Terminal Server and WebTV to let devices besides PCs act as clients to
the Internet and server-based software. But investors seem to see a shift in
momentum: Sun's stock jumped 117% in the first nine months of this year,
compared with just a 31% rise for Microsoft.
To sort through all the possibilities, we posed a series of questions to two
of the principal combatants at the companies -- Paul Maritz, Microsoft's
group vice president in charge of relations with other software developers,
and Pat Sueltz, president of Sun's software products and platforms
division, which oversees Java and other new initiatives. The questions were
posed before the recent antitrust ruling against Microsoft and the
company's announcement of plans to rent its popular Office software over
the Internet next year.
As befits the times, the debate was virtual -- conducted in rounds of e-mail
that gave each executive a chance to respond to the other's statements.
Off the Desktop: Good for Consumers?
WSJ: There's a broad push to move software, and computing
complexity, off the desktop and onto the network. Is this a good idea?
Why or why not?
Ms. Sueltz: We think it's a great idea. Sun has always believed that a
computer connected to a network is much more valuable than a
disconnected one. The network is a resource with far more information
and service capability than any one computer. It can provide access to its
information and services to anyone, anyplace, anytime, on any type of
device.
Sun calls the new model taking shape the service-driven network. In this
model, application service providers, or ASPs, deliver software to end
users via the network. These ASPs administer and maintain the software,
and individuals tap into the network as needed. Because the applications
reside on the network, individual users do not have to install and maintain
their applications, as they do on a PC.
The service-driven network model also yields
another benefit: It broadens and extends the
range of devices accessing information beyond
the desktop. It creates a new class of services
that can be accessed anywhere, anytime, by
anyone connected to the network with any
browser-enabled device.
The network does not replace the desktop; it
extends it, makes it easier to use and much more
ubiquitous. It's no longer a question of whether
the complexity of software and computing will
be moved onto the network. It's a question of how fast will it happen.
Mr. Maritz: There is certainly a role for using server and network
resources, but you have to separate what are customer needs and what are
computer-industry competitive ambitions. Right now we are seeing a great
interest from customers in solutions that reduce complexity in their
computing environment. This desire is independent from where the
software runs; they just want it less complex and easier to use and manage.
We are also seeing a lot of noise in the computer industry that the solution
to reducing complexity is a simplistic approach, that is, running all software
on the server, and giving users nothing but dumb terminals. It generally is
not the customer's desire to throw away the billions of dollars they have
invested in their current computing environment, turn all their currently
productive PCs into dumb terminals and run all of their software on
expensive new servers. Customers soundly rejected this model of
computing when the Unix vendors tried to convince them to buy network
computers.
What customers want is the advantages of the flexibility and compatibility
that the PC brings, combined with using network resources to reduce or
eliminate the cost of installing and administering software. This is what
Microsoft is very focused on and is addressing aggressively with Windows
2000 and associated products such as Office 2000.
Customers want the flexibility to support mobile users with laptops, serious
knowledge workers such as engineers with powerful workstations, as well
as giving users with simpler needs very inexpensive client devices. They
want this without having to rewrite applications or purchase new ones, and
without having to retrain users. This kind of "friction-free" operation doesn't
mean that customers have to go from one extreme of using desktops with
no network resources to another extreme of server resources with no
desktop resources. The PC can and will evolve to be a "happy synthesis"
of both.
Ms. Sueltz: Clearly Microsoft is sticking to the PC-centric model and
minimizing the network. They're also spreading the usual fear, uncertainty
and doubt about alternatives to their model.
The network-based model doesn't require new terminals, doesn't require
throwing away billions of dollars in investment, and doesn't require
rewriting or buying new applications. The network-based model builds on
current systems. The PCs, workstations and other systems we use today
are full players.
It's just like when PCs joined the computing model. They didn't replace
mainframes; they enhanced them by providing new ways to use the data
mainframes held. Computing has never stood still. All the new access
devices simply give people more choices. That's what Sun is all about:
giving people choices.
Mr. Maritz: Networking and now the Internet have been tremendous
boons for computer users, and the vast majority of access to any network
is through the PC. The combination of rich local computing via the PC plus
the network allows users to do far more than in a server-centric model.
The Microsoft approach is to provide a continuum that gives customers the
best of both worlds and the opportunity to choose the distribution of
resources between the client and server that best meets their specific
needs.
If you need to be productive when not
connected to the network, the server-centric
model Sun advocates is a nonstarter. The
classic example, seen on every airplane flight,
is working offline with a laptop. A model that
ignores the laptop flies in the face of reality,
given nearly 20 million new laptops will be
sold this year.
At the same time, the Windows environment
allows customers to run applications entirely
from the server if they so desire, with
Windows Terminal Server. The fact Windows Terminal Server is the only
commercially successful instance of "network computing" underscores the
idea that what is important are the applications that people use, not the
hardware used to deliver them. Putting everything on a server (and asking
the world to rewrite all of its software along the way) may seem attractive
if you build servers, but it ignores the real concerns and needs of many
customers.
How Microsoft and Sun Are Preparing
WSJ: How are you factoring this trend into your company's plans?
Mr. Maritz: Our goal is to work with the customer and partners to
determine the right products, technologies, and business models that will
meet the customers' desire for reduced complexity. Windows 2000 will be
a big step forward in terms of using network resources to achieve the
happy medium referred to above.
We do believe deeply in software as a service, that users should not have
to worry about the details of managing and installing software. But we do
not believe this means all software has to be purely server-based.
Windows 2000 will take a big step forward in making things friction-free in
terms of automatically installing and managing the software, while
continuing to allow existing applications to run, and addressing the crucial
laptop case.
Over the last several years we have made a number of investments in
software that uses the incredible connectivity and reach that the Internet
provides. We have built applications like Microsoft Money that are
designed from the ground up to fully use local client resources for a rich
user interface, but also use Internet resources for rich access to
information. We have also learned a tremendous amount over the last
several years from hosted application services on the Microsoft Network,
including Carpoint, Home Advisor, and Expedia, and from other hosting
and service companies. Separately, the WebTV service has helped us
understand requirements in the consumer entertainment market.
Microsoft is aggressively embracing the trend toward software as a
service, but doing so in a way that we believe is much more realistic for
customers. We are running numerous trials with ASPs hosting Exchange
and other server programs we sell. In addition, soon you will be able to get
Microsoft Office as a hosted service using Windows Terminal Server.
Ms. Sueltz: We've built our business around this trend. Sun builds all the
components from smart cards to mainframe-class Internet servers and
everything in between.
Sun provides the hardware and software plumbing that enables the
service-driven network. Our complete storage and server systems and the
Solaris operating system define a backbone of the network computing
model. From the smallest software component technology to the Java
platform, we're also providing a cross-platform application development
and deployment environment for creating applications for the
network-centric model. We also have consulting and professional services
to architect, design and help keep our customers' network-based
computing environments up and humming.
We're so committed to this model that we've created an entire organization
within Sun dedicated to providing technology, products and services for
the ASP market. Most recently we announced an initiative to deliver our
StarOffice office productivity suite, which includes word processing,
spreadsheets, presentation graphics and more, in a network-centric model
called StarPortal.
We're solidly behind the network-centric model. We're betting the ranch
on it.
Mr. Maritz: We expect the majority of new services to target the PC, not
just because it offers the richest platform for building services, but also
because that is where the largest business opportunity is for service
providers. Moreover, Windows and the PC will continue to evolve and
add new capabilities for service providers to build upon. As new devices
emerge, they will integrate with both the Windows PC and new classes of
services.
Sun, meanwhile, ignores existing customer investments and has decided
this is yet another opportunity to try to convince users that the only way to
access the new software services will be to abandon the PC, rewrite all
applications in Java, buy new dumb terminals, and disenfranchise the offline
laptop user. This approach is flawed and demonstrates Sun's fundamental
lack of understanding about what makes the PC successful.
Ms. Sueltz: The problem with Microsoft's plans is that they continue to
revolve around a proprietary lock-in. You can benefit from the networked
world, they seem to be saying, but only if you use Windows or the
Windows Terminal Server. Proprietary lock-in is anathema to the network
-- to working with customers, partners and suppliers who have diverse
information systems.
The Look of the New Machine
WSJ: What effect will this movement have on the design of the
machines that consumers and workers use?
Ms. Sueltz: The machines to access the service-driven network will be
specialized, smaller, faster, less expensive and everywhere. They will
adhere far more to the consumer-electronics model than the computing
model.
Manufacturers will combine together all kinds of functionality that we've
previously seen in separate devices, such as cellular phones with screens
for browsing the Web. Other devices, such as TV set-top boxes and
equipment built into cars, can also extend our capabilities for accessing the
network. The day is probably not far off when a driver can listen to e-mail
on the road and respond back verbally to an application that will send the
response to the sender as text.
The key to the success of these devices is the fact that they're being
architected on open standards and open protocols, so they can easily
exchange information.
Mr. Maritz: Microsoft is committed to "empower people with great
software, anytime, anyplace, and on any device." So we are working to
define how to best empower customers with current platforms, such as the
Windows PC, and how to provide the best software for new computing
platforms, from cell phones with microbrowsers, to hand-held Windows
CE devices that browse the Web via wireless networking, to Windows
terminals.
We don't see the PC going away, no matter how much our competitors
dream about taking away the power and flexibility of the PC that users
enjoy. Instead we see new devices integrating with existing platforms,
accessing software services that tailor the experience based upon the
capabilities of the devices, so that Windows PCs, Windows CE hand-held
computers and cell phones can all have access to the same application
services and content.
Specifically, we see smart phones, wireless devices, TV set-top boxes,
and Windows PCs as being just a few of the multitude of form factors that
will only increase in the future. We're not saying that the current interest in
applications hosted on servers is driving the design and development of
new classes of machines; rather, that these new devices are demanding
access to applications, content and services on existing server and desktop
platforms and are driving demand for new, flexible software solutions
delivered as services.
Ms. Sueltz: While we certainly agree that PCs will continue to play a role
in network computing, it will be a comparatively small role.
The device world is huge -- and growing fast. In the next two or three
years, the number of information appliances will dwarf the number of PCs.
And as new access devices proliferate, the move to Net-based software
will only accelerate. It's simply the model that makes the most sense for the
most people. And most companies. Even Microsoft sees that -- that's why
they're scrambling.
Mr. Maritz: The PC has already become a highly optimized and
economical device for accessing services over the Internet. New devices
will be additive to the PC, not replacements for the PC. Different devices
have different capabilities, and their usage patterns are different.
Sun's response to this question betrays their unrealistic hope that PCs will
simply disappear. It seems highly unlikely anyone is going to do word
processing on their cell phone or TV set-top box. The PC is where
information is created and manipulated. New devices will allow access to
that information, and many will work better in the presence of PCs. One of
the principal virtues, for example, of palm-sized organizers is their ability to
synchronize with the PC. Microsoft is investing heavily in devices that work
well with PCs. While Sun talks about a future where they hope all these
devices will run their software, Microsoft and our hardware partners have
products in the market today built on Windows CE and WebTV.
Selling vs. Renting Software
WSJ: Software is now mainly sold, with users paying the price
upfront. Increasingly, service companies want to rent software. How
widely do you expect this trend to spread?
Mr. Maritz: Software has been moving toward a rental or subscription
model for a number of years. We expect that some of our customers will
embrace this model, while others will continue to prefer to buy their
software, so we will work with our customers to ensure we meet their
needs.
The move to software rental will be gradual, because there are a number of
technical, business and security issues to be worked out. It is hard to see
major corporations "renting" their core financial software from an ASP
start-up, since there are issues to be worked out. These include the lack of
a more universal business model for these services; the need for standard
agreements about levels of service customers can expect, especially when
computing services are delivered by separate vendors, such as network
operators, data centers and software companies; and widespread adoption
of virtual private networks (a technology for reliably and privately
delivering company data traffic over the public Internet).
Ms. Sueltz: The dynamics and economics of the software industry are
changing. We're seeing an evolution in the way software is built, packaged
and distributed, and it's a direct result of the network economy and the
emergence of industry participative and collaborative development
platforms. Shrink-wrapped software will soon be a thing of the past. The
software industry is clearly moving to a new model of subscription
software and services where new functionality and bug fixes are added
continuously, not every six months.
In effect, you do the same thing with your phone today. Additional
features, like call forwarding, can be added for a few dollars a month. No
installation. No administration. No platform incompatibilities to worry
about. This takes the systems-management responsibility away from the
user and puts it where it belongs: with the service supplier. This makes
computing more like a utility, where the technology behind the system is
not visible to the user. All the user wants is the service; how they get the
service should be as simple as getting a dial tone.
Mr. Maritz: Let's take the phone analogy a little further. The telephone is
a simple device and consequently provides a limited number of services
when compared to what is possible with a general-purpose computer. A
centralized model where someone else decides what capabilities to provide
necessarily reduces the range of options available. Further, with your home
phone you have choices on what services you want to "rent" and what
services you want to buy. Despite the availability of voice mail as a service
from many phone companies, many people still choose to have an
answering machine. These customers may not want to pay the monthly
service fee, or maybe they are happy with the answering machine they
already have.
The point is that the user has a choice: They can use the service offered by
the phone company, or they can have their own answering machine. The
idea that the consumer decides how and where they want to do computing
is fundamental to Microsoft's approach. Harkening back to the centralized
phone system of old where all phones were black and Ma Bell would
decide what services you needed suggests Sun does not comprehend that
computing is an empowering force, not something that must be controlled
from above and reigned in at every opportunity.
Ms. Sueltz: A bigger issue is the technical standards that work with the
new network-based model, such as document file standards that work
with every personal productivity software tool. For example, why should
we have to own a particular piece of software, such as Microsoft Word, to
read a particular file?
How Software Will Be Priced
WSJ: What do you think will be the most popular pricing approaches
for these software services, and what impact will they have on the
profitability of software companies?
Ms. Sueltz: In the network-centric model, software exists in one place: on
the server. That means upgrades, distribution and maintenance of the
software is centralized, and as a result infinitely easier and vastly cheaper.
The cost efficiencies associated with this service-driven model are clearly
changing the business model for software companies.
We're seeing the emergence of a subscription-based pricing model that
provides the software, support and service for a single monthly fee. This
will be a real boon to the users of software, making it easier to acquire and
update the latest software.
Software developers benefit, too, from the cross-platform nature of
Web-centric applications because they will no longer have to go to the
expense of building and porting software to a variety of proprietary
systems. Instead, they can focus on what they really want to do: making
great software that provides state-of-the-art functionality.
Mr. Maritz: There will be many different pricing and business models
around software as a service. But the primary pricing mechanisms will be
based on subscriptions, transaction fees or schemes that give ASPs a share
of revenues or profits that customers generate with the service's
technology. The impact on software companies will be to provide a more
predictable flow of revenues, assuming that the contract to use the
software as a service has standard terms and conditions based on the
above business models.
Ms. Sueltz: When you think about it, why does the software have to have
any particular pricing model? Why does it even have to have a price? Why
can't people expect to have the basic tools they need supplied by an
Internet service?
Mr. Maritz: Distribution and management are not the issues driving new
"software as service" business models. The driver is the move toward the
continuous delivery of software value to customers, and we expect to see
myriad business models similar to the broad experimentation we have seen
on the Internet |
