Sun's Bid to Rule the Web
Business Week
Asian Edition
By PETER BURROWS
Last year's eBay crashes prompted Sun Microsystems to embark on a mission: To become as dominant and reliable as Ma Bell was
Late last June, Sun Microsystems Inc. President Edward Zander got the kind of call every tech executive dreads. After eBay Inc. suffered a 22-hour outage of its Web site and a spate of smaller crashes, CEO Margaret Whitman called to tell Zander that the problem was a bug in Sun's top-of-the-line server. Sun would learn something just as startling over the next few days of round-the-clock meetings with eBay: The Internet upstart didn't have a clue about running a $1 million-plus computer. The company hadn't provided sufficient air conditioning to keep the machine cool. And even though there had been a software problem with the machine for which Sun had issued a patch many months before, eBay had simply neglected to install it. The list went on--fueling the sentiment, as one Sun manager put it, that ''selling computers to some of these dot-coms is like giving a gun to a 5-year-old.''
That's when Zander realized things could get much worse. For most dot-coms, starting their business on a Sun server is
almost a given. Already, more than 40% of the servers found in the computing centers that house most Web sites are
Sun's, and that market is expected to boom as everyone from new Net companies to the click-and-mortar crowd set up
shop online. ''It suddenly hit me,'' says Zander. ''How many future eBays are buying their first computer from us this very minute?'' Adds Sun CEO Scott G. McNealy: ''It was our Pentium moment,'' comparing the eBay incident to the lesson
Intel Corp. learned in 1994 after the chip giant angered customers by initially trying to downplay a bug in its new
Pentium chip. ''That's when we realized it wasn't eBay's fault,'' says McNealy. ''It was our fault.''
McNealy and Zander didn't need another wake-up call. Since then, the two have been tearing apart Sun and rebuilding it
in an effort to make the Net as reliable as the telephone system. Just as AT&T became Ma Bell, providing that always
available dial tone, Sun is shooting for no less than Ma Web, the supplier of super-reliable Web tone. To do that, Sun is moving far beyond Web servers to providing many of the technologies required to make this possible: storage products, a vast array of e-business software, and consultants that not only supply all the gear but also hold customers' hands every step of the way.
Safe bet. If the duo can pull it off, Sun could emerge as the King of the Net--every bit as dominant as Big Blue in its mainframe heyday or Microsoft Corp. in the PC era. Just as high-tech managers used to say, ''No one gets fired for
choosing IBM,'' Zander aims to have the same said of Sun. ''I want to be the safe bet for companies that need the most
innovative technology,'' he says.
Sun hopes to go down in the history books as that rare company with the vision to change an industry and the ability to cash in on that vision. Since it was founded in 1982, Sun has promoted the notion that ''the network is the computer,'' a view of computing where the action isn't on desktop PCs but on big central servers where computing can be doled out in
easy-to-use chunks, wherever and whenever desired. With the explosion of the Internet and rapid deployment of
high-bandwidth networks, Sun's vision finally is becoming a reality. ''McNealy held out for the pot of gold,'' says Bill
Raduchel, a former Sun executive who is now chief technologist at America Online Inc. ''It took a decade to play out, but now the pot of gold is here.''
That's why Sun has been on a tear. In the most recent quarter, revenue climbed 35%--more than any other computer
company, including PC darling Dell Computer Corp., which grew 30%. Sun is growing faster than at any time since
1991, when it was one-fifth the size it is today. And with gross profit margins of 52%, it is the most profitable computer maker in all of techdom.
McNealy vows this is just the beginning. Known for having the strategic vision, slickest sales reps, and hottest new
products--but not the best service--Sun has made reliability the top priority. That means pumping up the services
business and overhauling the way the company designs and sells its products. In the past year, Sun has reduced the
number of configurations it sells from thousands by pushing customers to choose from under 200 models. And now,
managers and sales reps are compensated largely on customer satisfaction. What's more, McNealy, a sometime golfing
buddy of General Electric Co. Chairman John F. Welch, has become a convert of GE's Six Sigma quality program that
builds in checks to make sure customers' operations stay up and running. By far, the boldest element of McNealy's plan
is software. Sun is trying to define and dominate a new category of software that combines many of today's e-business software segments, including e-mail, e-commerce portals, and programs for serving up Web pages and wireless
applications. The idea: Wrap a suite of applications into one fail-safe whole available on any Sun server. On July 17,
iPlanet, Sun's Net software joint venture formed with AOL last year, unveiled the new suite, along with an audacious
goal: Within 18 months, the company expects to hit the $1 billion mark in e-commerce software sales, according to
Margaret Breya, iPlanet's vice-president of marketing. By 2005, she says Sun could have a $5 billion to $10 billion
software business. Other executives, however, say it may take a buying binge to get there.
Put it all together, and Sun is designing its own take on an old trend: vertical integration, in which it sells software,
hardware, and services as one--just like telecom equipment makers Lucent Technologies or Nortel Networks Corp. do
with their phone switches. ''The computing model of tomorrow is the telecom model of today,'' says Masood Jabbar,
Sun's senior vice-president of sales. How does Sun fit in? It plans to make the ''big frigging Webtone switches,'' as
McNealy calls them--the powerful servers that can whisk billions of bits around the Net, along with the software that manages Web pages, dishes up data, and executes transactions. ''The world's moving in our direction at 8 gazillion miles per hour. Our biggest problem is just trying to keep up,'' says McNealy.
Great article. See more at businessweek.com
Best regards. |
