Why Sun Microsystems can’t go it alone

Like everyone else, I have been looking what would happen if IBM were to buy Sun Microsystems. I actually thought it sounded pretty good. IBM would get hardware, some database, virtualization, cloud, and operating system software. Oh, and did I mention that they would control Java. But it sounds (at least as I am writing this) the negociations have broken down. Greed is an interesting phenomenon. Prior to overtures by IBM, Sun’s stock price was around $3.00 a share. IBM was offering as much as $9.50 a share.  I actually thought that price was a bit high — but what do I know.

So, what happens now? I suspect this little drama is far from over. It is possible, if rumors are to be believed that Sun’s Chairman Scott McNealy will take over the reigns of the company once again to try to restore the company to its former glory. It has happened before. Steve Jobs returned to put Apple back on the right path. Michael Dell is trying to turn Dell into the innovator that it had been a decade ago.  Will it happen this time? I think that there are some difficulties with this plan, if it is indeed true. A lot has changed since Sun declared in the 1980s that the network was the computer. Clearly, the company leadership was right. I was an observer of the pragmatic and brilliant marketing company that Sun became in the 1980s, when I worked for its competitor Apollo Computer that was later purchased by HP.

Today, the market is quite different than the market Sun and McNealy had successfully finessed.  Today, the market is consolidating around either very strong global leaders such as IBM, HP, Microsoft, Oracle, Cisco, etc. There is a new generation of leaders emerging that had their start in the Internet era such as Google, Amazon, and Facebook and even Twitter. So, is there room for Sun to remake itself in this new world?

I guess that my take is that it will be very hard for Sun to resurface and remake itself. Here are the three main reasons that I have doubts and why I think that shareholders and board members should sell the company to IBM.

1. Sun Microsystems will have trouble regaining hardware leadership.  While it has some reasonable hardware assets, it is not big enough to take on HP or the emergence of Cisco as a hardware players.  Even companies like Google and Amazon play an important role in hardware — in the commodity relm.

2. While it owns some impressive software assets that it has bought over the past decade, Sun has never learned to leverage these assets to propel it into a leadership role.  It has further confused the market by opening sourcing its software. While this might be popular in a down market, it is not enough to create a repeatable revenue stream. I was watching a funny video of Steve Gilmore interviewing current CEO Jonathan Swartz (as a puppet) that I think captures part of Sun’s problems.

3. Is there a single area of technology where Sun can innovate and out shine its competitors? I imagine there might be some hidden jewels that are transformational and will turn the market upside down inside Sun — but I doubt it. I think that as Cloud Computing moves to center stage, Sun could be a player but not a leader. To be successful, Sun will have to find a way to lead in some area.

The bottom line is that I do not see a good future for Sun as an independent company.  I think that the damage has been done. Not only does the company have to regain shaky customer confidence but it quickly has to start making a profit. It is not an easy climate even for the strongest companies.  While it is possible that McNealy will surprise us all and turn Sun from a struggling player in a consolidating market to a leader but it is probably too late.  Customers who are watching this drama unfold will have to be convinced that Sun has staying power — not just for this year for future decades. If Sun tries to maintain independent, I predict a long and difficult path that will not necessarily end in success.

Sun Microsystems and Commercial software: postscript

I have had several comments on my posting about Sun and its acquisition of MySQL. While it is nice that Sun has a software strategy, I would like to point out an important fact — Sun Microsystems is a public company. As a public company, Sun’s management has a responsibility to its shareholders to make a profit. My key question is how will Sun make money from open source? Many of the customers who use MySQL use it because it works well and, most importantly, it is open source and free. While some of these customers will buy a maintenance license, many who have deep technical expertise will not need the help and will not spend the money. Is it possible that Sun will turn MySQL into the equivalent of a $1 Billion plus company? I am skeptical.

I do want to add that I think that open source software is extremely important. There are two primary reasons: open source allows the best minds in software to collaborate to create great innovation; and open source provides customers with the access to that innovation without having to make hard financial decisions at the start. However, with risk comes responsibility. Not all open source software is the responsibility — from both vendors to provide consistency, reliability, and innovation and from customers who need to pick open source software that will stand the test of time.

Is WaveMaker the Web 2.0 version of PowerBuilder?

Some meetings are just fun (I can’t always say that..sometimes I just want to run away and hide under my desk). But my meeting today with WaveMaker reminded me of the type of meetings I had in the .com days. I admit I was excited about what I heard. Now a disclaimer — I haven’t taken a look at the technology itself. I haven’t reviewed their architecture. But I tell you about what I heard and what I liked.

This is not a brand new company. It just changed its name from ActiveGrid (a great name if you are running a data grid company but awful if you are a development environment for web 2.0 for the enterprise).

A lot of the corporations I have worked with and talked to about their SOA strategies are frustrated by the show development groups that bring in cool tools without any knowledge or approval of IT. This problem is as old as IT itself. I remember when I worked at John Hancock in the 1980s, it was common for the actuaries to sneak PCs into their department so they could get something done because IT was backlogged.

The problem has gotten a lot worse since those days. Now, when a department brings in its own development tools and technology, it can cause massive security breaches because these innocent projects happen to touch corporate data and cause decisions to be made out of context. Yet, it continues to happen. It got worse in the Internet days and it is getting worse in the Web 2.0 days — we are all developers and we can use the web to do anything we need for our businesses.

So, what does the newly named WaveMaker do? They provide what they are calling the WaveMaker Visual Assembly Studio. It is a service based approach to development. Everything within the environment is a service. It has web services interfaces so that an organization can default to the corporate authentication and authorization model. The studio generates a pure Java application.

While the company is of the Open Source world — it offers a free version of its development studio to be used for testing purposes. It supports a open source developer community called dev.wavemaker.com. However, it also sells its framework.

The company is really just getting off the group but has about six customers including Macy.com, Brunswick Bowling, National Citibank in Cincinnati, Pioneer Energy, and American Express. Not a bad start. CEO, Chris Keene told me that the reason the company was able to sell to those companies is that the development environment gives the business user Web 2.0 type interactivity and graphical development while keeping control of the computing infrastructure.

What was most interesting to me is the connection that WaveMaker is making with PowerSoft and its PowerBuilder platform — the company that transformed the graphical development process. This was a company that I knew quite well. I tortured the management team when I labeled PowerBuilder the poster child of the Fat Client Syndrome — a term I coined in the early 90s. It is interesting to note that Mitch Kertzman, one of the founders of PowerSoft is an investor in WaveMaker. If the company follows Kertzman’s lead of creating graphical development for the masses of Cobol developers, the company might be on to a good thing.

But, of course, WaveMaker isn’t alone. Companies like Microsoft with Silverlight, Adobe with Flex, and a host of new players such as Nexaweb, Jackbe, and Kapow — I wrote about these companies in my January 20th entry.

What may be different about WaveMaker is the focus on a the connection between the free wheeling Web 2.0 world and the structured world of enterprise IT.

SOA and Unintended Market Consequences

Now, I have been around the software world for longer than I would like to admit (I would be giving away my age if I told you). I have watched many trends come and go. The one consistent pattern that I see is the slow progression over the last 20 years towards distributed computing. There has been a lot of innovation – some that has resulted in some pretty interesting products and companies that made their mark on the world and then went away.

 

The advent of service-oriented architectures is not simply another fad with another set of products and services. I really believe that it will have the same long-term impact as the Internet did when it arrived on the scene as a commercial venture in the early 90s. If one thinks back to those days, many people had no idea of how this quaint piece of technology would actually be used in the commercial world. And, as we say, the rest is history.

 

Just as the Internet produced unintended consequences for the future of computing, I expect that SOA will too. It is my prediction that Service-Oriented Architectures will force a dramatic change in the balance of power in the software world – both on the vendor and the customer side. Why do I make this rash statement? Start by thinking about the implication of SOA. It is a dramatic change in the way software is created, reused, recombined, managed, and sold. From a customer perspective, SOA puts power in the hands of the business user.

 

So, what could change? First, in time, SOA will level the playing field. Today the major infrastructure vendors are all vying for control over who owns the customer’s infrastructure. Will SAP, Oracle, HP, IBM, Microsoft or an open source play, like JBoss be the winner? Will one of these companies convince enough customers to do it their way? Perhaps.

 

But I am envisioning a different possible scenario. Imagine that we get to the stage where vendors converge around codified standards such as XML and everything necessary for creating this highly distributed architectural framework. Imagine that there are enough good adapters that allow components from various environments to easily connect to each other. And now imagine that what customers really want to do is to reuse their existing software assets by encapsulating them into business services that are used over and over again to create new virtual applications.

 

If you follow my thinking here, it opens up interesting opportunities. Here are a few thoughts worth considering:

 

• Customers will take SOA seriously – not just as a technology initiative but as a business strategy – they will demand that industry leaders cooperate to make the customers’ job easier.
• New vendors will emerge that can leverage the SOA work done by infrastructure leaders to provide commercialized services address specific problems in specific vertical markets.
• The first era of the industrialization of software is initiated. Vendors will begin to create modular offerings based on a SOA model that are designed to fit into existing frameworks (kind of like steering wheels that can be used on 20 different car models).
• The packaged application that has been the mainstay of the software industry for the past 25 years begins to transform into these industrial packaging. In time – give us another 10 years – the traditional software package disappears.
• SOA opens the door to a new world where Software as a Service is the norm. This transition will take at least 15-20 years. But it is real and will have a dramatic impact on the entire industry from financial models to the importance of comprehensive hosting providers.

 

This is a lot to consider. A lot of companies are trying to figure out whether SOA is real or just a passing fad. Will the words Service-Oriented Architectures soar as a lynch pin of the future or be edged out by new hot silver bullets? Given the history of the computer industry, it’s not surprising that people are nervous. After all, trends come and go at a rapid pace. I predict that this one is real. But let me warn you: it is not a quick fix. We are, in fact, at the beginning of a big emerging market trend that will have ripples in the software market for the next decade and beyond.

 

 

 

Top Ten Predictions for 2005

While 2004 started out with a whimper for the technology market, it ended with a sense that the momentum that had been missing from the market was finally beginning to take hold. Hurwitz & Associates predicts that the coming year will offer some interesting opportunities as well as challenges. Here are our top ten predictions:

1. Emerging Technologies

Leveraging emerging technologies in innovative ways to transform business will be the key driver in 2005. While many organizations are able to provide a predictable payback from technology acquisition with relative ease, the bar is being raised. The insightful companies are looking for technology to become a core competitive asset. For many industries technology innovation has the potential to transform business practice. We expect that this focus on technology as the foundation for business transformation will become the norm – not the exception. Traditional ROI methodologies will begin to be viewed as outdated. We expect the buying pattern to move away from cost saving technology purchase towards technology that offers business opportunity.

2. Open Source

While the Open Source market will continue to expand at a rapid rate some customers will begin to experience problems because of poor, undocumented implementations executed by inexperienced contractors. Customers will begin to learn the hard way that all open source is not the same. Companies that provide verification and certification of open source offerings will gain major momentum in the market. More software companies will continue to try to regain market momentum by putting their crown jewels in the open source arena. We predict that many of these efforts will be viewed skeptically and will not be commercially successful.

3. Data Quality

Quality in general will become a massive issue in 2005. This crisis will extend both to data quality and software quality in general. Data Quality, traditionally viewed as a back office function will begin to emerge as a major crisis in organizations. Studies are showing that few managers have confidence in the quality of their organization’s data. With tough regulations (Sarbanes Oxley, etc.) bearing down on companies, the quality of data becomes a front office issue. We anticipate that predictable data quality will become a battle cry for many CIOs and their bosses in the coming months. As software becomes the personification of the company, software quality moves form the isolated Q&A department.

4. Integration

How organizations are able to manage their information across departments and across organizational boundaries will be one of the hottest markets in 2005. While many software companies are beginning to leap into this emerging market, most will fail to gain critical mass. Customers will want to buy a well integrated package from a highly trusted source. Therefore, we expect to see many more acquisitions in this market. Those weaker players who are not acquired will go out of business.

5. IT Security

Security is moving from an applications play to an infrastructure play. Today there are thousands of small security companies focused on small pieces of a bigger puzzle. We expect that companies like IBM, CA, HP, Symantec, Novell, and BMC will position them for leadership by providing a consolidated set of offerings both at the infrastructure and the application level.

6. IT Security Innovation

Innovation in security will be driven by the need to anticipate problems before they materialize rather than having to react to threats – a move to real-time and away from reactive security. We anticipate the real action in startups will be in this area.

7. Linux

The Linux operating system will continue to gain significant market share at the expense of traditional Unix and Microsoft platforms. Innovative emerging software vendors are increasingly selecting Linux as their platform in order to compete with larger, more established players. The net effect will be a renaissance in innovative applications that do not need the same funding to approach the market. This will have dramatic implications for the SMB market. The barriers to entry are indeed being broken.

8. Middleware

The definition of middleware will change in 2005. We anticipate that what had been viewed as industry specific packaged software will begin to be seen as corporate infrastructure and middleware. This has the potential to change the balance of power in the market. Oracle’s acquisition of PeopleSoft will start an avalanche of acquisitions by unexpected players who have not been in the packaged software market.

9. Software As A Service

This is the year that software as a service will become the norm. Increasingly, we are seeing customers accept that software can and should be bought as a service rather than in a perpetual license mode. This model will change the dynamics of software: it will be much easier for companies to walk away from their vendor if they become dissatisfied.

10. Software License Management

Being able to more easily manage software licenses will become a major market factor in 2005. Until now, it has been difficult for large organizations to know what software is installed on desktops and laptops throughout their organization. Activity will be driven by a combination of increasingly tight budgets, regulatory demands for accuracy in software fees, as well as security concerns, Increasingly, companies are unwilling to pay for software licenses that users do not access and do not need.