The End of Sun?

I see that, while server sales overall dipped last quarter, Sun was hit the biggest. This is not surprising, given that Sun has been diminishing in relevance in the server market for the past few years now. With the rise of Linux and commodity Intel servers, and the decline of vendor-specific UNIX implementations (like Solaris, HP-UX and AIX), Sun has been the one hit hardest, while Dell, HP and IBM have benefited. Unfortunately, this starts a bit of a death-spiral for Sun: reduced revenue and profits is less money available for R&D and changing the company’s direction, which means even fewer sales, less revenue, etc.

It isn’t like the industry shift was a big surprise for Sun. They saw it coming, and were starting to move toward commodity-level Intel servers while still offering their SPARC-based machines. IBM was doing the same with their Power line, building both Intel-based servers and Power servers (running AIX or Linux, or both with their VM technology). IBM also continued with AIX, OS/400 and zOS, adding Linux to their stable of offerings. However, HP was moving away from their collection of different CPU’s (MIPS, PA-RISC, HP3000) to Itanium and Pentium/Xeon, basically outsourcing all their CPU effort to Intel and focusing on the packaging and the software. HP also retired a number of operating systems, to simplify it down to HP-UX and Linux. Dell stuck with Intel-only. All of them offered Windows-based servers as well.

So why has Sun been hit so hard? Its not like their strategy was radically different from IBM (offer their own OS, along with Linux). I think that Sun was hit by two things. First, while they offered Linux as a solution, they didn’t have the same level of experience or facilities for building commodity hardware that vendors like IBM, HP and Dell have. While IBM and HP have long and deep experience with proprietary systems, they also have a lot of depth building generic Intel-based machines. Dell’s bread-and-butter are commodity machines. All 3 have a lot of experience at leveraging vendor streams and driving out costs. Sun has some, but I’m not sure they had nearly as much. Sun also has a very different culture than HP, IBM and Dell. They tend to get caught up in the technology and the “coolness”, and aren’t as geared to “design it fast, build it cheap” as vendors who are used to high-volume/low-margin selling. It meant that, at times, Sun was more willing to push the edges of things, and go for faster/better/cooler (with some pretty neat stuff as a result), but when you rely on volume, volume, volume, that isn’t as important.

The second thing that hurt Sun was the “feedback loop” that bad news can cause: Sun isn’t doing well, so people start to move away from Sun, so Sun does worse, causing more people to abandon the brand. Rinse and repeat. There probably was a point where Sun might have been able to recover, but it appears they are past the point of no return. I’m not sure that the Oracle deal will change that, assuming it will eventually go through. The uncertainty about the Oracle-Sun deal simply contributes more ballast to a sinking ship, driving it down further. I know its not statistically significant, but when I look at new server projects I’ve been involved with, and others I know about, very few (if any) have Sun on the list of server vendors to consider. Again, looking at projects and installations I know, those that have Sun gear have been replacing it with IBM, HP or Dell more often, not with new Sun equipment. I don’t know for sure this is the larger trend, but I wouldn’t be surprised if it is.

So what happens to Sun? The path will depend on the results of the Oracle deal, but I think the ultimate destination is the same. If the Oracle deal happens, we could see some systems dedicated to running Oracle, but over time, I would expect to see Sun continue to be removed from the server room, perhaps at a slower pace. I’m honestly not sure what Oracle thought they were buying, but by being a hardware vendor, they are competing directly with their “partners” in HP and Dell, and further encouraging IBM to find a way to push DB/2. Other than owning Java and getting their hands on MySQL (which it turns out they may have to part with), there’s not that much left of value inside Sun.

Without the Oracle deal, I think Sun’s exit from the server room will accelerate over time, leaving Sun primarily with Java and MySQL as the only technologies worth anything. Solaris will become another “me too” UNIX variant with a niche base.

Either way, Sun will be done as a server vendor in the medium-to-long term. Its sad, because Sun used to be one of the leaders. They were an important part of the rise of RISC, and the resultant evolution of other CPU architectures in the industry. Solaris was a benchmark for operating systems in many ways. I think that only a company like Sun could come up with Java, or could truly appreciate MySQL. But being technologically “better” doesn’t always translate into long-term market success, and it will be unfortunate to see them go.


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