Thursday, December 31, 2009

Understanding Sun in Three Easy Steps (1 of 4)

Understanding Sun in Three Easy Steps (1 of 4): "We've been making a fair number of announcements recently - on both the product and the partnering front. That's generated a lot of interest, and a fair number of questions. So I thought I'd take the opportunity to deliver this overview and the upcoming focused discussions on what makes Sun tick in a video format. Let me know if this is useful, or what else we can do to keep you informed via the comment field at the bottom.

We're approaching the end of our fiscal year, and given all the swirl in the economy, I thought it worthwhile to restate where Sun's headed as a company, to let customers, partners, employees and investors see and understand where we're headed. Clarity's always useful, doubly so in times of uncertainty.

Let me start by joining the chorus of those worried about the global economy. I am routinely talking to customers now partially owned by governments, whose share prices have declined 95% or more, whose balance sheets and basic business models are under extraordinary duress. Like every business, our health is a derivative of our customers', and to that end, we've got our challenges - sure, innovation loves a crisis, but only after customers have stepped out from under their desks.

The glass isn't only half empty. I'm also seeing customers who've never had it better, from media startups and telecommunications firms, to government agencies flush with new funding - but they're certainly a cheerful minority.

Sun is privileged to have an exceptionally strong balance sheet, over $3 billion in cash, and a nearly two decade history of generating positive cash flow. We've also got a set of technologies and people that continue to play an ever more vital role in the economy. Sun's products help companies grow and help them consolidate, and they help governments stimulate the economy, as well. From building bridges to automating health care, government stimulus will undoubtedly drive technology investment, and we're well positioned to participate globally.

Which is all to say, I'm neither worried about the role information technology will play in the economy, nor am I worried about the relevance of Sun's offerings. I'm not worried about the future, I'm focused on its arrival date.

So I'm going to divide my comments on Sun's future into three or four blog entries, of which this is the first. You're going to see an accelerating series of announcements over the coming year, from amplifying our open source storage offerings, to building out an equivalent portfolio of products in the networking space; from the addition of new and potentially surprising Solaris and MySQL OEM's, to our newest cloud offerings and startup programs. I want to put all this in context, to be as clear as possible about our priorities and market approach, and help everyone understand both the parts and the sum of the parts.

Let's get on with it.

In my view, we have a very simple business - when I talk about Sun, I talk about us needing to do 'only three things.'

1. Recruit every developer on earth to use our software or services.

This is a strategic activity, not a financial one, so don't look for revenue here. I'll devote an entire entry to understanding the motivations and mechanisms driving technology adoption, and to discussing the varied audiences we target. As the head of developer technologies from a very large customer said to me last week over dinner, 'I haven't visited Sun in five years, but all of a sudden you seem to matter to my developers.' I'll help parse that statement in my next entry.

2. Deliver the world's most compelling commercial offerings - focused primarily, but not exclusively, on deployers of the technologies whose adoption we're driving.

Our software and service products target those that find free to be a more expensive alternative than commercially supported, for whom the cost of downtime exceeds the price of a commercial license. That's a small fraction of the planet, but it's a lucrative one. On the systems side of the house, our products reach across rack and blade servers, storage and networking systems - basically, everything to power the cloud.

I'll talk about the reliance this business has on developers to drive differentiation, and gross margin dollars, and the competitive advantage such reliance creates as we broaden our market offerings into storage and networking.

3. Execute the world's most effective selling/service connection between 1. and 2.

I spend a lot of time talking publicly about the first two points, and very little talking about this last one - in part, because it's been a work in progress, and because the scale of our sales/services channel has been one of our biggest strategic challenges.

But the ordering matters - our first financial priority is to generate free cash flow; our first strategic priority is to grow our available market. When they're in sync, as I believe we are in our Open Storage business right now, you have to beat us in the free software community and then again in front of paying customers. That's a tough combination, especially if you're a proprietary storage vendor that pretends to like free software, so long as it doesn't compete with your products.

As you know, simplicity takes a lot of engineering, so it's easy to say 'just three things,' but I'm not in any way suggesting these tasks are easily accomplished. But our intent is to create, promote, and commercialize the highest quality network innovations. Innovations that captivate developers, and deployers.

To understand Sun, you have to understand both, you have to see what drives our financial performance, as well as read our financial statements. Absent both perspectives, you'll miss the bigger picture, the bigger threat, or the bigger opportunity.

With this as a backdrop, you should expect me to focus on the points enumerated above in the next few blogs entries. Focusing on today's market, and - independent of the economic slowdown - on tomorrow's.

Thanks for reading.

(YouTube version of video here)


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