Sun looks for Java pay-off
Published: 25 Mar 2002 14:57 GMT
As Sun Microsystems' chief claim to fame in the software world, Java began seven years ago as a bold assault on the company's sworn enemy, Microsoft.
Few deny that the programming language has been a major achievement for the company, which had previously been known mostly for its workstation and server hardware. Java has provided an entrée to prime accounts, subverted power from Microsoft, drawn loyal hordes of programmers, and won Sun the respect accorded a company with the ability to reshape the industry.
There's just one problem: for all its hype and popularity, Java has made more money in direct software sales for competitors than for the company that invented it. Sun, for example, is a distant third in the most profitable market for Java software, application servers. And the company gives away for free its Java Software Development Kit, easily the most popular tool among Java developers.
Mike Gilpin, an analyst with Giga Information Group, likens Sun's missed opportunity to the Spanish exploring the Western Hemisphere but losing ultimate control. "It doesn't matter that you were the first Spanish explorer to get there. Your name is stuck on the road sign, but people forget who you were," he said.
Today, as Sun enters its 20th year, the Silicon Valley stalwart is trying to redefine Java's place in high-tech history -- and finally make its prized technology pay off in a major way. In addition to restoring corporate pride, Sun is seeking to reclaim Java from a financial perspective to counter the devastating effects of the recession and dot-com meltdown.
Sun led the server market at the height of the Internet boom but has since lost ground to IBM and other rivals. Plummeting revenue has forced Sun to lay off staff and take other serious measures to cut costs.
The company is now trying to sell more software, as well as services and storage products, to offset its plunging server sales. That task, however, is complicated by Sun's long subordination of Java as an indirect way to make money while others profited from Java server software.
"There is more Java outside of Sun than inside -- more revenue, more product, everything," said Steve Mills, the head of IBM's software unit. "Sun is the steward but not the prime beneficiary or the prime contributor to the sum total of all that is Java."
To reverse its fortunes, Sun needs to overcome long-standing problems with its Java strategy. Some view the early handling of Java as a serious strategic misstep that continues to hamper Sun today because its rivals have consistently built on their initial advantage, leaving the company to play catch-up whenever a new software market comes of age.
This is the paradox of Java: the very openness that made the technology popular also made it possible for competitors to profit from Java at Sun's expense.
Gartner analyst David Smith describes it as something of a catch-22 that eventually worked against the company. "If Sun didn't have all these companies sharing the wealth of Java, Java wouldn't have been successful," he said.
Key to Sun's renewed plans is a focus on Java's potential in Web services, a growing trend to provide information and software on any device with computer transactions scattered across different companies' servers on the Internet. All major software makers are targeting new products at Web services.
This campaign, like so many others put forth by Sun over the years, is already on a collision course with perennial rivals Microsoft and IBM, as well as other formidable competitors. But the company is determined to wage battle on multiple fronts ranging from the industry to the courts, where it has filed an antitrust lawsuit that seeks to thwart Microsoft's .Net services initiative.
"We revamp plans to make sure we're winners," said Pat Sueltz, formerly of IBM and now executive vice president of Sun's software systems group, speaking of Sun's Java server product. Sun will showcase its latest efforts in Web services this week at its annual JavaOne conference.
For years, Sun has refused to quantify the financial value of Java, but some details illuminate just how important it is to the company's server hardware, the powerful networked machines that handle chores such as stock trades or online catalogue sales. "Java is a key factor in 90 percent of sales," Sueltz said, estimating that 98 percent of Sun servers used by customers run Java software.
Case in point, Ford Financial -- Ford Motor's financial services arm, which reported $1.5bn in revenue in 2000 -- wanted to replace its older servers with new models running Java. The software was Sun's foot in the door, leading Ford to buy the server hardware to run it.
Sun also licenses Java to IBM, BEA Systems, Oracle, Hewlett-Packard and other computer companies that sell software for writing and running Java programs. Although Sun plays down the importance of revenue from such licences, its help is undeniable.
IDC analyst Rikki Kirzner ranks Sun as second place after IBM in market share for licensing and maintenance fees for high-level programming languages such as Java. In 2000, the last year for which Kirzner has estimates, that revenue was $22m for Sun.
But there's a far more direct way to profit from Java -- application servers, an area where Sun has been largely a flop.
An "app server" is a software package that runs on a server connected both to a company's back-end database and to the Web servers that deliver pages that can be read through browsers. British Airways uses BEA's app server software for online ticket sales, while Pentax uses the same package to create online catalogue pages that can perform operations such as custom product comparisons.
Small piece of a large pie
App servers are also the way to run Java programs on server hardware, using a Java specification called Java 2 Enterprise Edition, or J2EE, and J2EE's component software model called Enterprise JavaBeans. IBM, Oracle, HP, BEA and Sun itself have written their application server software to conform to J2EE. Yet Sun's estimated app server sales were only $157m, a mere 7 percent of the market, which Giga Information Group estimates had total sales of $2.25bn in 2001.
Sun's iPlanet Application Server held a very distant third place to the 36 percent market share held by leader BEA's WebLogic and the 34 percent of IBM's WebSphere. In general, Giga's Gilpin said, BEA, IBM and Oracle have been better able to profit directly from Java because they had existing software businesses.
"Sun has been successful in shifting the agenda to Java, but in many cases others are capitalising on it, particularly IBM," Illuminata analyst James Governor said.
Sun's Sueltz isn't happy with iPlanet's weak market share and vows to fix it one way or the other. "I'm never satisfied with being at 10 percent. I want to be No. 1 or No. 2," she said.
Besides its app server, Sun's iPlanet software package includes programs for serving up Web pages, housing custom portal sites, and managing directories of information such as usernames and passwords. While the directory software has thrived, iPlanet overall has been a disappointment since its inception in 1999 -- the merger of server software from Sun and Netscape after the latter was bought by America Online.
As Forrester Research analyst Joshua Walker said, "iPlanet has almost disappeared from the radar screen."
Part of its problem has been the difficulty of combining so many app server technologies into a single product: Netscape acquired Kiva and its software in 1997, and Sun bought NetDynamics in 1998. "Frankly, that lost them some time," Sueltz said.
Mark Tolliver, general manager of iPlanet's e-commerce programs, said Sun and AOL together got "way over a billion dollars' worth of software revenue during the time we were together," but he refused to disclose how the companies split those sales.
Even if Sun succeeds in revamping iPlanet marketing, it faces a rapidly changing application server market. Java, as a programming language and software architecture, may have fared better in the marketplace than iPlanet, but it too has had its trials.
Foiled again by Windows
Sun's 1996 victory in getting Microsoft to license the software quickly turned sour when Microsoft modified Java to work differently on Windows. The move undermined Java's universality and led to a 1997 lawsuit that took four years to settle.
Along the way, Sun tried to secure Java's future by making it an industry standard administered by a neutral standards body. But Sun never was willing to release enough control of Java to others and eventually abandoned the plan. Now, Sun serves as Java's standard-bearer, in conjunction with Java licensees.
Microsoft, which now has put its weight behind its quasi-clone of Java called C# (pronounced "C-sharp"), hints that a more cooperative solution might have been reached if Sun hadn't been so "paranoid".
"Sun had a huge opportunity and squandered it," said John Montgomery, Microsoft's lead product manager for the .Net developer platform. Making Java a standard "would have been the right thing to help Java move forward in a way more open and amenable to both cooperation and competition." Perhaps, but outside observers are sceptical that any alliance could have been forged between such bitter foes as these two companies. From Microsoft's perspective, Gartner's Smith said, "anytime someone picked Java, it was a loss to Microsoft. And they acted accordingly."
Microsoft was especially threatened by the openness of Java, which lets programs run on a variety of computers without having to be changed for each one. Under Sun's concept, the exact same Java program could run, for instance, on an IBM mainframe, a Sun Unix server, or a Dell Windows server.
That convenience, touted in the much-ballyhooed slogan "write once, run anywhere," in theory could break the long domination of the Windows operating system if enough programmers adopted Java. But the programming language fell short of its promised universality, and Sun's version of Java for desktop computers never came close to replacing Windows as the software of choice.
The empire strikes back
Later versions of Java for servers and gadgets such as mobile phones have been more successful than the desktop version that competes most directly against Microsoft's stronghold. Just as Sun thought it had secured Java's future, though, Microsoft has turned the tables once again, this time with the help of IBM in Web services.
Microsoft, which has led much of the progress in this burgeoning field with its .Net initiative, is attempting to relegate Java to a subordinate role in much the same way that Java tried to demote Windows to an interchangeable cog years ago. That has left Sun scrambling to retrofit its software to accommodate the emerging market.
Where Java standardises the environment in which server software runs, Web services accommodate much greater variety. The idea focuses on standardising the way servers find each other, communicate and describe what they can do.
"Web services is not a function of Java," Illuminata's Governor said. "It is the way to span Java and the Microsoft environment."
Undeterred, Sun is fighting hard to influence the Web services agenda instead of just follow it, focusing on some key aspects of the technology's infrastructure.
Tolliver said his iPlanet e-commerce products will serve as "the delivery vehicle" for Web services. And Anil Gadre, general manager of the Solaris operating system at the heart of Sun's software work, says his top priority is to make sure "Solaris is going to be the best infrastructure on top of which those services can be deployed."
Outside the company, Sun spawned the Liberty Alliance Project to govern network identity and is seeking to make it a Web services standard. In addition, it wants to join the new Web Services Interoperability Group (WS-I).
Sun's hardware legacy
In many ways, however, the company's most difficult obstacles may come from within Sun itself. Industry veterans say Sun's roots as a hardware manufacturer have presented a psychological barrier to its identity as a software company. Sun became a success by selling computer hardware. It started with Unix workstations used by programmers and researchers but blossomed into a much larger company when it converted those products into servers.
Asked during a recent interview if Sun is becoming more of a software company, Sun's chief executive, Scott McNealy, refused to separate the software business from the rest of Sun's products.
"We will continue to be the systems company we have always been," he said, arguing that in most of the computing world hardware and software are closely married. "You don't buy your cell phone hardware from one company, the software from another. You don't buy your set-top box hardware from one company, your software from another."
With those kind of public statements, others say, Sun may have a tough time convincing people that it's serious about software. "From the top, meaning McNealy, they don't have a big belief in software as a separate market," Gartner's Smith said.
Still, no matter what the outcome of Java's future market, its stature as a defining technology will remain undisputed.
"Before Java, Sun was not one of the few pre-eminent companies," Smith said. "It was their ticket from being a workstation company to being one of the big powerhouses of the industry."
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