Sun's open-source gamble

Sun Microsystems is a company that's made good use of its visionary impulses to survive against bigger rivals. So it's fitting that Jonathan Schwartz is the company's No. 2 executive.

Schwartz has a reputation as an ideas man, but now he's got to turn those ideas into reality. For Sun, which is still working to reverse a three-year revenue slide, that suggests a period of intense change.

Schwartz has climbed Sun's ranks since the company

acquired his start-up, Lighthouse Design, in 1996. On the same day in April 2004 that Sun announced a detente with Microsoft, along with its third major round of layoffs in three years, he was promoted to president and chief operating officer.

Since then, Schwartz has pinned much of Sun's turnaround plan on software. So it is that the company's salespeople are no longer compensated simply for selling hardware. Meanwhile, the Solaris operating system is becoming open-source software, and adding a Sun database has become a real possibility.

But Schwartz intends to move beyond software into the Sun Grid--blocks of computing power that he believes will reel in new customers who previously bought and operated their own equipment. Schwartz talked with CNET News.com at the company's annual analyst event last week.

Q: Over the last year, the economy has been recovering and the server market has recovered from its revenue declines. But Sun hasn't seen nearly as much of that growth as IBM and Dell. If your sales pitch is so compelling, why is it that the revenue numbers haven't been going up to show it?
A: I think the average revenue per unit has been going down, but in terms of unit volume, I think our share has actually been growing, quite to the contrary of what you were talking about. If you look at the growth, for example, on the x86 (processor) side, we are now the market leader in Opteron servers over HP and IBM. Who would have predicted that? Where we haven't been seeing the growth necessarily has been in the high-scale data center systems, but that's been reflective of the industry as a whole.

Also, a leading indicator for the growth is the open sourcing of Solaris 10. We've downloaded probably close to about a million licenses now, and 95 percent of those have gone onto non-Sun hardware. So that's a growth opportunity, because running Solaris on Dell means now we can go talk to a Dell customer.

I recognize that unit shipments are significant and understand your argument that volume begets volume, but revenue also is relevant. Do you believe that at some point the revenue will pick up, and if so, when?
Thank you for the offer, but I'm not going to make a forward-looking statement. The unit volume numbers are important to us, the revenue growth is important to us and we've grown half-over-half from last year to this year. Certainly we're prioritizing growth as a company, and the leading indicator for us of growth is the adoption of our software platforms. So we're seeing more Java-enabled handsets go out into the world, seeing more XM Satellite Radio clients go out into the world, more Solaris downloads off of the Web site--those all accrue ultimately to an infrastructure opportunity that Sun's going to get after.

Describe your vision of how computing power will be consumed by the vast majority of customers five to 10 years from now.
I think you need only look to what an average consumer does to understand what the future of the enterprise will be. Most consumers use more infrastructure that's owned and operated by other people than they use their own. For example, I have my little cell phone here. I'm actually using a great deal of my operator's infrastructure to go chat with my friends and send pictures to my parents. When I go make a dinner reservation and I go to Opentable.com...I'm using their infrastructure.

The laggards in this process have been the enterprise. Some--who actually leverage Salesforce.com or Hewlett or even eBay--have figured out that the network affords them an opportunity to stop having to own and operate everything that they use. But how many consumers run their own e-mail server versus (those who) just use Yahoo Mail or Gmail? Very few. Should (companies) be using their $50 million infrastructure budget along with their management personnel, their data centers, their real estate, their power, or should they just go out and see if a buck an hour is a cheaper way of acquiring the same computer capacity?

Scott McNealy said to "stay tuned" about the Sun database. Is it fair to say that at some point Sun expects to be supplying database software?
I think it's clear the market has spoken that open source is the path that the developer community and the customer community wants to drive down, and we're going to do what we can to try to give customers as big a set of options as we can...we take the open-source developer community very seriously. It's an authentic commitment. What else can we do to continue to evolve that relationship? I don't think it's going to be limited to simply operating systems. Maybe it will extend to file systems, maybe it will extend to databases, maybe it will extend to middleware.

You've been a software guy, but as president, you're now more than that. It appears to me that software is increasingly important in Sun's constellation of products. To what extent is that because you're now No. 2?
That's a hard question for me to answer. I'm interested right now in creating new relationships with customers, and I believe those new relationships will be dominantly driven by the software platforms at Sun and then secondarily by the systems platforms.

How has your relationship with Scott McNealy changed in the last year since you became president? For example, are you in agreement or in disagreement more often than you used to be?
There are some environments in which I can complete the guy's sentences. There are other environments where we just disagree--and by the way, it's about 50-50. It's always been that way. It's never going to change...it's a highly communicative relationship. Plus, I send e-mail to the guy at 12:30 at night and I get a response at 12:31. That's an unusual boss relationship.

Clearly you're confident that you'll be able to build a vibrant community around OpenSolaris.
I just find it laughable that Red Hat and (CEO) Matthew (Szulik) can no longer claim we're proprietary. He's reduced to saying, "Yeah, but they'll never build a community because they don't know how." Sorry guys, we've been building communities for 20 years.

In Sun's perfect OpenSolaris world, what will the balance of power be between Sun and non-Sun folks?
In the advisory board (governing OpenSolaris) the majority will not be Sun. (In comparison), Red Hat makes proprietary decisions (such as) whether or not they put Jonas (Java server software) into Red Hat. They made that decision exclusively, without input from the community.

We expect that the governance model and the community model we build around Solaris will be as big a competitive weapon against Red Hat as the innovation within Solaris. We know that they have frustrated such a broad portion of their customer base that there is opportunity for us to really excel in ways that aren't necessarily technology-related. The governance model we use will be more open source and transparent. We'll be really meaning free when we talk about free and open-source software. Red Hat binaries aren't free. It will have genuine protection from a patent portfolio and indemnity against all intellectual-property claims, which for our customers will be something, I think, that's a real differentiator. Red Hat doesn't provide that.

One thing that I think enabled HP, Dell, IBM and even Sun to adopt Linux is its comparative neutrality. IBM's OS/2 by comparison was definitely not a neutral product. Do you think that Solaris is going to achieve the same level of neutrality as Linux?
First of all, it seems incongruous to call Linux one thing. (In market share charts) we've now broken Unix out into Solaris and HP-UX and AIX. That hasn't happened in Linux yet, even though that's already happened in the marketplace because there is a dominant player, Red Hat. You have to look at how many users Red Hat has, not how many Linux has. So when you assert that Linux is neutral, Red Hat is not neutral.

I agree that Red Hat is not neutral, but I take some issue with that. There are a lot of Linux developments by Oracle or Cisco Systems or Topspin or Dell or IBM. Red Hat packages them up and sells that package and has a relationship with some customer, but it is not the sole company to benefit from it. There is certainly still a cooperative development model that is neutral, even if the process of delivering that package of bits to the customer is not neutral. I think the overall project of Linux still is a valid entity to talk about. It might not be what I get on a CD-ROM and install in my computer, but given where the bits in that CD-ROM come from, I think it is legitimate still to talk about Linux as an entity.
So, number one, Solaris is now officially platform-neutral. There is an open-source license under which you will be managed. Gentoo OpenSolaris will be available. My belief is that there'll be another 10 or so (non-Sun OpenSolaris) distributions that will emerge.

And I suspect the company that will benefit the most from OpenSolaris will probably be not IBM or Dell, but Sun, which perhaps is why I think it's not considered a neutral product.
And I think when IBM acquires either Red Hat or Novell, I think the scales will fall from peoples' eyes and they'll also realize that neither of them are neutral. I believe that Solaris will be a platform-neutral operating system. I think it is up to us to prove that neutrality with the governance model. But a lot of the contributions that Cisco and Dell and Topspin are making (to Linux) are drivers. They'll also make them available for open-source Solaris.

I think the dominant beneficiary right now of Linux is Red Hat. Does that mean Linux is neutral? Red Hat has the branded relationship with the customer, so Red Hat is more in charge right now of Linux in North America than Linus is.