Web 2.0 and Sun: In Sync

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Reporter’s Notebook NEW YORK — Pop quiz. Was it the open sourcing of Solaris, the creation of multi-core, multi-thread computer servers, or Scott McNealy’s departure last year that contributed to Sun’s gradual climb out of the abyss?

Answer? All of the above, plus the arrival of a little phenomenon called Web 2.0.

Let’s quickly recap.

Sarcastic, wink-wink jabs at IBM (Quote) or other competitors
by McNealy aside, Sun
(Quote) is a company that had been strictly business. But
then a lot of the business left in 2001, with the dot-comers who bought so
many Sun servers fleeing for exit strategies and dumping contracts.

Sun ‘s sales
plummeted. People lost
their jobs. Analysts called
for Sun to change its ways and cut expenses. IBM and the rest of the rival
rabble rejoiced and smirked at Sun’s hard, fast fall.

Brian Wilson, distinguished director and CTO of Strategic Office at Sun, said
at a media and analyst event here Wednesday that one of the major factors
that contributed to Sun’s struggles was the refusal to unglue Solaris from
the SPARC processor.

“We tried to tie Solaris to the SPARC processor at a time when SPARC was no
longer the fastest chip,” Wilson said. “We tried to protect our market by
saying ‘You want Solaris, you buy our slow SPARC chip.’ What did the world
tell us? ‘Forget it.'”

With all due respect to McNealy (I’ll insert my own wink-wink here), Wilson
credited Schwartz
with talking to customers and turning around and doing the opposite: untying
SPARC from Solaris; opening up the operating system; and making servers
capable of parallel processing.

The result? Fifteen percent growth in the server market last year.
Twenty-four percent growth in the last quarter. Stay tuned next week for the
new results; Goldman Sachs is projecting Sun to come in well above the 4 percent
operating margin for the fiscal year.

Isn’t it funny how a few big changes and a few years can make a world of
difference?

While Sun may have untied Solaris from SPARC, the systems vendor is on the
rise because the company is tying itself so closely to this evolving Web 2.0
world of blogs, wikis and mashups.

The company is looking to sell servers and software infrastructure to the
newfangled applications makers who butter their bread by delivering
applications over the Internet. You know the type: Salesforce.com (Quote), Oracle’s
(Quote) on-demand assets, and a slew of other newcomers.

“If we only focus on serving our traditional customer, we are on the path to
going out of business,” Wilson said. “We need to capture the application
vendors, not just to port, but to introduce the software-as-a-service model
with Sun infrastructure.”

Wilson outlined an interesting paradigm shift in its customer base. He noted
that while traditional customers — the WalMarts and GEs of the world —
have already purchased the infrastructure they need, they continue to be
indirect customers of Sun.

Upstarts such as Salesforce.com purchase Sun servers to power
their Web-based applications. Salesforce.com then sells these applications
to the WalMarts of the world, piping them over the Internet.

Salesforce.com hosts the software in its server farms, powered by Sun
systems. Sun may not make money from this transaction after Salesforce.com
buys Sun’s servers. But, Wilson argued, Sun gets greater penetration in the
market, paving the way for additional opportunities down the road.

How’s that for market symbiosis? Great work if you can get it. Wilson said
Sun is getting it.

For example, Wilson said Callidus Software delivers sales
compensation and sales incentive software over the Web thanks to Sun’s gear.

Importantly, Sun understands what this new customer wants because it, too,
is involved in Web 2.0. At Schwartz’ behest, company employees post
blogs and conduct podcasts. This is Sun’s drive to increase its
transparency.

Hal Stern, senior vice president of engineering at Sun, said two years ago
he blogged
about meeting and striking up a conversation about hockey with supermodel
Veronica Varakova, whose husband was NHL player Petr Nedved.

“That blog entry gets more traffic by people who I guarantee are not looking
for Sun Microsystems but are looking for something on Petr Nedved or her,”
Stern said, drawing laughs. “You can’t buy advertising like that. It’s
better than an ad in Sports Illustrated in terms of the number of people it
drives to see what we’re doing.”

Transparency is great. As an East Coaster, I like knowing what’s going on
behind the scenes in Palo Alto, Calif. I appreciate that Sun is finding
traction in this SaaS world.

This article was first published on InternetNews.com. To read the full article, click here.