Wednesday, April 19, 2006

Comments About Novell and Sun

Just days after I made fun of a Senior Analyst for imagining IBM, Oracle and Novell coming together to defeat Microsoft, my friend Mike sent me this article on Larry Ellison's potential interest in Novell.

I wrote back to him:

"It's interesting but buying Novell to get into open source seems to me to be similar to buying a 1998 Chevy Lumina to race the Indy 500. Ellison has a tendency to buy and absorb into the Oracle brand, so it's possible he has no plans to maintain the Novell brand; he may just want SUSE as an asset that can be rebranded as Oracle Linux.

What interests me about this is what database Oracle would use. Would they support an OS database like MySql or would they develop an OS version of Oracle?"

In a note to a friend of mine in Dallas, I made the following comments about Sun:

I just don't think Sun is going to be able to get their poop in a group any time soon to please the institutional investors' desire for profitability and the market's desire for innovation that means something to customers. I think Mr. McNealy needs to step down and let someone else try; he hasn't led the company well since the 2000 burst. I'm not sure if Schwartz is ready yet for CEO duties but he does seem to be leading Sun's thinking. Jonathan is definitely the less strident and more articulate Sun exec.

I think the big problem with Sun is that it is innovating in back office hardware, which is largely a commodity space. I'm not sure I follow the business logic of leading their marketing with entry-level x86 servers. With few exceptions, i.e. iPod, hardware is a commodity. Sun has a couple innovative takes on servers, namely thermally cooler and less demanding of energy, but the problem with that is its hard to market those criteria when TCO calculations don't typically involve cooling and power costs. (TCO calcs are acts of accounting gibberish anyway, but no one wants to admit that). I think most people view the server as a commodity with a low lifespan and therefore the costs associated with powering and cooling them are essentially the same as the costs of powering and cooling cubicles: it just goes to overheaed electrical expense.

I think that most of the interesting innovation occurs on the software side rather than hardware and I think there is more market demand for that kind of innovation because software is what drives business value. The computing platform is a philosophical and business choice, i.e. do we go with Solaris, Windows, Linux, Unix, whateverix, but once that decision is made, a server is a server. Software, however, is what creates value for a computing infrastructure.

Sun is still primarily a hardware company hoping to make some back-end money on servers and services by giving away Solaris and by selling tape backup systems (????). I think Sun is trying to innovate in the wrong area and the StorageTek acquisition seems to me to be an expression of hesitancy from Sun that their direction is on track: why invest $4B (net $3B cuz StorageTek had $1B in cash) to supply commodity storage servcies? What I do not see in Sun's marketing or in Jonathan Schwart's blog are PR pushes that bring Sun software to the forefront. Why should a business choose Solaris? Where is the value? Why (God, Why??) should a business choose StarOffice just because it is cheaper? See? Sun is innovating a commodity product and yet shipping commodity software in a market that expects software innovation.

Microsoft is doing some hella cool stuff. I saw some technology in Dallas that blew my mind. Office 2007 is bringing in functionality that is incredible. Office is tightly integrated into SQL, Windows and SharePoint portal in a way that allows companies to deliver information and analytics that are truly exciting. One session I went to demo'ed this stuff and twice the audience erupted in applause and "Oh my God"'s and "Wow"'s. After watching this demo, the relevance of Office costing $300/user completely disappeared from my mind. It was the first time I'd ever seen value in Office beyond, "I have to buy this to keep compatibility with everyone else in the world." My thought was, "How can a company not buy Office after seeing this?" Yes, it requires initial setup and implementation but the value it can deliver is truly exciting.