Sun Microsystems has done good things for its partners of late, not the least of which was moving most accounts...
to a channel-only model. However, Sun solution providers say the message from the top -- about OpenSolaris and other "freeware" -- is not helping them sell Sun's high-margin hardware and software.
They want Sun CEO Jonathan Schwartz to ease up on the open source plugs and focus on the power and innovation of Sun's higher value-added (meaning non-free) offerings.
"What drives me crazy is that Jonathan spends a lot of time in the press talking about OpenSolaris and not about the architecture and density of Sun's x86 servers, or what continues to be the world-changing architecture of its Niagara boxes. As a partner I'd like to see him creating increased visibility and attention for those things at Sun that we partners can drive and make money on," said Rob Wolfe, CEO of AvcomEast, a Vienna, Va., Sun solution provider.
Those sentiments were echoed by half a dozen other solution providers across the United States, even though they all said they understand Schwartz's underlying strategy.
Sun was late to embrace open source, coming to grips with it long after hardware competitors IBM and Hewlett-Packard had already done so. Former Sun CEO Scott McNealy was once openly dismissive of Linux. By talking up OpenSolaris and supporting Linux, Sun can now salvage at least some sales that would have been lost to those hardware rivals, these Sun solution providers said.
"I understand Sun's viewpoint and direction as hardware becomes more of a commodity," said Dan Mori, vice president of FusionStorm, a San Francisco-based Sun solution provider. "The freeware option enables Sun to compete in the hardware market against other hardware vendors that fully embrace freeware."
Whether or not the vendor is getting the desired traction from this strategy is an open question, however. Several partners said that out of 10 customers looking at OpenSolaris or Linux, maybe one or two end up running either on Sun hardware.
But Sun-affiliated partners insist customers will pay for real value, as long as it is communicated clearly and emphatically. "If you look at the cell phone market, the model was historically to give away the handset and make money on the service or annual fees. The iPhone changed the rules, showing customers are willing to pay a premium for innovation. iPhones don't need to be $99 or free. I feel the same way about Sun's Solaris as well as its innovative chips and servers," said AvcomEast's Wolfe.
Harry Kasparian, CEO of Burlington, Mass.-based Corporate Technologies Inc., Sun's 2008 partner of the year, agreed. "My view is that people will buy great products." It is his contention that Sun fields superior hardware and software that can command a premium over competitive wares. But many VARs say the marketing is not keeping up with the technology.
Another Sun solution provider in the Northeast gave Schwartz's freeware stance credit for forcing the issue, perhaps even making Microsoft blink on what some call predatory pricing. "Maybe [Sun's free] OpenOffice did make Bill Gates more reasonable. You can now buy Microsoft Office Student Edition for $140 or something, down from a lot more. But how does that help me in the channel or help Sun's shareholders? I'm not saying Schwartz's macroeconomic theory isn't correct, I'm just saying a company isn't an experiment to prove an economic theory," this partner said.
Partners say Sun's customer base is very loyal. Where the vendor faces problems is in winning new accounts whose IT departments can see Dell servers as good enough for their needs. "Sun must show it's serious about these green-field opportunities," Kasparian said.
Sun's struggle is a microcosm of what's happening all over the industry, as customers see open source software running on standard hardware as a cheap but potentially powerful alternative to Unix and Windows environments.
Where is the margin on freeware?
The problem with open source is there's no margin on free, Sun solution providers said. "The big thing in open source is how … you monetize it," said Andy Kotarba, president and CEO of Dewpoint, a Lansing, Mich.-based Sun solution provider.
The answer, he maintains, is to build skill sets -- and presumably billable hours -- around those skills so VARs can charge customers for implementing, customizing and supporting open source solutions. They won't reap up-front license fees, but software sales margins are lower than service margins anyway.
The downside is this involves a longer sales cycle and a lot of hand holding, and not a lot of big-bang up-front sales dollars. On the upside, the resulting customer relationships are strong, he said.
"Here's the latest MySQL. OK, it's an open source database and we're embracing it. We're building solution practices where we can go to clients and talk MySQL and how it can help them save money. Frankly, you won't monetize that out of the gate. There's a lot of consulting and presales work, but the days of doing straight server refreshes are over," Kotarba said. Sun bought MySQL for $1 billion early this year.
Kotarba and some others say Sun's decision to flood the market with intellectual property is being accomplished through projects like OpenSolaris.
Of course, the impact of Sun's push on partners depends on what kind of partner they are. Companies selling solutions atop the Sun software stack -- regardless of the underlying hardware -- could profit in the long term if enough people catch the Sun bug.
"We sell Sun's software stack above Solaris, things like identity management, access management and compliance management, so it is probably a good long-range plan to have Solaris out there, whether it's OpenSolaris or not," said Jim Guinn, executive vice president of consulting solutions for Partners Consulting, an Irivne, Calif.-based Sun partner.
The hope is the customers will end up investing in both the partner's and Sun's technologies and skills.