The goal: Sun looks for payoff to Java addiction

The goal: Sun looks for payoff to Java addiction By Stephen Shankland Staff Writer, CNET News.com March 25, 2002, 4:00 a.m. PT 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 entr?e 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 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 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 , 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 that seeks to thwart Microsoft's .Net services initiative. "We revamp plans to make sure we're winners," said Pat Sueltz, 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 catalog 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 $1.5 billion 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 licenses, 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 $22 million 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 catalog 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 Gartner analyst Daryl Plummer says if the judge remains unconvinced, Sun once more will end up fighting the good Java fight while the benefits go to others. see commentary 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 $157 million, a mere 7 percent of the market, which Giga Information Group estimates had total sales of 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 capitalizing 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 Sun takes on Microsoft.NetScott McNealy, CEO, and Ed Zander, COO, Sun MicrosystemsOctober 23, 2001 directory software has thrived, iPlanet overall has been a disappointment since its 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 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 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 that took four years to settle. Along the way, Sun tried to secure Java's future by making it an industry administered by a neutral standards body. But Sun never was willing to release enough control of Java to others and eventually the plan. Now, Sun serves as Java standard bearer, in conjunction with Java licensees. Microsoft, which now has put its weight behind its quasi-clone of Java called (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 skeptical 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 cell 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 to retrofit its software to accommodate the emerging market. Where Java standardizes the environment in which server software runs, Web services accommodate much greater variety. The idea focuses on standardizing 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 the Liberty Alliance Project to govern network identity and is seeking to make it a Web services standard. In addition, it wants to the new Web Services Interoperability Group (). 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 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." Related stories DAY 1 DAY 2 DAY 3 DAY 4 The future: Sun pins hopes on Web services Download a PDF version of the entire Java jigsaw report. Back to intro September 1991:Sun launches its Solaris version of the Unix operating system, which ultimately will replace the earlier SunOS. May 1995:Sun publicly launches Java software. Its primary appeal is a way to bring animation to otherwise drab Web pages. January 1996:Sun releases the first Java Development Kit, the initial step to ease the creation of Java programs. March 1996:Microsoft agrees to license Java. May 1996:Sun holds the first JavaOne conference for Java developers. December 1996:Sun, Netscape and IBM begin a 40-city tour to evangelize Java. April 1997:At the second JavaOne conference, Sun proclaims that Java will beyond the desktop computer to the realm of gadgets and chip-enabled smart cards. Sun announces Enterprise JavaBeans, an early step to making Java useful on as well as in Web browsers. October 1997:Sun Microsoft over its treatment of Java, arguing that Microsoft tried to add Windows-specific extensions to Java that undermine the software's key promise of universality. Sun seeks in damages. Microsoft . January 1998:Two million copies of Java Development Kit 1.1 have been downloaded. March 1998:Sun announces PersonalJava for Windows CE, an attempt to outflank with Java Microsoft's push into handheld computers. July 1998:Sun NetDynamics, which sells Java server software called an application server. September 1998:BEA Systems pays for application server maker WebLogic. BEA now is No. 1 in the market, well ahead of No. 3 Sun, but more than half of BEA's WebLogic customers run the software on Sun servers. November 1998:America Online agrees to Netscape for $4.2 billion, and as part of the deal, Sun gets the right to Netscape's server software. December 1998:Sun announces Java 2, with three different versions: Standard Edition (J2SE) for desktop and laptop computers, Enterprise Edition (J2EE) for big servers, and Micro Edition (J2ME) for small gadgets. Though Java began with desktop systems, Sun has had its best success with the server and gadget versions, where Microsoft isn't as strong. December 1998:Sun loosens licensing restrictions on Java in an effort to tap into the enthusiasm of the open-source movement. Also, Sun invents the Java Community Process to give business partners more control over Java. January 1999:Sun Jini, software the company bills as a way to let gadgets spontaneously join together in networks and share services. Sun quickly backpedals from the gadget promise, saying Jini works better to harness software services. March 1999:Sun and AOL detail the , a three-year deal under which Sun gradually assumes control over the Netscape server software. The products eventually are marketed under the iPlanet name. June 1999:Sun unveils JavaServer Pages, software for creating Web pages on the fly. It competes with Microsoft's Active Server Pages. December 1999:The first version of J2EE ships, as well as J2SE for Linux. December 1999:Sun plans to make Java an independent industry standard. April 2000:Sun agrees to revamp the Java Community Process to give partners more control. January 2001:Sun and Microsoft agree to their Java lawsuits, with Microsoft paying Sun $20 million and getting permission to ship an older version of Java with its existing products. April 2001:Sun releases , an effort to try to shape the agenda of peer-to-peer computing. July 2001:Starting with its new Windows XP operating system, Microsoft decides to Java. September 2001:Sun announces the to compete against Microsoft's Passport sign-on service. Sun eventually signs up prestigious customers including Fidelity Investments, United Airlines, AOL Time Warner, American Express and Vodafone. November 2001:The Justice Department, nine states and Microsoft agree to their antitrust suit, sparking accusations from Sun and others that Microsoft got off . February 2002:Sun Chief Executive Scott McNealy puts on a , dressing like the Linux mascot to prove the company has a deep, new commitment to Linux. It's the first major departure from the company's position that Linux is chiefly useful as a wrench in Microsoft's works and as an upgrade path to Solaris. March 2002:Sun Microsoft over Java, piggybacking on the Justice Department's finding that Microsoft violated antitrust law. Sun's suit is much than other antitrust cases against Microsoft or than Sun's earlier suit against Microsoft.