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Why would Sun commoditize hardware?

It's actually quite simple, if you think about it.

In aikido, there is a class of techniques called sutemi-waza, or "sacrifice techniques".  The user of these techniques is worse off after the technique than before it, but the opponent is even worse off. 

Suppose Sun does not commoditize hardware.  Sales and adoption of Windows/Intel systems grows faster than sales and adoption of Sun hardware, and Sun gets frozen out as a positive feedback loop is established (everyone's buying Wintel machines, so that's what we'll target.  Everyone's targeting Wintel machines, so that's what we'll buy).  This is the infamous "lock-in" effect known to the industry for decades.

If Sun does commoditize hardware, it neutralizes this postive feedback loop, and emphasizes actual technical and price differences between hardware lines.

Whether or not this end result works in Sun's favor, I won't speculate.  But it's not hard at all to see why Sun would do this--I'm surprised Joel didn't pick up on it.

Tim Lesher
Monday, June 17, 2002

I still don't see why Sun would want to commoditize hardware. They practically give away Solaris and Java for free. Instead of focusing on their hardware's special capabilities (like massive scalability or ease of server management), now they want their high-end server hardware to be commoditized so they can compete with Dell/HP/Compaq/Intel/IBM solely on price? Sun hardware is notoriously overpriced, so they have nowhere to go but down. Free software + cheap commoditized hardware = MEGA PROFITS!!!!!

?

Banana Fred
Monday, June 17, 2002

Excuse my ignorance over Sun strategy, but what if Sun helped developers write more Java "network centric" or  Java "network aware" applications, like Word processors that store files over another company's servers or Java games played over the Internet with hardware servers processing and keep track of players over the Internet?  Would this had been part of their strategy back in the early to mid-90s? 

With Microsoft, would they make .Net programs run best on Windows to  prevent commoditization of Windows? 

They could commoditize everyone except themselves and get Linux/Unix/etc. programmers to move "up" away from the operating system layer and into the .Net  layer and then vacuum them up into Windows/.Net world when the time is right? 

Diego
Monday, June 17, 2002

I think you're right about Sun -- they thought they could topple the desktop and re-establish client/server (i.e. Sun servers) computing with Java.

Also successful companies believe they can win competitive fights simply because they're better.  IBM did this with the original PC.  They made disk drives, keyboards, and all sorts of accessories at the time, so creating an open standard in effect just increased the number of substitutes for IBM hardware.  But they believed their manufacturing strength would win out.

IanRae
Monday, June 17, 2002

Sun has positioned its hardware as the 'best Java platoform'.  Truly, the market seems to think that this is true since Sun controls Java.  Therefore, their hardware is not seen as a commodity at all.

Also, don't forget that Java itself is just plain valuable - but not for producing revenue.  Though it tries to tell people different, Sun owns and controls the Java franchise.

This adds significantly to the price of Sun stock.  Just ask yourself, "How much would X company pay to have control of Java?".

For X, try IBM, Microsoft, Oracle, and a host of others.  Java is a huge asset that doesn't directly show up on the balance sheet.  Some investors get this and some don't.  But believe me, those other companies understand.

Scott McNeally is not nearly as dumb as Joel thinks.

Stan Silvert
Monday, June 17, 2002

Oh, and I should have added that part of IBM's business case for open standards was the lock-in effect.  Better to have 30% share of a huge market than 100% share of a niche one (which is what microcomputers were at the time -- a whole bunch of niche players with no interoperability).

IanRae
Monday, June 17, 2002

You are right about huge markets/niche markets.  Steve Ballmer said the same thing about .Net and MSFT regarding owning a small part of a huge market vs. 100% of a niche market.  The thing is, IBM in those days, and MSFT today, are really saying that, but they are really trying to "own the standard", which eventually means they own the environment, which means whenever anyone buys anything, a small tax goes to them. 

IBM would have collected a tax on the PC, the same way MSFT does now with Windows, and now MSFT will collect a small tax everytime a website is develop, or an application is sold... since .Net does websites, xml web services, and desktop applications. 

MSFT can sell the best tool to develop .Net apps/services with Visual Studio.Net, then  collect a fee on transactions with Passport.Net, since the authentication system already works well with .Net or MSFT can make it seem that way.

So, strategically, it is more like they mean they want to obtain, through tax collection,  10-30% of every dollar spent  purchased in this huge market vs. 100% of every dollar spent in a niche one.  Since other companies become dependent on making money in this "environment," they become locked in, out of financial need and for other technical reasons, and do not mind IBM or MSFT making money as long as they do too.

Stan was right too.  Scott McNealy is not dumb.  However, and again, excuse the fact I am not a programmer, considering how it "seems" every objective programmer out there loves .Net and says .Net gets and implements ideas better than Java, MSFT seems to not just cloned (and commoditized) Java, but surpassed it all by Version 1.  Where can Sun go now?

And, according to Robert Cringely and I would agree,  MSFT can make .Net ubiquitous by distributing with Windows, MSIE, etc.  So those MBA overseer types will have plenty of busy reasons to go with .Net and force other programmers to do the same, in the UN-likely case there are programmers who hate .Net.

Scott McNealy may be smart, but am I wrong by thinking that  Sun can't market the software to the mass market, while MSFT can just distribute to it if it wants through Windows? Then leverage that to get other companies programming in .Net????  In the end, making Java a distant number 2?  Especially since .Net is not trying to make you buy expensive hardware servers like Java/Sun could have done?

Diego
Monday, June 17, 2002

Diego,

look at

http://citeseer.nj.nec.com/436071.html .

They seem to disagree about your "MS can do wathever they want", and make a pretty good argument.

Just me (Sir to you)
Tuesday, June 18, 2002

You are right.  Thanks for setting me straight.

Diego
Tuesday, June 18, 2002

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