What Really Scared IBM During Talks....
Okay, so I work in Sun Software (so I have to post anonymously) and tired of listening to outsiders who don't see the forest through the trees.
Sun is a great software company that has spent the last few years silently changing the game. What IBM probably saw was they could not make Websphere make money if they adopted Sun's software approach. Oracle should be scared as well. Really scared.
By open sourcing and building communities we have built over the years a unique software business model. One that is rapidly becoming very attractive to businesses in this down economy. Red Hat may have a Linux distro (which we support as well) and a JBOSS server they have done little to nothing with (we're moving the cheese with Glassfish), Sun has products at every level, from OS to applications, identity, utilities and monitoring. And you can download them and work with them for free.
But when they want to get serious, they are willing to pay for support and licensing. We can see MySQL downloads by the thousands into dedicated IBM and Oracle shops who previously would never stray from the fold. Now these customers, as dedicated as they are to their vendor, are asking to buy our software to save on costs. We can't help but think IBM looked at their cashflow from bilking Websphere, Tivoli, and DB2 customer accounts and saw a threat of Sun's software business model. Was it surprising when it leaked during the acquisition talks that IBM could not see how it could make money with Sun software? They would lose too much money moving to the new model that it would drag down their entrenched software business.
Lets look at another disruptive marketing approach - The Grateful Dead. They encouraged everyone to download and share their music. They listened to their audience and changed to stay in touch with their loyal fan base. Everyone asked how they could make money selling their records when they gave the music away. The answer is they never made money on the bootlegged (read downloaded) music, but it built their fan base to sell them other things, like concert tickets and merchandise. They never had a #1, but they are one of the most profitable bands by selling merchandise and concert tickets, not records. And a fan following so loyal it is almost tribal. Same with us. We will make money on other products, like enterprise versions of our products and support (noticed I did not say hardware though there is a pull through there as well).
One of our biggest software transactions recently was to include the Google Toolbar with every download of the JDK. Since then, Microsoft has paid us millions to switch to down loading MSN toolbar with the JDK. Buying a seat on the free JDK downloads is highly profitable to us. Think of all the downloads that go with MySQL, Star Office, Solaris, Glassfish, OpenSSO, etc.
What IBM probably got scared at was the threat this model is to their bloatware Websphere. Same with Oracle. One CxO has said they have a $50M+ annual license from Oracle and does not see the value (repeat value) from maintaining that license. He/she is looking into MySQL at 1/10th the license cost (don't believe MySQL is a poor cousin to Oracle - it works for 98% of all DB applications across most enterprises right now). We don't have to try so hard to break into a IBM or Oracle shop like we used to; we are being invited in by the customer. Really doubt we have the reverse problem with our customers.
It has taken use 3-5 years to build communities around our software and adapt to this new software model. It makes it very difficult for our competition to follow suite. How many open source database communities can one have? How long would it take Oracle or IBM to open source their bloatware and switch to our model? That is what scares IBM. It could never make money the way they do now (by heavy-handed, perpetual licensing models) if they had to adapt to our model. The reason they leaked the "Sun software cannot make money" story during the acquisitions negotiations is IBM could never make money if they had to adopt this model. They would buy Sun just to kill the business model off. BTW, those acquisition talks had more leaks to the press than it should have. Hope IBM looks long and hard where those leaks came from.
And one last point. Customers are telling us they want out of the integration game. They are tired of buying IBM and Oracle software (and ours to some point) and paying the vendors to weld it together. So, any vendor that can provide a comprehensive suite (sorry Red Hat) and not have to its customers shell a ton for licenses and consultants, has a distinct advantage. Whereas a few years ago, our open source approach was a nice to know about for a CxO (they wanted information about it, but had little incentive to make the enterprise switch), now they are calling us to find out more because the economy has given them an incentive to look a viable, lower cost alternatives. And they are buying. Repeat, buying.
Its not the software or support business that is causing Sun to post negative earnings - its the high end server and storage business, which is still the larger portion of the company. The downturn in the economy has put the brakes on everyone in that market. But that is changing. Sun software is reaching critical mass within the company. Over time, as Sun software becomes an equal revenue contributor to the bottom line, the company's fiscal status will be less whip-sawed as one sector goes through its cycles.
And one last point - to the poster using the term "Slowaris". First, dude, read a DTrace manual and tune. Solaris is used in many more high load, high reliability situations than Red Hat ever has. And it has 5 times as many applications available to run on it than RH. With OpenSolaris, customers can be assured that Solaris will have a long and happy life, with or without Sun itself. Ask some of our recent Solaris customers; IBM and HP.