Sun's war against Microsoft escalates

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Sun Microsystems made two key moves in recent weeks that have escalated the server and software company's undeclared marketing war with Microsoft Corp.

In the long run, what's at stake with these moves--and in Sun's battle with Microsoft--is a leadership position in the fast-approaching era of network-centric computing. Winning the scramble to be correctly positioned in this new era is likely to be worth billions of dollars in profits.

The danger for Sun is that the last company to pick a fight with Microsoft--Provo, Utah-based Novell--is only just returning to profitability after being stomped by the gang in Redmond, Wash., in the mid-1990s.

Latest moves

But Sun, whose longtime branding premise has been, "The network is the computer," appears undeterred, given its two latest moves:

  • On Sept. 8, the Palo Alto, Calif.-based company introduced the Sun Ray 1, a "thin client" device that is an alternative to low-end personal computers. Sun trumpeted the simplicity of the Sun Ray 1 "appliance," which it compared to a telephone, where all the complex systems running the device are hidden from the user.

  • On Aug. 31, Sun announced that it would offer its recently acquired StarOffice software, which competes with Microsoft Office, through a free Web download. In offering the software for free, Sun hopes to sell back-end services and hardware. At press time, a graphic on Sun's Web site proclaimed, "StarOffice downloads: 550,000 and countªing."

    Along with other companies such as Redwood Shores, Calif.-based Oracle Corp., Sun has long been an evangelist for network-centric computing. It has predicted that PCs would give way to devices like the Sun Ray 1--what some call "dumb terminals"--which are monitors powered by software applications that run on a distant central server.

    Fueled by the growing power of the Internet, the biggest network of them all, Sun's vision stands poised to become the dominant form of business computing. With the rise of network-centric computing, Sun is using a variety of marketing tactics to slam PC-centric computing, a concept synonymous with Microsoft, which built its Windows empire on PCs.

    Microsoft repositions

    While Sun brands itself as a network-computing leader, Microsoft has unsheathed some of its marketing weapons in recent months as it battles to maintain dominance in the post-PC era.

    Microsoft declined interview requests for this article, but company officials have discussed at press conferences their strategies for network-centric computing.

    "It's no secret that there's no love lost between these two companies," said Bill Tuebo, an analyst with LaSalle Street Securities, Chicago. "They're continually going at each other, and I wouldn't anticipate that that would change."

    Microsoft, of course, understands that the PC-centric business model is being challenged.

    "It's not a matter of if, it's a matter of when," said Matthew Nordan, an analyst with Cambridge, Mass.-based Forrester Research, on the coming of network-centric computing. Primarily, the appeal of network-centric or thin client systems is the promise of reducing computer maintenance and administration costs.

    Earlier this year, Microsoft acknowledged that the PC era is in the rearview mirror. The company said it has modified its vision statement, abandoning the credo of a PC on every desktop.

    These days the Web can be accessed using the Palm VII, cellular phones, Web TV and other devices. Accordingly, Microsoft has expanded its focus: "Empowerment anytime, anyplace, any device--that's got to be the view," said Microsoft President Steve Ballmer in a September press conference.

    Sun has crowed about Microsoft's change, which echoes its own long-stated philosophy. "If you're going to use someone else's vision," said John Loiacono, Sun's VP-brand marketing, "at least reword it a little bit."

    With its recent StarOffice maneuver and Sun Ray 1 introduction, Sun has made marketing hay by generating extensive press coverage, much of it positive, about network computing and the company's affiliation with it.

    But, as Sun acknowledges, the Sun Ray 1 is initially limited to making inroads in a few markets where PCs are not a good fit: universities, hospitals, airport terminals. Additionally, a previous Sun thin client device failed miserably.

    Analysts are also skeptical that Sun's StarOffice strategy will hurt Microsoft. A PaineWebber report concluded, "Sun's plan to offer StarOffice for 'free' is unlikely to persuade the corporate world to adopt StarOffice. ... It is just simply not worth the switching, training and support costs ... to change from the global standard."

    'The anti-Microsoft'

    Nonetheless, Sun continues to build its brand as a network-centric computing leader. The company has positioned itself as "the anti-Microsoft," said Al Reis, co-author of "The 22 Immutable Laws of Branding."

    "You always want to be the opposite of your competition," Mr. Reis said. "Then if [network-centric computing] does happen, you win. If it doesn't happen, you lose anyway."

    Rob Enderle, VP-desktop and mobile technology for Giga Information Group, Cambridge, Mass., said Sun's strategy is a shrewd one.

    "Sun is leveraging the large dissatisfaction in the marketplace with Microsoft," he said. "Companies [using Microsoft software] view the fees they pay to Microsoft as a tax, and companies don't like paying taxes."

    Not everybody is enamored with Sun's marketing approach. For instance, John Puricelli, an analyst with A.G. Edwards & Sons, St. Louis, ripped Sun's anti-Microsoft strategy.

    "It's absolutely the wrong thing to do," he said. "Corporate America buys Microsoft products. The right thing to do is to be a Microsoft-and-a-half and ask [corporate America] what I can do to help them make better use of these products."

    With its monopolistic market share, Microsoft's Windows has inertia on its side. Corporations don't like to change, because change generally costs money, Mr. Puricelli said.

    Microsoft has a similar advantage among software developers. The company's research indicates 91% of developers target Windows with their applications.

    But even with its market share advantage, Microsoft faces many problems. A network-centric model--with a pay-as-you-go system for software usage--would alter the company's revenue stream, likely shrinking it dramatically, analysts say.

    Mr. Enderle said Microsoft's influence will be diminished in the coming years. But he isn't convinced that Sun, for all its preaching about network-centric computing, will be in any better position to take advantage of the next major shift in the industry.

    His pick for the leading technology company in the network-centric era? The same one that dominated the mainframe era: IBM.

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