When my parents were first married, my mother was not quite the accomplished chef that she is these days. Living in a trailer near Fort Benning, where my father was preparing to be shipped overseas, my mother had a simple ambition: prepare a nice Thanksgiving meal for the two of them. Inexperienced as she was at the time, she sought assistance the traditional way – by asking her own mother for her turkey and stuffing recipe. Recipe acquired, she was off to the races and gamely set to work.
Unfortunately, one important and salient detail had somehow been lost in the translation. Unbeknownst to my mother, the recipe was for a turkey twice as large as the one she’d bought for herself and my father. Cramming the stuffing for an 8 pound bird into a 4 pound bird could not have been easy, but she managed it. Somehow. Unfortunately, the tragically overstuffed bird then proceeded to explode while in the oven, at once making the Thanksgiving meal somewhat problematic and providing future generations of O’Grady’s – i.e. my brother and I – with an amusing anecdote to mitigate our own culinary failures (ask me about the cilantro pesto sometime).
Why bring this up now? Well, I’ll confess that it’s in part an effort to nudge my Dad into relating a more detailed version of said story to his own audience. If they’re going to tell stories about me, I figure Mom’s fair game. But it’s also because the analogy is quite appropriate. When it comes to analyst conferences, we’re the turkey.
Like just about every other vendor analyst conference I’ve been to, Sun’s recent event featured a schedule that began at the unholy hour of 7:30 AM and continued through dinner. Not a second was spared in the drive to pack our brains full of everything we could possibly want to know about Sun’s various businesses, limited mental capacity be damned; even lunch was a working affair. Given the breadth of material that Sun or any other vendor has to – or perhaps more accurately, wants to – cover in what may be their only face to face interaction with some of the folks in the room in a given calendar year, I can’t really blame them for the forced march aspect to the scheduling. But I know how the turkey feels.
That grumbling preamble aside, because my scheduling issues probably aren’t your number one concern in life, what was important or interesting from Sun’s event? Many things, some of which I’ve written about previously and some of which will be written about in future. For now, I’d just like to talk about the underlying – and potentially interesting – theme to the show and the conversations I had there.
That theme was actually well in evidence before the show began, as evidenced by posts such as this one. Or maybe even earlier than that, with programs like this one. Or maybe even earlier than…actually, it’s not important. The point is made in any case; Sun’s interested enough in the market represented by Automattic that its CEO felt compelled to issue a public apology and mea culpa. That’s interesting. What’s more interesting is how pervasive the interest in serving new markets is; it’s not limited to just software or just x64 servers – it’s everybody. Even the services and storage folks were busy contemplating just how they might be relevant to the Automattics of the world.
That, in my experience working with some of the largest technology vendors on the planet, is rare. I’m not convinced that IBM, Oracle, and SAP would pick up the phone if Don or Matt called them. Sun’s got its own problems picking up the phone, but it clearly cares about those problems. The big folks? Not so much.
Does that matter? Well, if you were to judge solely by the financials, you probably conclude that it does not. Sun, after all, was just in the black. IBM and Oracle, on the other hand, were comfortably profitable. But you’re smarter than that, and you appreciate the lag on business model returns, so you’re aware that that’s obviously a superficial way of looking at the issue.
So what about economic opportunity? Well, setting aside the fact that most businesses in the world are in fact small businesses, the answer is clearly yes. Regardless of whether you personally agreed with the valuation – and I’m beginning to think it wasn’t a bad idea, the $1.6B Google shelled out for YouTube was in fact real money. Or stock. There is, then, wealth creation and accumulation, as Google itself proves every time it reports its absurd earnings. Yes, there are ten, one hundred, maybe even a thousand flameouts for every YouTube, but it’s not reasonable – I think – to argue that the startup market is devoid of opportunity. More to the point, these markets can themselves themselves have ripple effects back into the more staid, traditional markets. Or did you think that everyone wants to copy Google’s scale-out architecture for the fun of it?
Important as this market is, however, its pretty much blank spot when it comes to sales for IBM, Oracle, SAP, and yes, Sun. And that, to my way of thinking, is a problem – a fairly significant one. Here’s how I put it a week ago:
Consider the problem that faces virtually every major software infrastructure vendor in existence at the moment. The startups during the bubble – and I should know, as we worked with many of them – were almost universally deploying on top of quote unquote “enterprise” technologies on the advice of their VC advisors: EMC storage, Solaris for the OS, Oracle for the DB, and so on.
Today, the vast majority of the startups we speak with are running on one LAMP flavor or another, and occasionally Microsoft a la a MySpace. Assuming for the sake of argument that the folks who bought IBM and Oracle in the past will stick with that, but startups eschew those technologies in favor of free and open source alternatives, where does that leave us? The mature, sizable and fairly static market goes to the old guys, while the new and growing market goes to the new guys. Obviously it’s not all that simple, but that’s the worry – or should be – for most of the major software vendors on the planet. While their installed base has and will continue to make them money, it will not give them the growth that Wall Street tends to demand; only access to greenfield, growing markets can do that. And to date, those markets have traditionally been won by open source technologies.
So the trend, the underlying theme of the analyst conference for me, then, was this: Sun appreciates the magnitude of both the problem and the opportunity presented by new markets (i.e. not the Bank of Americas or Verizons of the world). Probably to a degree that few outside of Microsoft do. That’s the good news.
The bad news is that, as Sun’s discovering, knowing of the problem and fixing it are two different things. They’ve got the seemingly hardest part out of the way, as they’re now manufacturing products that are actually applicable to the startups of the world, but they may find that the last mile to these customers is the worst one. I’ve complained previously about their store, which is being revamped as we speak, but the challenges go far deeper. Sun’s organizational processes are designed around their traditional customer base – very large enterprises – and as a result, are unsurprisingly a significant pain point for downmarket customers. Further, selling downmarket – particularly if they take a more 1:1 role with their customers as they should – will inevitably have impacts on their relationships with their VARs. And while they’re not likely to be competing heavily with their traditional rivals for customers like Automattic, they will be seeing a lot of Amazon and the whitebox providers. They may even need to add bodies to attack the problem, as most of Sun’s DNA is heavily enterprise oriented.
To make matters even more challenging, they’ll have to make this adjustment on the fly without sacrificing or jeopardizing their existing customer base, not to mention their profitability. As I put it to a couple of folks, like every other large technology provider that’s publicly held, Sun’s a lot like the Red Sox (or, if you’ve fallen out of the light, the Yankees) – they can’t afford to take a year or two off to refit and retool. Rebuilding, as it were, is not an option.
But what’s important, and what I took away from Sun’s analyst event, is that they’re trying. And a couple of years from now, when the importance of these markets becomes as apparent as the effort that’s required to service them, I think they’ll be happy they did.
Disclaimer: Sun is a RedMonk client, and hotel was comped for the show. Travel was not.
