Guests at St Andrews’ Old Course Hotel who looked out over the golf course one morning in July were greeted with an amazing sight: golf legend Gary Player joined in a breakfast-time round by Scott McNealy, chairman, president and CEO of Sun Microsystems. As he stood over his ball on the notoriously difficult 17th green, McNealy’s thoughts may have turned to the words of his playing partner at a gala dinner the night before. Reprising his most famous quotation, Player told the assembled Sun executives: “The more I practise, the luckier I get.”
McNealy’s company needs some of that luck to rub off. Sales in the fourth quarter (to end-June 2003), traditionally Sun’s strongest, fell by 13% to $2.98 billion. Worse, profits tumbled 80% to just $12 million. Full-year revenue was also down, by 9%, to $11.4 billion. They were perhaps the most depressing set of figures that the Sun chief has presided over.
But he is not taking things lying down. Topping the agenda of Sun’s comeback strategy is ‘Project Orion’, an astrological name given to a new method of selling and packaging Sun software that McNealy expects will drive sales into the stratosphere again.
The precise content and pricing of the Orion bundle will be revealed at Sun’s customer show in San Francisco on 16-18 September. But, tantalisingly, some (albeit unconfirmed) details have slowly leaked out.
One of the first points to emerge concerns how Sun will licence and support Orion. The vendor is expected to charge customers on a per-employee basis, rather than per-processor, and it will update the software bundle at the beginning of every quarter.
Eventually, say insiders, Sun will slow down the frequency of the upgrades to once a year, rather than once a quarter. Removing a further layer of complexity, Sun will restrict the licensing agreements to only two pages.
There may be a catch, however: unconfirmed reports say that only users of Sun hardware will be eligible for the flat-rate fee.
The pricing of Orion has also been a rich source of speculation. This is a closely guarded secret at Sun, but it is widely predicted that the company will set the per-employee rate somewhere between $100 and $200. For his part, McNealy says the pricing of the bundled software will delight IT decision-makers. “When IT people see it, their jaws are going to drop,” he says.
In addition to pricing and support, details of the possible content of Orion have also emerged. The most important component, arguably, is Solaris, Sun’s version of the Unix operating system. Orion is also expected to include Sun’s ONE Directory and identity servers, messaging, calendar, portals, network availability and built-in authentication and security services. Sun’s forthcoming Linux desktop program and server package, codenamed ‘Mad Hatter’, is also believed to be earmarked for inclusion, as is Sun’s storage management software products.
To some analysts, the Orion move is a smart one. Like Microsoft and IBM, Sun has discovered that the way to raise customer spending and encourage loyalty is to bundle lots of things together and charge for the package. However, critics argue that Sun is playing a dangerous game with Orion, since it risks commoditising arguably its most valuable chunk of technology, the Solaris operating system. At a time when Sun feels compelled to support the open source Linux operating system, however reluctant that support may seem, Orion may accelerate the marginalisation of its Unix product.
Meanwhile, back at St Andrews, McNealy holed his putt on the 17th to pull off an unlikely win. A fluke? Perhaps. But McNealy will hope it is a sign that his luck has changed.
