Tomorrow's Fortune 500

I remember a particularly unpleasant conversation with a Sun executive about a year ago. The introduction of our "eco-responsible" Niagara systems had just blown up a $250,000 purchase order from a big customer, replaced by a $25,000 Niagara (sorry, T2000) order. "You're killing me," he said, "are we trying to shrink or grow this place?"

What followed were some choice words about headquarters being out of touch with the field, not understanding real world challenges, pricing going in the wrong direction, etc. And frankly, pricing Niagara was a big bet - putting a price on innovation is an art, not a science. And lest you ask... yes, we're trying to grow, not shrink.

But there's an interesting phenomena in the computer marketplace, which strikes some as counterintuitive: if you double the performance of a machine, customers don't buy half as many, they tend to double their order. Same goes for utilization, if you can double server utilization via Solaris containers or VMWare, people don't buy fewer computers - they buy more. The value of innovation, at least to our core customers, is growing so fast that if the price declines, the overall return (value/price) goes through the roof - encouraging a feedback loop. Moore's Law and free software drive relative pricing down, and customers accelerate their growth.

So I had two pieces of advice for the unhappy executive, 1) I'm sorry to hear about the order (executives are people, too), 2) please make sure your teams are selling into our competition's installed base, not just our own, and 3) trust the market will grow.

Since then, our Niagara systems have ramped from $0 to more than $100M per quarter in only two solid quarters of shipment - while our overall (multi-billion dollar) systems business has grown by double digits (while many of our peers have shrunk). The growth of Solaris 10 on HP, Dell and IBM certainly drive awareness for our innovation, but pricing's been working in our favor, too. Even our trusty friends in the analyst community have taken note of our consistent share gains.

And although I'm thrilled to see our share gains, I'm worried our growth masks a trouble spot - among customers that don't buy $250,000 at a time, but more like $2,500 - startups and small companies. Granted, we are making headway with a few very cool startups, but there are too many signs that all's not well in a market that daily redefines the network. Do I have data? Not perfect data, but certainly anecdotal evidence. As an example...

Recently, we held an "unconference" for startups in the Silicon Valley area - an unconference is one in which the agenda is defined by its attendees, after they arrive (sounds strange, but it totally works.) We had solid, even overflow attendance at this event.

Nearly all of the feedback was positive. Nearly. But there was a troubling, and consistent message. It usually went like this, "wow, this is a great idea... thank you, Sun. But hey, why are you guys here? I thought you built big expensive stuff that ran in banks?"

Ouch.

It was a message delivered with sufficient frequency that we've started to really focus on acquiring new customers - and no, not just banks and telcos, but new companies. The startup community, a traditional stronghold for Sun.

So if you are a startup, or you know someone who is, please send them the following.

We are committed not only to growing in today's Fortune 500, but tomorrow's, too. And as you know, all our software is free for the asking (you pay only for commercial support, when you want it). From Java to Solaris to NetBeans, to everything in between - it's all free for the asking.

But we can't just give hardware away for free (at least permanently). And we know you're price sensitive - so we're going to drive prices into the ground to lower the cost of using Sun's newest innovations. As of now, that's exactly what we've done. If you're a US business that's been in business less than 4 years, and you employ fewer than 150 people, you'll find this blog posting very interesting. Just go look at what Thumper will cost vs. any of our storage competitors (by our calculations, we're about half the price). Just click here to apply for the program.

And yes, we are in the midst of globalizing this program as we speak - "younger than 4, fewer than 150" isn't a global definition for a startup (that's known as a midsize business in some places).

Why are we doing this, even though we're showing great growth?

Because growth in our installed base is nice. Growth in the competition's installed base is better.

But growth in tomorrow's installed base is best of all. And by definition, every large customer Sun serves today started as a small customer.

Remember, just click here.

Jonathan Schwartz Tue, 28 Nov 2006 22:44:00 -0800

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Source: http://blogs.sun.com/jonathan/entry/tomorrows_fortune_500
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