Inside Sun's New Deal with Microsoft

[Sunite]

Inside Sun's New Deal with Microsoft
By Peter Burrows
September 13, 2007 8:26AM

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What's in it for Sun in its new deal with Microsoft? For one thing, volume: Sun's sales of x86 machines have risen for seven straight quarters, and reselling Windows could only help maintain that momentum, especially after Sun brings out new versions of its Galaxy servers. Analysts say, though, that the margins on Windows PCs will likely be minimal.

Related Topics
   Sun
   Solaris
   Microsoft
   Windows
   Interoperability
   Virtualization

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   It can now be stated plainly: Sun Microsystems has officially lost its old-time religion. Thanks to an expansion of its three-year-old alliance with one-time nemesis Microsoft Relevant Products/Services, Sun will now resell and install Windows on its x86-based servers. In other words, the company that was famous for its scrappy David vs. Goliath war with the forces of Wintel will sell servers built around Intel chips and Windows software. That's a long way from the days when former Sun Chief Executive Scott McNealy proclaimed: "It's mankind against Microsoft."

But that doesn't mean the company has become agnostic. Rather, the Sept. 12 move was the ultimate expression of Sun's new religion -- one that in some ways is just as risky. If Sun was once defined largely by who its rivals were, it's now partnering with many of them in an effort to ensure as many customers as possible have the option of buying its technologies.

The new Microsoft deal follows alliances with IBM and Intel, which Sun is trusting to resell its Solaris server software for customers who want it. It's another aspect of Chief Executive Jonathan Schwartz's plan to drive adoption of Sun technologies as broadly as possible. The linchpin of the scheme: The 2005 plan to give away the battle-tested Solaris, Sun's crown jewel, for free.

As a result of these efforts, "We can do business with 100% of the marketplace now. That's not something we could have said a few years ago," Schwartz told BusinessWeek in a recent interview.

Expanded Alliance, Not Sales

By itself, the expanded alliance with Microsoft is no huge leap from the landmark deal the companies struck in 2004. Since then, the companies have quietly collaborated on a number of fronts -- such as creating ways for Web services built on Microsoft's .Net Framework to work with those built around Sun's Java technology.

Also, Sun has let customers run Windows on its servers that use x86 chips from Intel and Advanced Micro Devices. While Windows still won't run on Sun servers built on SPARC chips -- the source of most of Sun's sales -- Sun will now preinstall Windows Server 2003 itself. The current deal does not give Sun rights to resell Microsoft's upcoming version of the software, Windows Server 2008, but sources say that such an agreement is likely in the future.

Very likely, none of this will amount to much in new sales for Microsoft. After all, every corporate technology buyer already uses Windows and knows how to buy Wintel machines from Dell, Hewlett-Packard, and others. But executives from Sun and Microsoft say the new deal will let them more effectively serve the many customers that use both Solaris and Windows -- typically with Solaris running the huge databases and complex programs that undergird corporate IT and e-commerce operations and Windows for less mission-critical jobs. (continued...)

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