Marketing Memos

I thought Scott McNealy stepping down as CEO of Sun Micro would have been the final sign of the Apocalypse.  But the other sun rose this morning, and everything seemed reasonably right with the world.  So calm down, we’ll all survive (even though the tech industry may not be as humorous ).

What is simultaneously understandable and puzzling is the elevation of Jonathan Schwartz as the top dog.  Aside from the comical sight of Schwartz’s ponytail swaying while ringing the NASDAQ bell, the value of his leadership remains questionable.  According to Schwartz’s unofficial bio, he has not headed a technology company of note or strong financial success.  He worked for, and eventual lead Lighthouse Design, which made non-noteworthy applications for the failed NeXT line of workstations.  His claim to fame, and an early attraction to the big wigs at Sun, was that Lighthouse sold their wares over the Internet at a time when doing so was novel and way to far ahead of the market.

Schwartz’s blog is instrumental in understanding how he perceives technology and Sun’s relationship to the market.  Over the past months he has used his blog to poorly articulate the value proposition of Sun products, and to intellectually disconnect himself from his audience.

What Schwartz fails to show is an understanding of any particular market, what drives buyer motivations, and the result market dynamics.  His justifications for Sun’s Rent-a-grind, lack of acknowledgement of the fundament change cause by commodity hardware and operating systems, or even why Java makes some people nervous, indicates he will have a difficult time doing the one thing CEOs must do — communicate.

This may be why Scott McNealy says he is will spend the next 90 day traveling and evangelizing Sun products.  McNealy, though complicit in Sun’s failure to adapt to market changes, is a gifted speaker and one who commands attention.  He has a bluntness that allows him to praise Sun, slam Microsoft, and kick Mark Hurd in the virtual crotch . . . all in the same punch line.

Yet unleashing McNealy on an unsuspecting planet will not address the basic issues that created Sun’s current predicament.  Larry Ellison saw that middleware was being commoditized, and began turning Oracle into an application vendor well before the DBMS bloodletting began.  Sun has only limply responded to Linux (by giving away Solaris) and x86 processing power (by building an Opteron server).  Both moves are symptomatic of the elder Sun, being slow and merely reactive. Losing nearly a billion dollars a year cannot be sustained for long (2.5 years given their current cash holdings and burn rate).

So Sun will rise or set based on Schwartz’s next few moves.  Personally, I’m stocking up on flashlights.

Bookmark to:

The unholy masters of Chinese society recently decreed that no PC
manufactured in China can be shipped without "a legal operating system."

Ignoring for a moment that many people would like a bare-bones PC, and the
relative insanity of such

autocratic edicts, we can look forward to one unintended consequence —
greater exposure of Linux to the masses.

Chinese PC manufactures are allegedly omitting operating systems because most
in-country buyers want to install pirated copies of Microsoft Windows. 
Since

Bill Gates needs a few extra billion to cover personal expenses, the intent
of the edict is to prevent piracy.  But the Microsoft Tax on new PCs is
steep enough that the average Chinese consumer will avoid paying the price.

Enter Linux.  Since a Linux distribution (such as
Fedora or

OpenSuSE ) can be installed for nada and thus meet the legal objective. 
The manufacturer may well expect their customers will install Windows over top
of Linux, but there will be two other audiences:

• People who purposefully want a Linux PC/server (which helps them promote
  Linux)
• People who will be exposed to Linux and not make the switch

Microsoft is in no fear of losing massive market share to desktop Linux in
China from the one event.  But it is another camel nose under the tent, and
adds one more wedge in the market.  Gates might have been better off
accepting a little piracy to maintain brand familiarity.

Bookmark to:

The buzz in IT markets and the Open Source world is Red Hat’s purchase of JBoss.  Many have predicted the end of Open Source as we know it, and claim the purchase is clearly documented as one of the signs of the Apocalypse.

It is not as bad as all that, but people are scrambling.  My morning email included requests for help from some Open Source organizations who fear that the mindshare of Red Hat and JBoss, and financial might of Red Hat alone might forever exclude other J2EE servers.

Unlikely, though it does significantly change the strategic landscape.

Markets reward winners and not whiners.  Red Hat has brand preference for Linux.  JBoss is rapidly gaining brand preference for J2EE servers and related SOA functions.  The market has been steadily feeding both organizations more money because IT believes committing to market leaders is safer.  For commodity J2EE servers, RedBoss certainly has momentum.

But market opinion is a fickle thing, and is based in part on brand trust.  Other marketing mavens have correctly noted that a brand is "a promise kept."  The promise of Open Source is one that IT has embraced.  The worst thing that could happen to RedBoss is if this fundamental promise is forsaken.  Much as Google broke its promise of "do no evil" when they embraced the evil dictates of Red China, RedBoss could break the brand if they violate any of the precepts of the Open Source pact.

This seems unlikely.  JBoss is licensed under the Lesser GNU Public License (LGPL), which in my reading means the community could fork JBoss at will.  But LGPL has derivative licensing arrangements, and this untested scheme might provide a stealthily shyster the wiggle room to take some of JBoss out of the public domain and promptly cripple any attempted fork.  RedBoss would be insane to try this . . . today.  But no telling if riches alone would cause Raleigh to act like Redmond.

I expect to see a backlash from several fronts:

• The other J2EE server communities (namely Apache/Geronimo and JOnAS ) already have significant mindshare
• IBM, a subject of derision from elders at JBoss, has a vested interest in promoting solutions that undermine the (un)holy union
• Novell can be the White Knight, and their cozy relationship with IBM might make a winning trilogy

From a market standpoint though, it is still a horse race.  The adoption rate for J2EE servers (compared to straight HTTP or LAMP servers) is small, the learning curve to productivity is high, and thus there is a lot of elbow room in the market.  But like Linux before it, the open ground is on the low end and continued development and defacto distribution of a completely unencumbered J2EE server will eventually displace anything that may well be too Red Hat centric.

Bookmark to:

George Bush the Elder referred to it as "The Big Mo", shortly before being mowed over by Ronald Reagan.

Which goes to show that momentum is a tricky force of marketing
physics.

The two big stories in momentum these days are Linux and AMD.  Both are gaining mind share and growing at rates far beyond market averages, their competitors, and kudzu combined. 
Linux is being used in about 1/2 of all government agencies, and 70% want to use more of it.  This mirrors what industry has done with Linux, and mirrors AMD’s chips that now have about 20% of the market share and sales growing at a more-than-healthy 20.5% on a quarter-by-quarter basis.

This bodes well for both, providing they can control their rate of growth.

It sounds like an oxymoronic situation, but market momentum can cause you to lose momentum in the market.  Generally speaking, the market rewards winners.  Companies and products that gain new customers and converts, gain momentum, and as a result gain more customers (repeat until the FTC intervenes).  But growing rapidly creates strains on an organization.  If uncontrolled, these growing pains can cause an organization to fail at some particular function or service, and remove the halo effect of being the market’s favorite child. I believe this was a contributing factor behinds Intel’s ill fated Pentium FPU replacement decision of 1994.

Top management must monitor corporate momentum and assure that the basic brand promises that created said momentum are never compromised.  AMD has gained momentum through listening to customers (creating backwards x86 compatibility for 64-bit systems), providing technology innovation (Hyperchannel), and being price competitive.  AMD appear to be continuing these three functions, and taking growth in proactive and measured steps.

Linux is an interesting study in as much as the Open Source community has redefined momentum by ignoring it.  Certainly, everyone from Richard Stallman to Linus Torvalds wants Linux to rocket past UNIX, Windows, and a few of the minor Saints.  But the goal has never been to dominate the globe.  When I met Linus a few years back, he was rather sheepish about having changed an entire industry, preferring instead to discuss how I/O subsystems could be optimized and how virtualization will aid enterprise server management.  His mindset mirrored that of other Open Source developers I have met.

And therein is where Open Source and Linux market momentum will continue: by staying 100% focused on the core mission, the brand promise.  They want only to create great software that people will want to use.  This all but assures their momentum will continue.

Well, until Microsoft tries to litigate them into oblivion.

Bookmark to: