Managing Director of Sun Microsoystems Australasia Jim Hassell talks about future directions for the company in the face of tough markets and increased competition.

Q: Scott McNealy has said that Sun invented the idea of Web services. If so, why are Microsoft and IBM the ones who seem to be getting all the credit?

A: Microsoft might be winning the promotion battle--as you would expect with the colossal marketing budget for .NET--but they are not winning on the product and implementation side. To a lesser extent IBM is getting some airplay with its advertising on infrastructure, but you have to look at the runs on the board to get the true picture.

For 20 years, Sun's vision has been that the "Network is the Computer", but it is only in the last four to five years with the growth of the Internet, that other vendors have caught on.

We have always pushed open systems and standards that enable anyone access, anytime on anything, which is what Web services are all about. Also, many of the things that make Web Services possible today--such as TCP/IP and Internet standards such as NFS and XML--are intrinsic parts of Sun's DNA. In this context it is true we invented Web services, which is why we are focused on implementations and new products rather than heavily on promotion.

Sun customers such as BPay, the West Australian Government, the Singapore Government, and hundreds of global customers have already deployed innovative Web-based solutions. Internally, we are using Web services to do everything from manage HR to procurement to sales.

In contrast, Web services are a new paradigm for Microsoft, which has always been about proprietary systems for PCs, and IBM is pretty much about selling everything to anyone.

IBM has a huge services organisation that it needs to employ and deploy, and its Web services offering is about piecing together existing but disparate hardware and software, that requires costly integration work.

So while promotion may be important in gaining mindshare, what customers want are partners that have a clear and consistent vision and proven credentials. Sun is in the fortunate position to have both.

If Microsoft ends up dominating the Web services market, what would be the problem?

Like any market, if one player dominates it, prices go up and innovation goes down. Microsoft's .NET model relies on tying users to the proprietary Windows platform and online authentication using products such as Passport.

This strategy has huge ramifications for privacy and security. Microsoft would hold on its servers information on everything a user does on the Net, such as banking data, healthcare purchases, leisure preferences, and so on.

That gives rise not only to concerns around security, but also how the information will be used in the longer term. For example, if you do a large number of transactions with your bank, there is nothing stopping Microsoft from charging your bank per transaction--in doing so, becoming a toll keeper for every transaction done via the Net, or even moving into the provision of banking services.

Given the pervasive nature of the Internet today, if Microsoft were to dominate Web services, they can influence a user's behaviour simply by screening the information to which they are exposed via the browser, office suite, or the operating system.

Web services

Sun has said that its Web services can alleviate the "pain points" that businesses are feeling today. What are these pain points?

Most of our customers want help in ways to boost revenue, control costs, and improve customer service. In the case of BPay, by developing an Internet bill payment service, users can pay a utility bill, check their bank balance, and transfer money to another account all via the one portal, at any time of the day or night. This is better customer service at a lower cost.

If we look forward, BPay now has the infrastructure to add new functionality--different data, different data types, different applications--through the same customer interface to meet new, unexpected challenges more cost efficiently.

The infrastructure we put in place helps them do this by leveraging existing information--often held in legacy applications--and making it available as a service across the network that can be accessed by anyone, anytime on any device. We call this Services on Demand.

A customer does not have to throw out old technologies to transition to Web services, nor do they have to write new code every time they want to deploy a new product.

The best way to harness this evolutionary, rather than revolutionary, approach is to put in place an infrastructure framework that is open and standards based to enable a step-by-step transition to Web services--what we provide in the Sun Open Net Environment (Sun ONE).

There is no reason why using existing Sun technologies, the banks, power providers, water companies, and so on, can't all link up over the Internet, so that the entire payment function from end-to-end is automated via a Web service.

With next generation technologies, these Web services will be even smarter. By detecting context factors such as where the user is located and their personal payment terms, a Web service can tailor the information to the individual customer's needs without manual intervention. That is even better service at lower cost.

Isn't there more money to be made in software and services today, than hardware?

Not necessarily. There is plenty of money in hardware and there will be for years to come. In terms of what Sun is doing, we have a strategy to provide infrastructure around the Internet.

That means providing hardware, some operating systems software, and some Internet access and usage software such as directories, portals and so on. Sun has always been a product company and still is.

We rely on our partners to deliver innovative applications. Customers come up with the content and we help them deliver it efficiently and effectively. This strategy prevents us from competing with our customers and partners.

Interactive TV

Non-PC platforms are already important and will grow in importance as organisations try to better serve their customers and cut costs. In the field of Web services, for example, using non-PC platforms means user can perform functions without being tied to their PC. They can use their palm device, their mobile phone, a kiosk, or a set-top box, for example.

In the field of iTV, SBS, and Sun launched Australia's first application offering back-channel functionality using Multimedia Home Platform (MHP).

Back-channelling enables audiences to submit comments or retrieve information while the program is being aired, and allows journalists to monitor comments, gather valuable data and send immediate feedback to viewers without going through a computer programmer. It is a greatly enhanced viewing experience, and a way for the television station to get closer to its customers.

The parallels between computing and the television industry highlight the importance of open systems and standards. If one vendor with a closed proprietary system was allowed to dominate the TV industry, it is unlikely we would have more than one or two television channels today.

Can you imagine users buying one TV to watch the ABC and a second set to watch SBS? For audiences to experience the full functionality of iTV, a series of open standards must be globally ratified to enable production of the viewing devices.

Sun continues to play an active role in the development of industry standards for digital television for the same reason we are active in open standards for computing: it results in a better user experience and greater innovation because vendors are free to compete on the excellence of their product.

Sun's recent financial performance has been less than stellar. What's going wrong, and how will it be fixed?

Sun, like everybody in the industry, underestimated the magnitude of the drop in demand. This was compounded by the dot-com crash and the slow-down in the global telecommunications sector.

Sun is driving its business forward by remaining focused on its vision: being the number one provider of infrastructure around the Internet. We will leverage the head start we have in this market to take share from our competitors.

We have refreshed our product line during the last 18 months, and these new technologies are selling extremely well. Australia has been more stable than other countries because we didn't have such a huge dot-com boom, and therefore we haven't had a huge bust. We have made a concerted effort to manage our costs, which means we are leaner and fitter than our competitors.

When the markets free up a little, we are well positioned for good growth.

In a recent interview, Scott McNealy gave his views on the top five priorities for IT. What are Sun's top five priorities for Australian IT?

Not surprisingly they are consistent:

1. Choose a single architecture that can deliver dial tone--like reliability for the services and applications you provide.

2. Pick an integrator or consultant who can help you with the job.

3. Use a browser, based on open standards, on every desktop as the standard interface for all your applications and services.

4. Before transitioning your legacy apps and services to the new system, load a directory service with every one of your customers, employees, resellers, suppliers, shareholders, etc.

5. Use everything you put in place in steps one through four to Web enable all of your applications and services.

Coping with competition

Is there a chance that Sun's emphasis on going up against Microsoft runs the risk of distracting you from other threats to Sun: Intel, IBM, and Linux?

No. We compete in two ways: head to head with vendors at a product level which includes Microsoft and IBM; and then second, with Microsoft's business practices in the US, some of which stifle innovation in the industry.

We have an eye on each area, we tackle them in different ways, and give them the appropriate emphasis to ensure the best outcome for Sun and its customers in the long-term. For example, we have moved into the lower-end server market, offering a range in the sub AU$2000 price range to capture the pent up demand for high-end performance at a lower price tag.

In the news page of www.sun.com, one recent article was entitled, "Linux on the Mainframe-Not a Good Idea". The following article's headline was "Sun Broadens Support for Linux". What's the real story?

Linux is good for Sun. It promotes open systems, and open standards, which is good news for the marketplace also. Any Linux solution increases the size of the Unix marketplace, keeps it open for innovation, and will run on Sun.

In regard to the mainframe, Linux is still open source, which makes it a dangerous technology for any mission critical functions as there is no one vendor who takes ultimate responsibility if a customer is having major problems.

Linux does, however, have a valuable role to play in applications at the edge of the network, such as firewalls, caching servers and network servers. That is why we have broadened our support for it.

In the past companies wanted two things from Sun: top-of-the-line hardware and stable operating-system software. Now the company seems to be focusing on storage, middleware, and Web services. Can the company cope with such a major shift in direction?

There is no major shift in direction. Everything Sun is doing is consistent with where we have been and our vision for the future. We have always offered storage and middleware, and Web services is simply an enhancement of our offering.

We are headed in the same direction we have for the last 20 years: to be the number one provider of infrastructure for networked computing. And history has proven that we can cope with managing the growth that flows from that strategy.

About Sun Microsystems

Sun is a provider of hardware, software, and services for establishing enterprise-wide intranets and expanding the power of the Internet. Sun Microsystems Australia joined the Australian Top 500 list in 1992, just six years after the company was formed and currently ranks number 287.

Coping with competition