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Sun's services queen ready to take on the Big Bad

McNealy has Mac attack

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On Oct. 30, as some of us prepped ghoulish costumes and purchased large stores of candy, Pat Sueltz, the head of Sun Services, had the unenviable task of dining with CEO Scott McNealy.

It's not that McNealy is such a bad guy. Some people claim he's quite witty (for a hockey player). He is, however, Sueltz's boss and had the audacity to make her eat at McDonalds and then fly out to Detroit instead of celebrating her wedding anniversary at home.

You might expect Scooter to cut Sueltz a little slack. She is a tech veteran who served directly under Lou Gerstner at IBM, jumped ship to fine-tune Sun's software strategy and then took the helm of the services organization. Sueltz travels constantly and works long hours, which should entitle her to a little quiet time with the hubby.

(She once gave us a stern talking to in the back of a limo for digging into a Sun software strategy best left undug. Drudging up old dirt, however, seems a shallow thing to do, especially after having such a nice chat over wine and controlled-rot steaks.)

But relaxation isn't really a choice for Sun or Sueltz. Sun has seen its revenue slip quarter after quarter for the past couple of years and is facing increased pressure, in particular, from main rival IBM. Big Blue has come on strong with its server line, middleware stack and services wrappings.

This leaves Sun competing against the Big Bad with fewer people, a thinner product line and a hint of nervousness from customers.

"I'm scared, but I'm having fun," Sueltz said, during an interview here this week.

Near the end of the boom Sun was looking for ways to edge in on some of its partners' turf. Executives were not shy about naming BEA and Veritas as two longtime ISV mates that could stand to share some of their Solaris-led sales. These days, however, Sun is talking up the partner approach once again.

"We were perhaps a bit over-aggressive for a while there," Sueltz said.

Sun has tweaked its software and services strategy to aim right at IBM. Being just a fraction of IBM's size means that Sun has to come up with some creative attacks to be effective.

On the software side, Sun has rolled out the Java Enterprise System. Under this well-received plan, Sun is selling the vast majority of its software stack in a bundle that runs to $100 per employee. For some customers, this is just a simpler way of purchasing software. You receive a fixed cost for a big chunk of the infrastructure stack - app server, directory server, messaging, etc - and don't have to deal with per processor or number of user licensing schemes.

Sun can take this rather dramatic pricing approach because key parts of its software business have not been all that successful. Unlike IBM, Sun does not have billions in middleware revenue to protect.

Sueltz is confident that the pricing plan will open doors to new customers and make it possible for clients to roll out services they might have been putting off. If you're paying much less for software this year than last, why not give that new wireless content delivery app a go?

That's where the services part of Sun's strategy really kicks in. Without pause, Sueltz can rattle off a long list of partners such as EDS, CSC and Accenture that step in to up Sun's services body count where needed. The idea is that IBM wants to keep the whole pie to itself, while Sun wants to be seen as the partner of choice for third parties trying to run successful businesses of their own.

In some ways, Sun hopes to create a kind of intimate relationship with customers. Instead of throwing lots of bodies and cash at problems, as some claim IBM is prone to do, Sun teams with select specialists as problems are presented.

Then, once it's in an account, Sun will start talking up some of its longer term strategies. One area in particular that Sun is looking at is remote monitoring of systems. Sueltz tried to keep things a bit vague as this point, but she did mention a possible partnership with AT&T to create network operation centers. This would be a way for Sun to check in on the health of customers' data centers.

As much as Sun talks about partners, it's clear that Sun wants to handle the Sun gear whenever possible. McNealy has been trying to steer customers away from creating custom data centers and toward buying large Sun packaged bundles of servers, storage and software. Sueltz again sees another opportunity here to have Sun services come in and fine tune these bundles for customers.

At present, Sun's services business accounts for close to 35 percent of overall revenue, but Sueltz would actually like to see that go down over time and understandably so. Services have become a bigger chunk of revenue as sales of high-end systems have gone down. With a bit of help from the systems team, Sueltz expects services revenue to range between 28 percent and 32 percent of total sales.

A keep part of this mission means placing more and more emphasis on Sun's strength - hardware.

Sun's software strategy is to a large degree designed to make customers worry less about their code about more about the systems they are buying. If Sun can trim software costs, then customers might not mind shedding a few extra bucks for high-margin gear.

By the same token, Sun is hoping that its N1 hardware and software management tools will decrease the need for admins to handle day-to-day tasks. With less infrastructure costs and a little help from Sun services, these workers can then focus on rolling out more interesting applications.

"I'm betting that a lot of employees will skill-up to meet new demands," Sueltz said.

By centering its business around hardware instead of software and services, Sun hopes to give much larger rivals such as IBM and HP a run. After studying under Big Lou, Sueltz may be just the person to pull this off. ®

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