Sun insures software model with Blue Cross win

One step at a time

By Ashlee Vance in Chicago • Get more from this author

Posted in Hardware, 13th January 2004 09:59 GMT

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Sun Microsystems has found life for its Java Enterprise System (JES) software at a large health insurance company, giving a boost to one of the most aggressive and risky pricing strategies in the software industry.

Blue Cross Blue Shield of Massachusetts (BCBSMA) is exactly the type of company Sun hoped to woo with the JES pricing model, which includes all of Sun's data center software for $100 per employee per year. BCBSMA has a whopping 2.4 million customers but only around 3,300 employees. Many software pricing schemes would see BCBSMA pay extra either for the use of its software by those customers or for the number of servers needed to accommodate them. Under Sun's model, however, BCBSMA is expected to pay a flat fee of $330,000 for a huge chunk of its software stack, including Sun's directory server, application server, identity server, portal server, messaging and clustering products.

Sun has billed the JES model as a good choice for companies with relatively few employees compared to their customer base.

Never one to mince words, Sun's software chief Jonathan Schwartz used the deal to proclaim, "Middleware is history."

It wasn't long ago that many analysts said Sun's enterprise software business was history. The company has enjoyed success in some markets for its portal server or messaging products, for example, but failed to win share from IBM or BEA in the lucrative application server space. Given these past struggles, Sun decided to change its approach to software pricing, trying to undercut companies that rely on software for the bulk of their revenue.

While many still wonder whether or not the JES plan will work, industry watchers have largely given Sun credit for taking a big risk in a big way. Sun needs to bring enough revenue from its software business to pay for the development of a wide range of products. It also needs a strong software bundle to help it compete in the hardware market against IBM, HP and Dell.

Sun is hoping that a few wins like BCBSMA will at least encourage potential customers to ask Sun for a pricing quote. If nothing else, Sun's bid should put some pressure on rivals that typically sell similar packages for thousands of dollars per processor. ®

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