Original URL: http://www.theregister.co.uk/2007/08/30/sun_bric_growth/
Sun looks to huddled masses for growth
Sun Microsystems is looking to billions of citizens in Brazil, Russia, India and China (BRIC), defined by the west as emerging economies, for long-term success.
Chief executive Jonathan Schwartz predicted BRIC nations will dominate Sun's business in time, thanks to a "staggering surge" in the purchasing power of citizen consumers who will overturn the established patterns of technology adoption.
And yes - you guessed it - Sun is perfectly positioned to ride the wave having open sourced its software, putting it in the hands of developers and students. You know, the next generation.
"We have seen very aggressive growth in the developing world," Schwartz told a Sun conference on emerging markets at its Menlo Park, California, campus. "The developing markets are growing faster for Sun. Today they are the minority of our business, not the majority. My view is that will shift pretty aggressively in the next four to five years.
"We are trying to focus in on the next wave of developers, next wave of students, the next wave of research, the next wave of economic growth to best position Sun for growth in the next decade, not the next few weeks or next quarter."
Growth will certainly come as a relief for a company that's struggled like a hippo stuck in mud since the dot-com bubble burst to expand or make money.
BRIC is a fresh take on Schwartz's familiar "Sun monetizing volume markets" theory, though. Among the smörgåsbord of selectively harvested facts on exhibit this time: the good people of the BRIC nations will account for 44 per cent of the World's GDP by 2050. Consumers, not enterprise IT elites, will determine what IT systems are deployed thanks to the prevalence of things like cell phones. More than half of people will live in cities rather than the countryside, and 18 of the planet's 20 largest cities will be located outside North America and Western Europe.
BRIC, though, remains tiny by comparison to the global IT market, according to IDC. The analyst firm claims a total global IT market of $1.16trn compared to $85.1bn for BRIC.
And it's the established markets that serve as the barometer on Sun's fortunes, that could help fund its BRIC activities, and where Sun continues to struggle. Despite a profit last year, Sun is still making layoffs - with more than 3,000 expected next month. The company's stock has failed to recover anywhere near the 90 per cent in value lost since 2000.
Growth is being driven by the server infrastructure demands of enterprise customers and service providers, not the open source stuff that Sun wishes people would love it for.
On software, Sun last year claimed 16 per cent growth for its Java Enterprise Server (JES) business. JES features Sun infrastructure staples such as access manager and Solaris clustering with Sun's middleware in the base stack, along with directory server and integration (from SeeBeyond) for a little extra.
Schwartz told The Reg it's difficult to break out software sales because of the transition towards services-based income. That said, it's extremely likely the infrastructure products such as access manager and directory - as ever - along with SeeBeyond are helping drive JES.
Underscoring Sun's credentials as an infrastructure provider, is the fact last year that the company's identity software and Java Mobile Edition, used on cell phones, along with Java on smart cards saw revenue stride forward 32 per cent and 60 per cent respectively.
Sun's bread and butter service providers, enterprise and government users will already have picked their portal, application and web server software. And that software will come from the likes of IBM, BEA Systems and Oracle.
There's little in Sun's recent activities in the established markets, either, to suggest it can translate those downloading its open source software or open source Java into fee-paying customers. Just faith in a theory, this time that people have heard or care about Sun, or Java, and will make purchasing decisions based on that knowledge.
"Sun defines the technology, brand and standards that allows us to bring as many people online as possible so that at some point they will open an account or send an email, and when they do that, that will create and opportunity for Sun," Schwartz said.
That's going to be a problem in the BRIC nations. Sun does not have BRIC to itself, as IBM, Oracle and SAP on middleware and Java, and even Microsoft on Windows and .NET, have also been busy reaching out to consumers and developers through investments in research, education and structured programs that have raised the awareness of their companies and technologies.
Finally, there is the question of Sun's relevance to this next generation. The open source software that is getting traction in the BRIC nations - as it is elsewhere - comes from Red Hat, MySQL and Ubuntu in addition to scripting languages. The thing they have in common: they come from outside Sun.®