Sun’s announcement on Linux desktops was disappointing. What Sun basically said is that they will provide a desktop hardware and software solution which will cost USD 300,000 in quantities of 100 to buy and administer over a 5-year-period, compared to USD 1 million for Windows. It will bundle open source software on the desktop.
From a Reuters release (via NYT):
The new desktop, dubbed Mad Hatter at Sun, will probably be a small-sized machine with an average microprocessor, hard disk drive and RAM memory costing about $1,000, including monitor.
The machine will also have a reader for credit-card sized identity cards to ensure security using Java technology and likely will not include a floppy disk drive. Sun officials predicted it would go for sale in the first quarter of 2003.
Sun plans to provide only one version of the computer and sell it in lots of 100 along with a powerful server computer and a services fee. Users could take advantage of free e-mail and word processing software and might use the browser as the primary tool.
Equipment and maintenance costs would be about $300,000 for 100 users over five years, or about $50 per user per month, Sun’s software chief, Jonathan Schwartz said, estimating traditional PCs would cost about $1 million, including Microsoft Office software and support over the same period.
More from an AP release (via NYT):
Sun’s Linux systems will be sold in increments of 100 units; the company will target customers in industries, such as call centers, retail banks, payment centers, schools and government institutions. Pricing has not been announced. The company expects to sell the computers and levy a monthly subscription fee for service and support.
The desktop systems, set to come to market next year, will employ “military-grade security,” the company said.
The computers are not meant to compete directly with Dell’s Linux-based PCs, which target both individuals and corporations.
“The target demographic is all the people in a fixed-function environment … who probably do not need a $3,000 desktop,” Schwartz said.
The desktops will include several free open-source programs: the Linux operating system, a Mozilla Web browser, the GNOME desktop graphical environment and the OpenOffice suite of word processing and database applications.
The per unit cost for five years comes to USD 3,000 for Sun (vs their claim of USD 10,000 for Microsoft). At the proposed price of USD 1,000 for the desktop, it is way too high. And so is the USD 400 per annum for support and software and other stuff.
I think this is 10x more expensive than it should be. Of course, Sun is assuming “total cost of ownership” which means it includes support costs and software upgrades and perhaps more. But the costs are still way too expensive.
Sun had an opportunity to redefine computing and that is where it failed.
Here is what Sun should have said: “We are using our strengths on the server to provide a server-centric computing environment wherein you never need to upgrade your desktops, and in fact, can recycle desktops. You can buy older machines for less than USD 150. We’ll provide all the software that you need based on Linux for USD 50 per annum. Assuming a loaded cost on the server for USD 50 per client (one-time), the year 1 hardware infrastructure costs USD 200 per client and the software costs USD 50. Now, over 5 years, assuming we need to replace 1 desktop in every two (it just stops working or whatever else bad happens), our projected 5-year cost per desktop is USD 200+100+250=USD 550. Okay, lets add USD 200 so we make some money and so does everyone else in the chain. So, for 100 Linux desktops (and the servers necessary for them), the 5-year operating cost is USD 75,000.”
Instead, Sun has come up with a pure desktop business based on Intel CPUs with open source software. They have no competitive advantage in either of the two areas. Instead, their strength, which they should have played to, is on the server side.
Sun’s Thin Client Solution (SunRay) costs USD 500. That is way too much. The way to beat Microsoft is to drop costs of hardware and software — the price points for users have to be 10-20% of what they are at today. The developed markets may still take time to switch because of legacy and the applications base, but the emerging markets will jump at this. That’s the opportunity Sun missed: to create a computing platform for the next 500 million users.
It is almost as if Sun expects Microsoft to be not listening when they made the announcement. What happens if Microsoft makes Windows free tomorrow? That is why one needs the hardware-software as a combo to drop in prices. The only way the hardware prices can drop is to recycle PCs and eliminate the need for upgrades. That is what server-centric computing can do. That’s the opportunity Sun missed.
I like Sun as a company. I used Sun workstations when I worked at NYNEX in the late 1980s. A lot of innovations have come out of Sun, and perhaps more will. Sun, like many others, needs to think beyond the US, beyond today’s desktops, beyond today’s computing models, beyond today’s users. That is what they did not do. That’s the opportunity that Sun missed.