Can Sun India shine on?

On the face of it, Sun is singing the blues—it recently scrapped the UltraSparc V, signed a deal with arch-rival Microsoft, and announced a second round of global job cuts. Under the hood though, there’s a robust growth engine ticking as Sun India leverages its strengths in telecom and BFSI, and guns for growth in FMCG, says Prashant L Rao

Anil Valluri says that the cut-throat Sun-Microsoft rivalry will continue, despite the recent deal between the two giants; he also says that Sun is working on some India-specific software licensing models because the per-employee licensing model isn't popular in India

The recent spate of announcements surrounding Sun Microsystems have been ominous. Standard & Poor reduced Sun’s debt rating to junk status. Gartner said in February that the company’s server sales dropped 15 percent to $5.4 billion in 2003. Sun reported a loss of $760 million on revenues of $2.65 billion for the quarter ended March 28. The bad news has continued—Sun is dealing with 3,300 layoffs (about 9 percent of its workforce), its third major cut in the last three years. In a deal that took a lot of people by surprise, Sun smoked the peace pipe with arch-enemy Microsoft in a deal that earned it $1.95 billion from Microsoft. In other news, Sun cancelled its UltraSparc V processor.

For any other company all this would be as good as plonking down a headstone and carving RIP on it, but this is Sun we’re talking about. Sun has been down before but like any great fighter, Sun always comes out fighting with a new move and bounces right back.

Storm in a coffee cup

While its parent in the US has been suffering, Sun India has weathered the storm quite comfortably. The single biggest factor that keeps Sun shining in India is its huge success in the resurgent Indian telecom sector. All but one of India’s biggest telcos run on Sun. Better yet, core banking is another area where the Solaris-Finacle combo has trumped the competition in the domestic market. This is why Sun closed 2003 with a 49 percent share of the UNIX server market in Q4 (OND), according to IDC India. That’s almost as much as the next two (IBM with 29 percent and HP with 21 percent) put together.

So where does Sun go from here? Can it survive, better yet, thrive? Will the hardware company go ‘soft’ under Jonathan Schwartz, Sun’s chief operating office and new Number Two—he was Sun’s software chief before his elevation to COO. What about R&D? Sun has famously gone its own way with its Solaris-Sparc mantra, ignoring the Wintel horde. This time, however, it is cutting R&D and sales, general, and administrative spend by $500 million in fiscal 2005—June to June. Read on and find out why India is crucial to Sun’s comeback (if come back it does) and how Sun’s competitors will find it tough to unseat it in India. On the desktop, it’s still WW III out there. McNealy and his merry men will give no quarter to Microsoft in their battle to put Java Desktop System (JDS) and StarOffice on every corporate desktop.

Indian R&D shines on

Sun has a strong R&D presence in India. The IEC (India Engineering Centre) is home to over 600 professionals who are responsible for some of Sun’s enterprise software products. “Application Server continues to be our flagship product. Version 8.0 is the first production quality, free application server—it’s been deployed in GE Capital,” says Vijay Anand, managing director, India Engineering Centre, Sun Microsystems India.

The IEC is releasing the Enterprise Edition of the application server, a high availability ‘five nines’ software. It was wholly responsible for the development of Application Server 7.1, an incremental update of the previous version. This was not a free product. Version 8.0 was partly done in India. All the high availability code was written in India. The connectors for enterprise applications such as SAP and Siebel were also done in India. “In 8.0 we do aspects of Web services basic profile, which is new in J2EE 1.4,” says Anand.

The IEC created the installer and packaging for Java Enterprise System 1.

Java Studio Enterprise (JSE) is Sun’s solution for the enterprise developer. Then there’s Java Creator, a new tool aimed at Visual Basic developers. It is a visual RAD tool, that lets you get an application for web deployment ready in a jiffy. Later, it will support the creation of rich clients. “We are going to target the ten million Java developers worldwide with Java Creator,” says Anand. IEC has a team that works on JSE. It is planning to add people who will contribute to Creator. “There’s a nice emerging new team for tools. We work with Wipro, HCL, Infosys and TCS and help them adopt our tools as they develop projects for their clients,” adds Anand.

While the IEC primarily undertakes software development for Sun, it has recently formed a group in India that does remote hardware diagnostics for Sun’s top-of-the-line E15 and 25K servers. Sun IEC is starting a small processor development programme with less than 10 people—this team will develop tools for processors.

Though Sun is cutting its overall R&D budget, chances are that IEC’s work will increase in the next 12 to 18 months. As Anand puts it, “There is always an advantage of doing more in India.” India is Sun’s leading R&D centre in the emerging markets and the IEC is Sun’s biggest R&D unit outside the United States.

Sun believes that the Sun-Microsoft deal’s impact on Sun’s developer tools and Java Enterprise will be positive. “The perception is that interoperability will be better [for users]. We want that perception,” says Anand.

Sun is still fiercely competitive when it comes to Microsoft and its platforms. “The key advantage of Java is portability and developer productivity, we think it doesn’t exist in .NET,” comments Anand.

Sun is coming out with J2SE 1.5 (code named Tiger) that will have developer productivity enhancements and the new VM (Virtual Machine) will run a lot faster than the current one and handle enterprise apps better.

Roll over, UltraSparc V

Sun had announced CMT (Chip Multithreading) while building the UltraSparc III and IV. “We put some of that technology into the UltraSparc IV, the precursor to CMT is a dual core,” says Anil Valluri, director— Systems Engineering, Sun Microsystems India. Interestingly, the UltraSparc IV was a single core chip in its design phase. Halfway through the design cycle, it was revamped into a dual core chip. The UltraSparc V was a single core chip from the beginning. “Having branch prediction and a L3 cache in a single core processor didn’t make sense. Out of the UltraSparc V family, one chip called Millennium was shelved. While that was the flagship of line, Sun hasn’t dropped the entire line,” says Valluri.

Sun’s argument is that while processor speed doubles every 18 to 24 months, memory speeds take as long as six years to pull off the same feat. “There’s no way you can escape the memory queue even if the processor is faster,” says Valluri. In an online transaction processing (OLTP) environment there are tons of transactions that need to be constantly refreshed. That, Sun argues, is where throughput computing (as exemplified by its CMT technology) is a better alternative. OLTP benchmarks such as TPC-C reveal that processors are idle most of the time. “Everything nowadays is a thread, a subset of a process. If a thread is executed a process may still wait for other threads to complete. While one thread waits for memory, the other thread executes. Threads overlap and with four threads you can get a throughput of 3.5x,” says Valluri.

In traditional x86 processors, you end up doubling real estate and power for 20 percent additional power. You can reduce processor capability by 20 percent and bring down size by as much as 80 percent and use this saving to put multiple chips on the same wafer and that’s how you get multiple cores.

Sun may have ditched Millennium/UltraSparc V but it is going to move faster on Niagara and Rock as a result. Niagara will be a four-core processor with four threads per core. Each thread unit will perform equivalent to Sun’s UltraSparc IIIi. This chip will be aimed at the blade or edge server market. Rock will be a eight-core chip with four threads per core, offering 32x performance. Each thread in Rock will offer performance comparable to an UltraSparc IV thread. The best part is that Sun will continue to offer binary compatibility with its older UltraSparc processors. As Valluri sums it up succinctly, “Solaris-Sparc continues.”

Many popular enterprise applications on Solaris—SAP, Oracle, PeopleSoft—are already multi-threaded. By reducing the complexity of the processor core and putting multiple threads on multiple cores, Sun hopes to go beyond the Gigahertz mark in enterprise computing.

These new processors are expected to debut in the 2005-06 timeframe. Sun is promising a doubling of the UltraSparc IV’s performance next year.

Meanwhile Sun’s launched an update to its E15K box. The E25K is an extension of E15K. 30 E15Ks are installed in India. The E25K has already been deployed by Punjab National Bank. The bank has upgraded from an E15K to an E25K for running its core banking on Finacle.

Software licensing

Sun’s Java Enterprise per-employee licensing hasn’t taken off in India largely because of the difference between the Indian business model and that of the US. “Even a small Indian business has a large number of employees [of whom only a few would be using IT]. We are working out division-based licensing for India. These kinds of licensing schemes were not envisioned in JES,” says Valluri.

The JES licensing terms cost $100 per employee. “Any Indian public sector bank has thousands of employees. You can’t go back to them and say $100 per employee. We are looking at a per-desktop or per-department scenario,” says K P Unnikrishnan, country head-marketing, Sun Microsystems India.

Sun has now re-aligned itself into four divisions—x86, Sparc, storage and edge/software.

“The telecom resurgence has been a great boon for us. We read the signs early. A year before that we started discussions with service providers about the value we could bring to this segment. Today, pharma, healthcare and consumer-packaged goods (CPG) show potential,” says Vishal Dhupar, director-Sales at Sun Microsystems India. With the WTO regime coming in, Sun expects to see new industries take off—retail, pharma, healthcare and government in particular. It intends to replicate its success in telecom in CPG in the next one to one-and-a-half years.

“From our perspective the high growth verticals remain banking financial services and insurance (BFSI), e-governance and infrastructure (including telecom). We have currently not upgraded fast moving consumer goods (FMCG) to a vertical and still look at it as a horizontal. Given the low investments in this segment so far, it could well be reviewing its IT spends,” says Dhupar.

Talking about the challenge from Big Blue, which has thrown down the gauntlet and reached the runner-up position in the UNIX server market, Dhupar comments, “Reliance is end-to-end Sun. So are Bharti and Tata Teleservices. Everybody’s going to find it that much more difficult to make a dent.”

Sun is very strong in BFSI. Six of the top ten banks run their core banking systems on Solaris-Sparc. Seven of the 12 mid-sized banks do the same. These installations are mostly Finacle on Solaris. Lasersoft has won a few deals on Solaris. In treasury applications Reuters and Lasersoft have both been deployed on Solaris.

Sun is trying to get into ATM networking where all vendors who aren’t on the BASE24 standard (Tandem) are backing it. It claims to have a one is to ten price advantage over BASE24.

Sun continues to be a systems company. The only difference is that its top brass talk about integrated solutions today. Software accounts for a large chunk of any deal now, particularly large infrastructure ones where software’s share is as high as 40 percent. Normally, that would be 20 percent.

“If somebody’s looking for features that Linux can’t offer, go for Solaris. If you’re looking at low-cost, not very critical, go for Linux. Linux is a great talking point, but has all the headaches of integration. On the face of it, the cost looks good, 35 to 40K for the box plus 2.5K for the OS. But then you run into backward compatibility issues, an application that runs on 7.1 may not work on 7.2,” says Dhupar.

“We are looking at doubling our business over the next three years, growing at 45 percent per year. In the last three years Sun has had a market share of 55 to 60 percent. It expects to maintain that number. We have a huge backlog from OND,” says Dhupar.

Sameer Kochhar, CEO, Skoch Consultancy Services says, “With the domestic market booming it is possible for any player with the right go-to-market strategy to look at significant growth over the next few years. Such a strategy would include products, channel, pricing as well as the engagement model with the market. It would also be driven by the kind of momentum that the offering gains in global markets.”

Sun is pushing beyond its traditional hunting ground, the metros. “We are getting into B&C class cities with a strong SME focus. Our SME solutions seminar series is demonstrating our low-end to mid-range and even some high-end systems and our software, including JDS,” says Unnikrishnan.

Though services account for a substantial portion of Sun’s global revenues the company doesn’t want to get too deep into that line. “For us it isn’t like IBM Global services. Our team sticks to architecting, consulting and integrating a total network architecture,” says Unnikrishnan.

K P Unnikrishnan says that Sun is expanding its Indian market by getting into smaller B & C class cities, and by building a strong SME focus

Deal with Microsoft

The deal with Microsoft has resulted in Sun withdrawing its antitrust case on Java. It has licensed Java to Microsoft for future use. The deal gives Sun access to Microsoft’s NetBEUI protocol (used heavily in small and medium-sized Windows-based networks) and allows for interoperability between ADS and LDAP. It also lets the two ompanies create interoperability between J2EE and .NET Web services. Lastly, Sun has certified its x86 boxes for Windows Server.

“All Sun customers use both Sun and Microsoft products. So far third-party or ‘best guess’ hacks for interoperability were in use. Interoperability, common directory management and network-based management will all become possible [as a result of this deal]. The most important component is about ADS and LDAP. Today you have to access ADS through a hosted model to get authenticated on an LDAP directory server and get re-authenticated on ADS. Customers will find it easier from now,” says Valluri.

Interoperability between .NET and J2EE objects will come in the next year or two.

Objects on the two platforms will be able to exchange parameters and handshakes for object transformations.

As part of the Sun-Microsoft settlement both companies are expected to work on compatibility between Java and .NET, solving interoperability issues and help Active Directory interoperate with LDAP. While there are no clear plans in terms of product or technology integration, [the settlement] creates an opportunity for Microsoft and Sun to talk without being encumbered by lawsuits.

“Given the raging battle on IP related issues a realignment of forces is inevitable. The market clearly is looking at all options that save money. Any steps that indicate a widening and more functional portfolio are healthy steps,” says Kochhar.

Sun admits that every customer of theirs wants the option of being able to run Windows on Sun’s x86 servers if Linux doesn’t work out for them. “We don’t want to buy Windows from you, but I should have the option even if I deploy on Linux,” says Valluri, quoting the CIOs’ refrain.

Desktop wars will continue

It may look like Sun and Microsoft are good buddies now but that’s far from the truth. They may have stopped fighting in court but the two companies are still going hammer and tongs at each other in the marketplace. Valluri says, “We are fighting tooth, nail and claw in the field.”

A leading brewery company is shortly going to deploy JDS countrywide. Dhupar says, “We intend to double our market share on the desktop and get to 10 percent.” The second iteration of the Java Desktop System (JDS) will be released in H2 2004.

prashant@expresscomputeronline.com