Sun deploys Linux in battle with Microsoft

Sun Microsystems' Koby Lif explains how his company will win market share among small and medium-sized enterprises in Israel - and the world.

There's no other way of looking at it. Sun Microsystems (Nasdaq:SUNW) has again declared war on Microsoft (Nasdaq:MSFT). In the past, Sun generally provided servers, while Microsoft focused on software. The border has become very blurred, especially now that Sun has made a new play for small and medium-sized businesses. Sun's traditional customers were large and rich enterprises. Its products were the Mercedes Benzes of servers, and were priced to suit. But the high-tech crisis hurt the giants too, and Sun changed direction and products, cut prices, and entered the services sector.

Sun Microsystems enterprise mid-market director and partner director South-Eastern Europe Koby Lif, formerly CEO of Sun Microsystems Israel, visited Israel last week, and unambiguously declared, "With our new strategy and products, we're going against the Microsoft coalition. This is true in Israel and worldwide. If in the past Sun's market in Israel numbered only 250 large enterprises with over 1,000 employees each, we're now turning to a market of 12,000 enterprises with 25-100 employees each."

Sun offers end-to-end solutions to small and medium-sized enterprises that are initially cheap, but are based on the support model. Sun's products use Linux, and it offers complete office packages that include its Desktop Java or Open Office. Sun Microsystems Israel offers a Hebrew version in cooperation with the Ministry of Finance. This version has recently been distributed free to all comers.

Belying earlier reports, the Ministry of Finance and other government ministries are in no hurry to install Linux operating systems. Following the well-publicized dispute with Microsoft, the Ministry of Finance signed an agreement, and, for now, all government offices still use Microsoft Windows.

Lif says the market is hungry for a new office computer business model. He claims that Sun's products are far cheaper than Microsoft's, but does not disclose the support and maintenance costs for open code systems.

Lif says, "The market dictates Linux. The problem with open code systems is that no one supports them. We do. And yes, it will cost money. We'll offer a cheaper alternative for everything on office desks."

Microsoft's model is based on fast and easy to install products that require minimal support. In contrast, under Sun's model, small and medium-sized enterprises do not manage their office computer systems, but outsource the management of servers to an Internet service provider (ISP), for example. Company servers will no longer manage the office network; ISP servers will do the job, and the ISP will provide computer support.

"Globes": Why did Sun change its target market?

Lif: "It's true that we used to focus on large customers, such as telecommunications companies and large international entities. We reevaluated our policy during the past three years to find new markets, in order to raise our market share."

You had no choice. Large enterprises, like small ones, were no longer buying. There was a crisis.

"It's true that market conditions dictated the policy change. We switched our focus from hardware and infrastructure products to software and accompanying professional services. We now have a richer and more balanced products basket that is also suitable for new sectors."

Have you neglected your older customers?

"Of course not. I think they've also benefited from these changes. In any event, all of our branches adapt to the relevant market conditions. We can offer a wider range of Linux or Solaris servers, and storage and desktop products. We have end-to-end Linux operating solutions."

Does that mean you've cut product prices?

"The entire market did that. The commoditization of the market dictated it. We also realized that the potential growth of small and medium-sized companies was greater than that of the giants like Enron."

Published by Globes [online] - www.globes.co.il - on March 1, 2004

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