Analysis of IT news

Saturday, June 10, 2006

News Item: Sun co-founder Scott McNealy stepped down

News: Sun co-founder Scott McNealy stepped down (

Analysis: unless they radically change, Sun is eventually doomed. The reason is simple: Sun is currently stuck in their vertical integration logic. They indeed have always lived by their culture of designing everything themselves (from the microprocessor to the operating system) instead of trying to specialize in a particular piece of a computer.

The problem is that if this logic makes sense at the beginning, horizontal integration eventually takes over. And when this happens, a company stuck in a vertical logic cannot compete against the economies of scale a horizontal model provides. That's how Sun's SPARC chips aren't outperforming the Intel chips as they used to (as a matter of fact, they're now even using Intel Itanium chips on some of their machines). But on the other hand, relying on third party vendors become mere assemblers like anybody else.

So Sun is in a situation where they're damned if they do and damned if they don't. By sticking to their current logic, they see their competitive advantage getting weaker every day, up to a point where there will just be no point in buying Sun hardware. But by switching to a horizontal logic, they lose most if not any competitive advantage, along with the fat margins their proprietary architecture enjoys (ever tried to buy spare parts for a Sun machine?)

They had the opportunity a few years ago to focus on Solaris Intel. But their lack of focus left the room open for Linux.

Maybe Solaris for Itanium will gain some market share against Linux, but it will be an uphill battle - especially if they always want to sell it with Sun hardware.


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