Sun sees Europe ripe for picking

While Sun Microsystems Inc. has been hit with recent layoffs and financial blows, company executives are remaining confident that its strategy of pushing open standards, mobility and ubiquitous connections to the network is on target, with Europe being a clear case in point.

“In Western Europe what we see is that innovation is back, led by systems for delivering mobile services,” Elie Simon, president of Sun for Europe, Middle East and Africa (EMEA), said Wednesday.

Services delivered over mobile phones, such as games and ringtones, and the emergence of RFID (Radio Frequency Identification) tags, that allow retailers to track and monitor customers’ purchasing habits, represent a boon for Sun, Simon said, as it courts telecom providers and pitches its identity management offerings.

“The idea of everything being connected to the network is moving from hype to really, really happening,” Simon said.

But Sun doesn’t just have its sights on Western Europe, as Central and Eastern Europe are also attractive, given that 10 countries in the region are currently gearing up to join the European Union (E.U.) next year. In preparation for E.U. accession, these countries are rolling out new e-government, health and education initiatives, partly funded by the E.U.

The E.U. accession countries present a ripe opportunity for IT vendors looking to reap the fruits of a growing market. However, the costs of deploying new infrastructure is high and the nascent E.U. countries are looking for IT partners who are willing to provide serious funding and then stick around for the long term.

“This is a new way for IT companies to operate,” Simon said. “You have to put lots of money on the table.”

In the hopes of snagging lucrative contracts to build e-government, healthcare and banking systems, Sun is trying to line up a financial partner.

“We are negotiating with a giant American bank to go after exclusive partnerships with governments in the region,” Simon said. He declined to say which bank Sun was in talks with but said that the results would probably be announced in the next couple months.

IT vendors expect to see some US$2 billion worth of contracts coming from the E.U. accession countries over the next four years and the race is on to see who wins the lion’s share of projects.

For Sun, the E.U. enlargement opportunities fit nicely with the company’s open standards push and new Linux software offerings.

Last month, the Santa Clara, California, company took the wrappings of the Java Enterprise System, an open source server software stack which includes the Sun ONE application server, directory server and portal server, as well as Sun’s clustering software, and messaging and calendar products, which is priced at US$100 per employee, per year.

The company also the Java Desktop System, which offers an integrated set of open source application for the business user, also priced at US$100 per user, per year.

Users in the E.U. accession countries could be prime candidates for these products, Simon said. With their price sensitivity, high education levels, and need to quickly come up to speed in terms of technical development, they are ideal early adopters of open source, he said.

“These (E.U. accession) countries are prepared to take risks because they know they can leapfrog other European countries to offer access and deliver services to their people,” Simon said.

That’s also why Sun is loudly promoting open standards for identity management and identity-based services in the region through the The Liberty Alliance Project consortium, which it spearheaded.

“We are pushing Liberty Alliance like hell there,” Simon said.

While the EMEA region currently accounts for 33 per cent of Sun’s overall market, emerging opportunities in Europe could bump that up in coming years, although Simon said that Asia is expected to be another strong growth area.

Growth is what Sun needs as it looks to shake off recent losses that forced it to announce it was trimming 1,000 more jobs last month, and news earlier this week that it was revising its fiscal fourth quarter 2002 results, taking a charge that more than wiped out its profit for the quarter.

Simon pointed out that the company still has US$5.7 billion in the bank, however, with US$2 billion going toward research and development.

“We are back to our core competency, pushing down prices,” Simon said.

“We know it doesn’t make us a lot of friends but (the competition) will respond, they must respond,” he said.