Sun and MS bury the hatchet

In what can only be described as the apparent end to an epic battle between two weary warriors, although with one having a decided advantage over the other, Sun Microsystems Inc. and Microsoft Corp. have concluded their longstanding hostility.

For many in the industry, especially those who have spent time at Sun conferences and witnessed the palpable hatred directed toward Microsoft, this “broad cooperation agreement” and its US$1.95 billion payout to Sun seems like the story of the kid who found out that his beloved Chicago White Sox had thrown the 1919 World Series and had to beg “Shoeless” Joe Jackson to tell him — “say it ain’t so, Joe.” Or in this case, Scott.

But analysts — most of whom were also caught off guard — say the agreement is a good one. It includes technical collaboration, giving the companies access to each other’s server technologies, as well as Sun’s licensing of Microsoft’s communications protocols and Microsoft’s support of some Sun products.

“When the announcement came out I don’t know what my face must have looked like,” said Warren Shiau, manager of software research at IDC Canada Ltd. in Toronto. But “once the initial shock got over I thought ‘this is great.’”

“My first reaction was that Scott (McNealy, Sun’s CEO) was finally getting it, that Sun was in dire straits in maintaining these non-productive (legal) battles,” said Rob Enderle, principal analyst with the Enderle Group in San Jose, Calif. Sun’s recent unprofitably may have finally convinced McNealy “that Sun was dying, and if [Sun] didn’t do something dramatic, he was going to be an ex-CEO.”

“The biggest complaint I’ve had from IT clients…is that Sun will tell them how bad they are for having Microsoft products, but they won’t tell them what is good about Sun. So they have been great as a spoiler for Microsoft but they have been absolutely horrid with regard to selling their own value,” Enderle said. With the agreement, Sun is no longer “playing to some computing philosophy,” Shiau said, adding that there is an indication that Sun has decided not to “paint themselves into a corner as a high-end, big-bucks Unix vendor,” he said.

“They have to start to become more than a Solaris company.”

Sun had some realization that “the world is larger than Solaris” and that it has “got to be part of the volume market,” Shiau explained. So “if they are going to go into the volume market, they can’t do it half way.” Aligning with Microsoft is thus an obvious choice.

Linux was also a bigger threat to Sun than Microsoft, as the recent migrations of some companies off of Sun on to Linux on HP and IBM have proven, Enderle said. “Sun needed to re-architect itself to address that threat.”

“At the end of the day, instead of having a company that was clearly focused at the wrong competitor, now Sun comes back with a vengeance and probably will be seen more as a Linux competitor, at least initially, than as a Linux advocate. But over time they are going to become more and more operating system neutral.” Much like IBM Corp. and Hewlett-Packard Co., it won’t matter. “As long as [a solution] is on Sun hardware using Sun services, they’re going to be there.”

More importantly, Sun’s move to be in more tune with Windows will benefit users since it may help them reduce their reliance on third-party software at the application level.

“It should be able to increase the overall cost performance of the Sun products because they’ll be able to go in more efficiently and you’ll be able to pull out a lot of the secondary middleware stuff,” Enderle said. “The (Sun) executive team will (also) no longer be focused quite as much on breaking Microsoft. They’ll focus more on coming up with value for the customer.” Dan Kusnetzky, vice-president of systems software research at IDC, in Framingham, Mass., said that’s good news for Sun’s install base.

“The competitive disagreements between the two companies have put customers in the middle. Customers who wanted to deploy software wherever they chose to deploy it have found it hard because the companies haven’t wanted to make it work,” Kusnetzky said. “This removes one level of stress for customers as they try to come up with a broad deployment strategy.”

“Conceivably, if this all works out, you could plop the Sun Java stack…down on Windows and all of a sudden the user has far more choices,” Shiau said.

But not everyone approved of the settlement. After years of branding Microsoft “the evil empire,” Sun has effectively capitulated to Microsoft in return for a large handout, according to Jeremy Allison, the co-author of Samba, a widely used open source program for sharing Windows files between Unix and Linux systems.

He noted that as part of the deal, Sun accepted the terms of Microsoft’s Communications Protocol Program, which provides the communications protocols for exchanging data between servers and Microsoft desktops. Sun may not be able to make use of those protocols in its Linux servers, he said, because Microsoft’s technology is governed by strict licensing terms. “By licensing those protocols they are basically conceding that that stuff is Microsoft’s intellectual property and promising to keep it secret. That means they conceded one of the most important points they had been fighting for,” Allison said.

Shiau agrees that Microsoft has a lot to gain from the new pact. The core advantage Microsoft gets from its platform is its market dominance. “From the perspective of protecting the platform, by making it more open (to Java) this is probably one of the best things Microsoft could have done,” he said.

Whether or not the agreement will be a success will partially be at the mercy of the differing corporate cultures. “You had personality conflicts that kept the companies from working together for so long…so this may be [a] hurdle,” Shiau said.

The $1.95 billion is as follows: $700 million to resolve pending antitrust issues, $900 million to resolve patent issues and $350 million in royalty payments to use Sun technologies.

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