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ANALYSIS: Channel Waits for Sun-Microsoft Dust to Settle

Fifteen months after Microsoft and Sun Microsystems kissed and made up, the relationship appears ready to begin providing benefits to customers.

Fifteen months after Microsoft and Sun Microsystems kissed and made up, the relationship appears ready to begin providing benefits to customers and to the firms’ channel partners, but the exact nature of those partner benefits is far from clear.

The two companies have agreed to cooperate in broad technology areas, while competing vigorously in others. In all, 12 different Microsoft groups are collaborating with 12 groups at Sun, says Ben Lenail, Sun’s director of corporate strategy and development and lead on the relationship with Microsoft. They are working on projects to achieve “much tighter Java and .NET interoperability,” he says, along with joint specifications for integrating identity systems as well as for unified systems management. Sun’s AMD Opteron-based servers are certified to run Windows Server 2003, and Sun is working on certification for Microsoft’s 64-bit editions for both the desktop and server.

Sun does not ship Windows pre-installed, although that may come. “We have to walk before we can run,” hedges Lenail. The two companies have already made some joint sales calls to large government and commercial customers, he says.

Sun also recently purchased thin client software vendor Tarantella, which supports Microsoft’s Remote Desktop Protocol (RDP), and has licensed RDP—the core of Windows Terminal Services—from Microsoft. Those elements plus the Sun Ray thin client amount to a “perfect bundle” for partners to take to market, Lenail says. “It’s not eating into Microsoft’s core business [and] it eliminates the need for very costly Citrix clients.”

“This will give Sun the ability to compete with Citrix,” more so than Microsoft, agrees Rob Enderle, principle analyst at The Enderle Group. “Microsoft isn’t big on thin clients anyway.”

“Ultimately, there are many opportunities for us to go to market together,” Lenail says.

Microsoft declined to discuss specifics as to how its developing relationship with Sun might affect the channel, but did provide an e-mail response from Allison Watson, vice president of Microsoft’s Worldwide Group.

“Both Sun and Microsoft have high expectations for continued cooperation and increased interoperability across our product lines, which equates to greater opportunities for our partners,” Watson wrote. “This alliance creates synergies that will enable Microsoft to continue to align products and resources toward empowering partners to meet customer demands.”

One clear joint strategy emerges in competition against IBM. Big Blue, after all, competes in Sun’s big iron markets and also is pushing hard for more Linux and Java adoption. “You’ve got two companies there that both have a common enemy [in IBM],” says Mike Haines, Gartner research vice president and a specialist in the firm’s channel practice.

The Java-.NET interoperability is great news for Microsoft ISV partners, says Howard Reisman, CEO and founder of server management tool vendor Heroix, a Microsoft Gold Certified Partner in Newton, Mass. The latest version of its flagship product—Longitude—is written in Java. “If Microsoft drops its antipathy towards Java, it’ll help everyone,” he says. “I’d love to work in Visual Studio and write Java and have it run anywhere.”

A Savior in Windows
Sun certainly has good financial reason to more closely embrace Windows. According to its most recent 10Q (SEC filing), growth in sales of its x86-based, entry-level servers has been helping to take up the slack for a slowdown in sales of its high-end UltraSparc systems. Market researchers at IDC say that the the first quarter of 2005 was the first time that sales of commodity Windows servers matched typically more expensive Unix servers.

Adding Sun as an x86 and Windows player doesn’t necessarily increase competition for Microsoft’s existing channel partners, however. For the most part, Microsoft Partners face little overlap with Sun resellers, so it’s not a problem of having to share the same sized market pie with a larger crowd, according to analysts and resellers. And Sun doesn’t rely on the channel to the extent that Microsoft does. In the United States, about half of Sun’s sales—particularly to very large customers—are direct, Lenail says. “Sun isn’t known very much as being channel friendly,” says Bill Hammett, who works in enterprise storage sales for integrator and reseller Synegi in Irvine, Calif.

“We’ve started to look at [sales channels because] there’s a lot of synergy between our volume resellers,” Lenail says, adding that with large channel players like Insight Direct, CDW and Tech Data, the companies actually already share resellers. “We tell them, ‘You have to cross-train your people.’”

A Market-Driven Alliance

A powerful motivator for cooperation, say analysts, is that the two companies’ products sit side-by-side in many customer sites, and those customers are getting impatient for their systems to be much more interoperable.

“Whether either company likes it or not, most customers are both Windows and Sun shops,” says Michael Cherry, lead analyst for operating systems at researcher Directions on Microsoft.

“Both sides have something to gain. For Sun, it increasingly has to interoperate with Windows,” says Joe Wilcox, operating systems analyst at JupiterResearch. Still, he points to both companies’ statements that they will continue to compete in key areas. “Sun doesn’t want to end up as just another [Windows] OEM,” he says.

But Sun isn’t planning on that. “We’ll never be a 32-bit desktop player like Dell [and] you won’t see us sell Microsoft’s Small Business Server,” Lenail says. “We’ll definitely lead with Solaris and the Java stack.”

In the meantime, even the analysts are waiting to see how it will play out.

“It may create an environment where the channel partners of both companies will be able to leverage whatever comes out of this [and] down the road it could be a threat to IBM,” says Gartner’s Haines. “As a channel strategist, it creates two huge channel opportunities. [But] it’s awfully early [to draw any conclusions]. It’s all long term.”

“Ultimately, it’s going to be a longer-term play,” says Stephen Graham, who covers alliances for IDC. “The toughest part will be trying to keep their focus as they try to keep their heads above water from a quarterly [financials] standpoint.”

About the Author

Stuart J. Johnston has covered technology, especially Microsoft, since February 1988 for InfoWorld, Computerworld, Information Week, and PC World, as well as for Enterprise Developer, XML & Web Services, and .NET magazines.

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