Sun + IBM: Economics Making the Impossible Possible

Rob Enderle

IBM is rumored to be about to buy Sun for around $7 billion. Back when I worked at IBM, we had a running pool for anyone who was hired from Sun on how long they would last before they quit. The running average at that time was about nine months. Things have changed a lot since then -- for the better at IBM, not so much at Sun -- but the firms are still very different. The most similarity may be found on the software side, and it is here that the most value for this proposed merger will likely be found. The fact that IBM can even try to do this showcases how far the firm has come and how much more agile it is now.

 

For much of the late 80's and early 90's, Sun pounded on IBM, often making fun of the larger and then lumbering company. I'm sure, for some of the IBM old timers, the change in fortune that came with this decade favoring IBM is only topped by the possibility that someone from IBM can tell Scott McNealy, "You're fired." Back then, IBM buying Sun seemed impossible. My, how times have changed.

 

Sun and IBM on Similar Paths but Only One Executed

 

As I wrote earlier, IBM is a vastly changed company from the one we grew to know last century. Then, it was more like HP is today: mostly hardware with a large, though largely second class, software entity. By second class, I mean hardware ruled, and even though software generated vastly more profit for its revenue, in IBM it was a second-class citizen.

 


This decade, software is the power in IBM, and services, which was always one of IBM's greatest competitive advantages, remains one of IBM's strongest elements. IBM, as a result, is more like Microsoft + Services today than it is like HP. As a result, it seems nearly invulnerable to the current market conditions, standing almost alone, so far, in terms of being able to weather the current difficult financial storm.

 

For much of the 90s, Sun seemed to be in search of a strategy and could only focus on Microsoft (which wasn't even a primary competitor to the largely hardware-focused Sun). This century, it seemed to be investing in separating the company into software and hardware components. Unfortunately, while Jonathan Schwartz, Sun's CEO, was long on vision, he was short on execution. While Sam Palmisano was completing IBM's transition to a company focused on software and services, and Mark Hurd at HP was doubling down on hardware, Sun stalled and got caught in the middle. Getting caught in the middle clearly wasn't a good thing, and Sun has been on death watch for some time now. Several years back, I pointed out that Sun was positioning for acquisition. That day may have finally come.

 

Why Would IBM Want Sun?

 

The next big battle for IBM is "the cloud." The companies it will run hardest against aren't just HP and hardware vendors, but Microsoft, Cisco and possibly even Google. It needs Internet technology. Sun, with Java and related developers, has a key part of that. On the hardware side, there is undoubtedly some IP that IBM might like and that both the Server Unit and IBM Microelectronics could use, but I expect IBM would simply transition Sun's roadmap into IBM's very quickly.

 

The other key part is the Sun customer base which, because of Sun's hardware focus, is probably not generating very much at the moment (Sun is heavily used in the troubled financial industry), but this base is where IBM services and software could move more freely. While they may not be buying much hardware, they are looking for ways to dramatically cut costs, and IBM's software and service offerings are pointed tightly at this opportunity. More important, these remaining customers have shown themselves to be incredibly loyal. If IBM can embrace them, and IBM does this better than most, they will be just as golden for IBM as they have been for Sun. Loyal customers are the most valuable in any market and very hard to acquire, outside of buying the company to which they are loyal.



Add Comment      Leave a comment on this blog post
Mar 19, 2009 1:10 AM Anonymous Insider Anonymous Insider  says: in response to Jim Federline

IBM might want to acquire Sun Microsystems for protection if...

... a significant amount of source code and procedures from Solaris 8 were used to enhance Linux scalability features.

... a jury in the near future validates the Novell SCO Amendment to Asset Purchase Agreement from October 16 1996 in a way it benefits SCO in regard to Unix copyrights and patents.

Then IBM loses the right to distribute AIX.

However, if by the time the jury validates the APA IBM owns Sun Microsystems, IBM could still use Solaris to replace AIX.

Reply
Mar 19, 2009 1:54 AM Anonymous Insider Anonymous Insider  says:

Why Would IBM Want Sun?

These IBM-Sun talks might be just noise to distract public attention from IBM's upcoming quarter report. Are there more massive layoffs coming for IBM soon? We'll know pretty soon...

Nevertheless, how did Linux obtain scalability features in the early 2000s? Enter Sun Microsystems.

In the late 90s and early 2000s, there was lack of knowledge among Linux kernel developers on how to provide Linux with things like task scheduling, virtual memory management (VM), communication device drivers, TCP/IP, storage device drivers, web server, kernel locking, kernel preemptibility (SMP only), buffer cache management, IPC (semaphores, shared memory, message queues, and pipes). [1]

This lack of knowledge was partially confirmed by Linus Torvalds when he wrote in early 1999:

"Does anybody know semaphores by heart? I've got code that may well work, but the race conditions for semaphores are nasty... Anybody? Semaphore theory used to be really popular at Universities..." [2]

Then, in 2000, Sun Microsystems announced the release of Solaris 8 source code. Sun made Solaris 8 source code easily available on the Web. [3] [4]

In the years 2001, 2002, and 2003, Linux obtained the much needed scalability features.

Where did Linux developers obtain the code to do so? Well, Solaris 8 source code was easily available on the Web.

A timeline on Unix source code availability is found at this link.

If the above did occur, Sun Microsystems is a much needed acquisition by IBM. Similar to IBM's need in the late 90s to acquire Sequent.

[1] Link (PDF document, page 27)

[2] Link

[3] Link

[4] Link

Reply
Mar 19, 2009 2:38 AM Anonymous Insider Anonymous Insider  says: in response to Jim Federline

Among the applications IBM will obtain with Sun's acquisition is the only viable replacement for Microsoft office in Linux: OpenOffice.

You already mentioned MySQL, the most popular database for Web applications.

So if the IBM - Sun talks aren't noise, Sun's acquisition is a pretty strategic move by IBM.

Nevertheless, I think the acquisition won't be an easy one for IBM. Sun knows the value of its products...

IBM needs to take into account a possible SCO settlement as well.

Reply
Mar 19, 2009 11:14 AM Jim Federline Jim Federline  says:

Anonymous-Insider - A lot of what you say makes sense and is factually true. But please connect the lengthy Sun-and-Linux historical accounting with IBM's need to buy Sun. I can see some other software connections to build more services revenue, such as expansion of DB market (MySQL) and ubiquitous programming platform (Java), but the whole OS connection (Linux or Solaris) seems like a boring commodity trader's domain. I just don't see it.

Reply
Mar 26, 2009 3:01 AM Anonymous Insider Anonymous Insider  says: in response to Anonymous Insider

I enjoyed the way you wrote about the Solaris-Linux connection: "There is some speculation that Solaris is the source of many of the core components in the current generations of Linux, and that IBM's acquisition could prevent another SCO event in the future, should someone less friendly acquire Sun instead."

Here's a better timeline of Solaris 8 source code availability:

1999-10-01
Sun to make Solaris code available More More More

2000-01-28
Solaris 8 source code left open More More - Program Overview FAQ E-mail

2000-06-28
Sun re-thinking source code giveaway

2000-12-06
Sun Unveils Solaris 8 OE Source Code More - Program FAQ Package Process License

2001-06-27
Sun set to end Solaris download program

2001-06-29
Sun Continues to Offer Free Solaris and Foundation Source Downloads More

2002-03-31
Does Solaris source license interfere with Linux contributions?

2002-12-21
Solaris 8/9 Source Code?

Ps. I told you about IBM's new layoffs. IBM should have kept the talks with Sun more low key. It's not nice for the new layoff workers to know IBM apparently has the money to get Sun but not to protect US jobs. IBM needs better PR indeed!

Reply
Mar 26, 2009 3:56 AM Anonymous Insider Anonymous Insider  says: in response to Anonymous Insider

A teaser from Linus Torvald's himself: "Most of the inspiration early on came from Sun OS which was what I was using at the university at the time..." (fast forward to minute 4:48 in the following video)

2001-02-01
Revolution OS: Free Software goes Free Enterprise [52.8MB WMV]

Another teaser from much, much early on also from Torvald's himself: "Indeed - the /concepts/ of linux are naturally based on things that have been available in USL and BSD code. That doesn't mean that there is any risk of linux being sued by AT&T - they are all properly documented features, and thus AT&T cannot claim any infringement due to things like uid/setgid etc general unix interfaces."

1992-07-21
BSD NET2 distribution requires AT&T license

Reply
Mar 26, 2009 4:14 AM Anonymous Insider Anonymous Insider  says: in response to Anonymous Insider

Could the message "2.4.16 & OOM killer screw up" from 2001-12-10 be one of the smoking guns in the Solaris-Linux connection?

Quote by the newly appointed Linux 2.4 kernel maintainer in late 2001: "Andrea (Arcangeli), Could you please start looking at any 2.4 VM issues which show up ? Just please make sure that when sending a fix for something, send me _one_ problem and a patch which fixes _that_ problem. I'm tempted to look at VM, but I think I'll spend my limited time in a better way if I review's others people work instead."

Do these quotes by Andrew Morton point to the smoking gun: "Why does this code exist at the end of refill_inactive()?... Why did you make this change?... The VM code lacks comments, and nobody except yourself understands what it is supposed to be doing. That's a bug, don't you think?..."

Someone else said: "Andrea, it seems -aa (Alan Cox kernel tree) is not the holy grail VM-wise. If you want to merge your good stuff with marcelo, please do it in the 'one patch with explanation per problem' style marcelo asked."

Andrea finally responded: "Lack of documentation is not a bug, period. Also it's not true that I'm the only one who understands it. For istance Linus understand it completly, I am 100% sure."

2.4.16 & OOM killer screw up contains the most important messages.

Nevertheless, there are copies of all the messages in various locations on the Internet such as http://lkml.indiana.edu/hypermail/linux/kernel/0112.1/0615.html , so check the thread list at http://lkml.indiana.edu/hypermail/linux/kernel/0112.1/index.html#615 to view all the messages.

By the way, Andrea Arcangeli worked for Suse which was later acquired by Novell...

Reply
Mar 31, 2009 1:10 AM Anonymous Insider Anonymous Insider  says: in response to Anonymous Insider

Look at how a finance board is hijacked by agenda folks:

http://messages.finance.yahoo.com/mb/SCOXQ.PK

Reply
Mar 31, 2009 2:17 AM Anonymous Insider Anonymous Insider  says:

Something important to add...

Sun has the records of who downloaded Solaris 8 source code in between late 2000 and 2002.

http://www.infoworld.com/articles/hn/xml/01/06/27/010627hnsun.html

Probably IBM would like to have those records and probably delete them.

Reply
Apr 6, 2009 4:43 AM Anonymous Insider Anonymous Insider  says: in response to Anonymous Insider

On the negative outcome of IBM - Sun talks, here is a list of individuals who probably took a look at Solaris 8 source code:

http://www.krsaborio.net/research/1990s/98/0113_b.htm

The list corresponds to individuals who asked SCO for ancient Unix source code licenses in 1998. In the list, you'll find various BSD developers. The list also features some individuals with e-mails at IBM.

While Sun has the list of individuals who took a look at Solaris 8 source code, it might be possible that some of these individuals also asked for ancient Unix source code licenses.

A timeline on Unix source code availability is found at http://www.krsaborio.net/research/unix/source_code.htm

Reply

Post a comment

 

 

 

 


(Maximum characters: 1200). You have 1200 characters left.

 

 

Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.


 
Resource centers

Business Intelligence

Business performance information for strategic and operational decision-making

SOA

SOA uses interoperable services grouped around business processes to ease data integration

Data Warehousing

Data warehousing helps companies make sense of their operational data