It seems that Jonathan Schwartz has traveled to Damascus and undergone a Pauline revelation. According to reports (here and here) Schwartz sent an e-mail to Sun employees containing this text: "It's about an SMI wide initiative called Project Mercury - which allows us to *lower* the price of our products to customers who agree to subscribe to Sun's service offerings. (Just like when you buy a cell phone in a shopping mall - sign up for service, you can even get the phone for free). Lower prices mean more demand, higher service attach means more margin and predictability (both prized by shareholders). At an SMI or systems level (vs. a component sale), Mercury improves our business model."
SMI is Sun Microsystems Incorporated I believe.
So now that old cliche 'the network is the computer' is going to change to the 'the service is the computer.'
Schwartz says it is working with Niagara systems: "Externally, we first introduced Mercury with our new low-end Niagara systems. Low end systems typically have a single digit 'attach rate' of services to systems. Yet nearly one third of customers buying the most recent Niagara systems agreed to Mercury offerings. While growing the business to over $100M in Q4 (the fastest ramp of any product I've ever seen). It's actually amplifying demand, not tamping it down!"
He is keen to accelerate its adoption: "And as the value and breadth of our service offerings grow, from remote monitoring to update services, Mercury allows us to put distance between ourselves and those simply capable of delivering a box, software or hardware. Mercury allows us to change the rules of the game."
"So let's not a waste a minute making it happen - the competition is no longer invincible."
From one point of view this is the latest event in an ongoing story of computer suppliers wanting to transfer their customer's payments from Capex to Opex. It's ASP mark 58 or whatever. Why it is that computer suppliers see themselves as utility company wannabees when other product suppliers don't is a mystery. Not every car manufacturer wants to be Hertz or Avis.
A second reflection I have is that IBM Global Services and Accenture are pretty damn near invincible compared to Sun services. They are huge and vastly experienced and have well-oiled senior-level customer relationships.
It's an exciting time for Sun. Schwartz is a catalyst and is making things happen in unexpected ways. Whatever next?
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