Sun Aims New Low-Cost Strategy at Street Firms

By Maria Trombly | Securities Industry News | May 5, 2003

Sun Microsystems' permanent shift to a low-cost strategy announced last week was designed in part to appeal to Wall Street firms that have a great deal of money and expertise invested in Sun's Solaris unix operating system-but want to move to a lower-cost platform. Instead of focusing on running a proprietary operating system on proprietary hardware, Sun will now offer Solaris on Intel machines, Sun Linux on Intel machines, and Red Hat Linux on Intel machines-at prices up to 50-percent cheaper than those of Dell, HP and IBM. Previously, the Solaris operating system was not widely available on the x86 Intel microprocessor.

The widespread adoption of Linux on Intel has prompted CTOs to consider that operating system, even with its reliability issues, said Nigel Woodward, Sun's global segment manager for securities and capital markets. "Now with Solaris coming on x86, it gives them peace of mind. You're going to heave a sigh of relief because you're not going to have to go to a new operating environment to have lower platform costs."

The financial services industry's need to stay on a single platform was a major driver in last week's announcement, he added. Santa Clara, Calif.-based Sun will continue to support its proprietary Sparc processor, however.

"We're not abandoning the high end," said CEO Scott McNealy at a press conference last week. "But we think the world will be made up of high-end, mid-range, and low-end components integrated according to what the customer wants."

Accompanying McNealy, Larry Ellison, CEO of Redwood Shores, Calif.-based Oracle Corp., said that Oracle's database software will be available on Sun's low-cost servers.

"Scott and I are abandoning the high-cost road and pushing low-cost computing," Ellison said. It takes away the ammunition from low-cost competitors. "When people talk about Oracle and Sun together, they say, yeah, they're scalable, they're fast, they're secure, but they run on those big, expensive computers. It just costs too much. You don't need all that power and security. We can do it good enough.' The only thing they keep hitting us on is we cost too much. We decided to attack that thing head-on."

The two companies will also cooperate on support-users calling for help will receive the assistance they need even if the problem is with the other company's software. Ellison and McNealy referred to this as "no finger pointing" service.

McNealy also talked about Sun's efforts in the area of grid computing, a growing area of interest for Wall Street firms. Sun offers its own grid computing engine, which allows firms to pull together many small, inexpensive machines to take over the functions of large, expensive mainframes.

In addition, Sun has recently formed a partnership with New York City-based DataSynapse, a grid computing company that's been gaining traction on Wall Street.

According to McNealy, grid computing is a faster and more reliable way to do heavy-duty number crunching - if one machine goes down, the others seamlessly pick up the slack, he said.

With grid computing, Sun is making a virtue out of necessity as cost-cutting firms are turning away from high-priced big iron. "Grid computing is reducing the demand for some of our vertically scaled computing," Woodward said.

IBM and others are also working on grid computing projects, though implementation on Wall Street has so far been limited to a few pilots. Grid computing is more widespread in academic and research environments.

"Grid's time will come," said Damon Kovelsky, an analyst at Framingham, Mass.-based Financial Insights consultancy. "Maybe not this year, but definitely next year. It's a much more cost-efficient way of doing things." However, Kovelsky said, it's too early to tell whether Sun's grid approach will take off on Wall Street the same way the company's Solaris line of products did.

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