SUN’S new CEO on Bangalore, blog, business and battles

NEW DELHI: When Jonathan Schwartz took reins of Silicon Valley-based network computing major Sun Microsystems as its new president and CEO from co-founder and current chairman Scott McNealy three months ago in April, few gave him a chance to be able to revive the ailing server and network solutions major.But the pony-tailed blogger CEO has begun in right earnest with Sun beginning to cut losses, the first time in nearly two years. In an exclusive marathon interview with Neeraj Saxena, his first with Indian media, Schwartz spoke about the growth in Indian operations (worth Rs 1,100 crore as per current market estimates); opportunities in India including the potential in Bollywood and Indian cricket; Bangalore’s infrastructure bottlenecks and how he plans to institutionalize virtual offices and home working as an answer. Read on.

Q: India is your second biggest R&D centre after the US. What is India’s chance to see an increased investment from Sun, or become its No.1 R&D destination?

Jonathan: Unlike many companies in the world that look at R&D in terms of how much it costs them, our business is not very sensitive to the wage rates. It is far more sensitive to productivity and leadership. I am much less sensitive to how much it cost me to deliver an operating system (OS) and much more to how soon I can deliver it and how great it will be when delivered.

Thus, for any engineering site around the world to attract more of Sun’s R&D dollars is to deliver great products on time, or ahead of schedule. India Engineering Centre (Sun’s R&D centre in Bangalore) under the leadership of Vijay Anand has done a fantastic job in ensuring that India maintains its prominence as a key R&D destination for us.

For it to become our largest R&D centre is not something I pay that much attention to. I’m more focused on how to work across disparate time zones to get the best product to market fastest possible. We don’t staff up or down by mulling ‘should we do this in India, do we do this in China, do we do this in the US’. It’s much more like where do we have the leadership skills, where do we have the technical skills, and where is the market emerging.

The MD of Indian operations Bhaskar Pramanik has been doing a fantastic job of growing Sun’s business. That growth is causing us to think how to invest more in Bhaskar and Vijay, because we’re more likely to invest in a great leader than we will in getting better wage rates.

Q: How do you rank your Indian leadership versus the leadership in your other markets? If you indeed have so much faith in it, what took Sun so long to turn India its 16th GEM? How central is this hidden GEM really to your global growth vis-a-vis Greater China?

Jonathan: I believe we were just implicitly criticized for being late to discover that India was a good market! There’s a tremendous amount of respect for both Bhaskar and Vijay’s delivery records. That’s why India has been made what we refer to as a geographically established market (GEM) and you obviously know well about our internal management model.

But India is still a relatively small business for us, quite unlike for Accenture, IBM, or even TCS and Infosys, who all run service delivery businesses. These companies want to employ more people simply to do the work done by others, for less money. In fact, I would like to caution those in decision-making positions in India: Your country may be so attractive today that IBM is hiring 50,000 people. But you just got to make sure that companies that are today looking to take advantage of the cheap labour pool don’t discover China, Vietnam , Cambodia or Namibia having cheaper labour tomorrow and then simply shift those 40,000 jobs elsewhere!

What Sun tends to do is build R&D, skill-sets and intellectual property which is far more durable. The skills that we gradually build will be much more valuable to Sun, as also to the Indian economy. What took us so long is the fact that we weren’t outsourcing world’s data centres to India. We have been focused on product development and serving Indian businesses. India or any other country is not central to our future, innovation is! So long as Vijay and Bhaskar produce innovation, we’re going to continue investing here by all means.

Q: Then it must be time to relook your investments in India because even though India is your second fastest-growing GEM and in spite of seven fold growth in seven years, you have invested just $150 million in the country so far? Surely your best managers, product development and customers being here, there ought to have been more investment …

Jonathan: We invest in growth, period. And that growth has to be profitable in the long run. We’re certainly looking at the maturing of the Indian market opportunity, to provide us with the kind of indicators that we need to increase our investment here.

Right now, Indian economy is growing mostly along the outsourcing opportunity, a business we are not in. People look at Sun and IBM side by side and say – ‘IBM is hiring 50,000 people in India, why aren’t you’? Well that’s because IBM is hiring for a very different purpose. They’re hiring to lower the cost of their operation and that’s not what we do. So in one word: Are we going to grow in India? Absolutely!

Q: Who is your best Indian (executive) trump card 24 years after Vinod Khosla co-founded the company, specially now that a 22-year veteran like Jay Puri is also no longer at the helm of your mission-critical APAC region? Jonathan: My mother is half-Indian, so I think that would be me. Second on the list is Anil Gadre, who is the company’s chief marketing officer. Through the ranks of the organization, there’s a lot of Indian representation in Sun Microsystems.

Q: Will Sun’s recent success in high performance computing (HPC) and entry in the list of Top 10 supercomputers make you look more favourably towards India’s needs for supercomputers? Would Sun look at partnering Indian agencies in joint pilots, for instance, to study the impact made by weather, environmental pollution, soil quality or tectonic movement on Taj Mahal?

Jonathan: Frankly, we have not been involved in HPC space in the past three-four years because we didn’t have high performance infrastructure. Now that we do, we just claimed a set of largest HPC computing installations in the world. We’ve also been investing heavily in the software and hardware to enable a large-scale grid, both as a service we have called, as well as through our own infrastructure to go with the type of network companies are going to be investing their money in building their own grid. So without going into specifics, I can say we see the market growing. We certainly see our innovations, both the Solaris OS platform as well as the next generation infrastructure, being relevant to marketplaces like India.

But you touched upon a very interesting thing: Looking at the Taj and trying to understand whether its tectonic shifts upon the impact of the weather or some of the environmental issues. Those actually are issues that are beginning to not only affect the demand for what we build, but a lot of companies want to understand the environmental impact of what they’re doing. We also see that as creating differentiation for us in the data centre space because companies are now focusing on infrastructure that is power-efficient, space-efficient, and efficient in terms of the personnel needed to run it. Many businesses around the world are trying to understand the environmental impact of their infrastructures. The market opportunity for Sun in terms of supplying to those who want to use HPC is shaping up our R&D orientation.

Q: India has new, but significant, needs for HPC in areas like meteorological simulation and visualization; oceanography; monsoon tracking; defence; space research, and even life sciences. Any plans to have a partner for the HPC programme in India?

Jonathan: The trading symbol for Sun Microsystems is SUNW. That stands for Stanford University Network Workstation. The history of the company spawns from academic environment. And if you look at the evolution of computing, what happens in academia ultimately rolls out to leading enterprises. What happens in leading enterprises further rolls out to mainstream. So when we look at segments like HPC, the first institutions we look to are academic institutions because they tend to be on the very bleeding edge of innovation. So we are going to work strongly… In fact, we’ll be doubling our commitment to the academic environment over the next 12 months to intercept a lot of that bleeding edge thinking.

We’re working across India with a variety of academic institutions as well and hope to establish the kind of collaborative research partnerships that will allow us to understand where the market is heading. We will help them progress in understanding the next frontiers of everything, from protein modeling to reservoir simulations to crowd behaviour. All of that requires the kind of computing innovation that Sun can almost uniquely apply.

Q: So you do see India as a good potential market for HPC?

Jonathan: Absolutely yes! Indian government is very committed to education, and you have a society that cares deeply about education as a route to economic betterment. That investment, familial as well as the government investment, is pushing a lot of Indians into taking up hard sciences, engineering, mathematics, computational physics, into the kinds of areas that lead to not only usage of computing infrastructure, but also leads to the creation of intellectual property that can be exported across the world. We’re going to work in collaboration with academic institutions that understand the value of technology and the value of partnering with the private sector.

In fact, I was just talking to the head of our academic collaborative computing effort a couple of weeks ago about this. Our belief is that India is very well-prepared right now, partially due to the success of the system integrators in India, and because so many folks want to work for these SIs. These are very prestigious, very high-profile companies. A lot of the work that’s being done in computing in the academic environment is going to be shared in the commercial environment, and a lot of that’s going to be HPC work.

this answer is absolute beaty:>>>>>>>>>>>>>>

Q: Would you look at Bangaloring Sun’s product innovation as also your internal processes as part of a long-term strategy? How do you see India on its outsourcing merits or strengths? Jonathan: Let me talk about Sun processes first. If there’s a process that I can cost-reduce, and the process is price-sensitive, then I don’t want that process to be done by Sun. If I can find someone in the world who can do it more cheaply than me, then I don’t need to do that. Our core competence is innovation; technology; understanding markets, and being able to deliver innovation to satisfy market opportunity.

So how do I look at moving processes to India? I don’t. Frankly, if we were to look at moving any processes to India, I’d look at how we’re going to exit those processes and find an Indian company, say a partner like Wipro, Infosys, TCS or Satyam, who can do the same with world-class expertise. Those companies are better at cost-reducing business processes than anyone else in the world. So it has become their core competence and unique intellectual property.

Our intellectual property is going to be the Solaris OS, the next generation of power-based storage, the next generation of energy-efficient (hyper) processors. That’s where I want to focus our time and effort.

Q: That means irrespective of when, but you would be keen on third party outsourcing to India?

Jonathan: There’s no doubt about it. By the way, we’re looking at that today, and we’re continuing to look to our business partners such as those four I mentioned, and who, arguably are the best in the world. And again, what’s extraordinary to me is watching the Indian progress on to the network. What started as a discussion around wage rates has instead become a discussion centred around profit! What originally looked to be a movement to hire a bunch of people cheaply, has instead become highly billed world-class competence in build intellectual property in core areas that can be exported to the rest of the world. So that can be a much more sustainable economic model.

By the way, these partner companies are also becoming large customers of ours. All of the businesses that we see growing in India are growing not because they’re doing others’ job around the world, but because they’re exporting their intellectual property outwards.

That’s one of the most interesting discussions I have had with a new customer from a company that owns the franchise to Indian cricket. They were telling me about the statistics involved: the number of people, the amount of wealth involved in watching cricket, not only by Indians in India, but by Indian across the world. I was dumbfounded because one of our largest customers in the US is called (Major League and the Indian company had a business plan with vast multiples of the business plan since the market opportunity is just too expansive.

There are more people watching Indian cricket than there are people living in the whole of US. Fantastic! So that’s the need… that’s a great market opportunity that we can satisfy with our Indian business partners. Outsourcing functions is just not our priority.

Q: How do you rank Bangalore as the sole Indian location for Sun and most tech companies in the wake of infrastructure bottlenecks and political changes? Jonathan: There isn’t a region in the world where I am satisfied that it is convenient enough, low-cost enough, or efficient enough. The traffic is horrendous in the Bay Area and San Francisco where I live. It is probably not as bad as Bangalore, but not far off. The problem is whenever we find talented people anywhere in the world, we aren’t the only ones to discover. Same is the case with Austin , Texas; Prague in Czechoslovakia to St. Petersburg in Russia to Sao Paolo in Brazil .

But the good news is that the infrastructure is improving to a point that most of our employees can work from home. So the question for me isn’t so much – Is Bangalore a good site? The question for us really is – Does the Indian government take education seriously enough? Does it take network connectivity seriously enough because those two things combined means that there will be talent that can get access to the network and work for Sun.

When I look five years from now, I don’t expect our employees to have offices. I don’t think any of our employees like having offices. They like having really fast computing infrastructure and great bandwidth. That’s the kind of infrastructure that I care about because the most environmentally responsible commute is the commute that you can avoid. I’d like to keep our employees off the road, I’d like to keep our service professionals off the road and allow the sales people to visit customers in the ways they need to, but rely on the network to do the job that’s otherwise done by an automobile, or an airplane.Q: Any thoughts on the market opportunity in animation and special effects for Bollywood studios?

Jonathan: I look at Bollywood and Indian cricket like any other media opportunity. There’s no question that cricket or Bollywood’s main audiences are not going to be in stadiums and movie theatres in times to come. They are going to be on the handsets, set-top-boxes, back-seats of the cabs driving through downtown Bangalore! Since we have been working in partnership with the media companies in the US and Europe, we will be able to help create the type of content that consumers will want. Not just on their PC, but on their handsets, on the devices they use to connect with the network. Sun has actually very heavily invested in the media marketplace, partially because it creates such a demand for network infrastructure, but also because it is key to what consumers want.

To understand where the market is headed, just go hang out with the average 18-year-old – whether on the streets of Mumbai or San Francisco – you’ll get a sense of where the computing environment is headed.

I had a nephew staying with me recently and I was running him through my normal tests to understand what teenagers think. I gave him three choices – a new Motorola Slvr phone, an iPod, or the fastest desktop computer. He chose the phone and the iPod! Kids of that generation are all set to use the mobile computing devices. When I asked him what he wanted to do with the iPod or phone, he said he wanted to watch movies and listen to music. So, if you want to understand the future of the network in India, you should probably go and hang out with the producers at Bollywood, because consumers will find Bollywood. I’m not sure they’ll find Sun. But Sun’s objective is to go find the folks that are trying to find consumers and go serve them. Given how appealing and how attractive Bollywood has been for India, the producers will drive a lot of demand for consumers who want to see their content, no matter where they are.

Q: Are you engaged with any of the Indian production studios for the supply of high-end servers for movie production?

Jonathan: Sun is focused on banking and financial services; telecom and the government sectors which have been our traditional customers. But next generation media and entertainment companies such as those producing Bollywood or cricket content will drive a tremendous amount of new infrastructure on the network. We will have to engage them.

Q: How would you rate the Indian Java developer community? How does Sun plan to turn them into revenue generators?

Jonathan: Look across the world for the most vibrant and dynamic Java developer marketplace and India would be right at the top as the fastest growing, as well as one of the most innovative communities out there. That’s partially because the Indian SIs are doing so much hiring, but also because there has been a tremendous upsurge in the demand for programming knowledge across the world. So the investment that we’ve made in NetBeans has really begun to bear fruit for seeing a very significant majority of the new community members, in both OpenSolaris and in the NetBeans community coming from Asia, and from India specifically.

Again, the best way that we can grow that adoption is to work with that community, to create better innovations and help folks get their jobs done more efficiently. As I said revenues for Sun is a lagging indicator of the adoption of our core developer platforms, whether it is Solaris or NetBeans. So I would love to encourage the Indian Java developers or the Solaris developers to engage and communicate, not specifically with Sun, but with others in the community to help define where we go next. The Java or the Solaris platforms are products of community initiative. The more folks participate in those communities, the more control they can take over where that platform heads next. So the No. 1 imperative for Sun is to have a globally compatible platform, but the No.2 imperative is to make sure that platform can evolve and serve mobile devices, set-top-boxes, medical instruments, automobile dashboards. That happens due to the innovation of community members. Again, there are a lot of developers in India that have the skill and wherewithal. I will continue to encourage and engage them in the NetBeans and OpenSolaris community, to keep driving the platform forward.

Q: When would Sun be back to profitability and how much pressure are you under to take quick-fix measures? Jonathan: I’m under no pressure to do anything other than work with the long-term best interests of Sun stockholders. On profitability, I’ve stated that we’re targeting 4% operating margin in Q4 this year and 10% operating margin in subsequent years. As we look at driving towards more predictable earnings and profitability, we’re going to focus on the innovations that have created Sun to be a $13 billion company. We’re not going to focus on the actions that in the short term may in fact lower the operating expenses of the company, while simultaneously giving us unacceptable competitive positioning.

Other companies may be disinvesting in their OS. Hewlett-Packard just introduced its exciting new Blade platform and was thrilled to tell the market that Sun’s Solaris ran on those machines. They were probably less excited to point out that HP’s own operating system UX couldn’t run on them. That’s the kind of innovation and competitive advantage we have got by sticking to investing in the core R&D. So, I’m really enjoying the new markets opened to Sun since we’ve allowed Solaris to run on x64 platforms. We’re seeing tremendous adoption in IBM Blade Center and the new HP Blade servers. It is us versus Microsoft in those environments. We really don’t see HP UX or IBM AIX, because they don’t run there. That in itself is an advantage.

Q: But some critics are already accusing Sun, under your leadership, of being slow to change and not wanting to move away from UNIX just yet. How do you react to these accusations and could you elucidate the basic cornerstones of your revival strategy, including the review of Sun’s future spending?

Jonathan: Anybody who is accusing us of being slow to respond has perhaps missed the fact that within my first 45 days, we announced a restructuring plan to re-shape the core economics of the company, having reviewed every inch of the organisation from top to bottom. We’ve been in business for 20+ years and we’ve looked at leading indicators and lagging indicators. It’s hard to understand that revenues at Sun is a lagging indicator of developer adoption.

Developer adoption is the world’s best leading indicator. So I’m more focused on whether TCS, Infosys, Wipro and Satyam use NetBeans to build applications for the market that we can then satisfy with Sun’s infrastructure! I’m as focused on developer adoption as I am on revenue generation.

The last quarter, we grew revenue, we gained share in our core market. The toughest market in the world for us is the US and we gained significant share in the US. Our growth margins are up and we’ve made absolutely tremendous strides. We’ve improved the operating economics of the company, reduced operating expenditure by over $1 billion, besides a radical reduction in the real estate facilities expenses, to enable a more profitable business going forward.

So I’m under no pressure to take the kind of quickfixes that Mark Hurd did in HP by cutting their OS. I’m going to focus instead on creating innovation that we think will play out in the next 5-10 years. Again, I’m not worried about market opportunity for Sun. There’s demand in India, just as much as there’s demand across the rest of the world.

The Indian economy and its participants understand that the network is a vehicle to new growth, new opportunity and new wealth. So long as that continues to be a part of the assumption basis across the world, it means Sun’s going to always see a demand for what it builds. I want to stay focused on getting Sun in front of that demand.

Frankly, I’m in the mode of thinking we only have 17,000 people in our field organization. I wish we had 1,17,000 people because a 100% of companies in the world are going to buy the technologies that Sun builds. The issue for us is will they buy it from us, or from one of our competitors.

Q: Of approximately 5,000 jobs that Sun is going to cut this year, how many could be from India and which areas?

Jonathan: We haven’t rolled out the global impact and frankly we’re still working through that. We’re going to focus on identifying programmes that we want to continue investing in: our core software assets and core systems assets. Where that happens in the world is somewhat of an after-effect. We’re not targeting geographies where we will increase or decrease investment, we’re targeting product areas and profit-derived programmes.

Q: Your reaction to Red Hat’s criticism of your not open sourcing of Java Virtual Machine (JVM) and how do you visualize Java to brew in the coming years? Jonathan: At our largest JavaOne conference ever in San Francisco this June, we had tens of thousands of people in the audience as well as hundreds of thousands online. What was really amazing this time around was that it really seemed like a truly representative world audience. You could walk through the audience and hear 50 different languages being spoken. I loved that! That to me was a really interesting crowd. So, I’m thrilled with the progress that we are making.

We are obviously moving on the path to open source Java and we continue to see the Java community process being absolutely instrumental in driving demand in the marketplace. But we are also thrilled to death that Red Hat has elected to leave behind their obviously misinformed rhetoric of the past, which it built around the openness of the Java community process because Red Hat has just joined the Java community process itself through its acquisition of middleware provider Jboss. We are thrilled that it now understands how to really work with the community.

I’m sure Red Hat is going to be welcomed with open arms by the rest of the Java community to work collaboratively and will continue to define the platform. Unlike what has happened with Red Hat in the Linux marketplace where it really became somewhat the sole provider and is now in the process of factoring that to be a Red Hat product, Java continues to deliver value universally to all members, whether it is the Indian systems integrators, or the systems companies, or the software companies, or the service companies and we’re just continuing to grow exponentially. We welcome Red Hat’s contributions with open arms and we’re glad to see that they are putting their rhetoric behind them and really recognizing the integrity of the Java community.

Q: Coming back to the mobile devices. How much inroads has Qualcomm’s BREW made into the Java bastion?

Jonathan: We don’t actually see that much BREW as we see Java across the world, whether it is on Reliance handsets, or throughout the US with Cingular, or Vodafone, NTT DoCoMo or China Mobile. This year, we are on the path to about a billion mobile devices running on J2ME. With Blue Ray obviously now set to come on consumer DVDs, Java is going to be in the living room. We don’t really see BREW making any headway there at all.

With the next-generation OCAP (OpenCable Application Platform) standards, we see Java showing up on set-top-boxes, in telematics, we’re beginning to see it show up on automobile dashboards, on cameras, on cell phones, on consumer electronics, on medical devices… So I see a tremendous and growing platform for Java. I think Brew was a phenomenon two years back, but we haven’t really seen a lot of momentum around it since then.

Q: The Network may well be on the road to becoming. The Computer indeed with powerful mobile devices coming to fore, but the PC hasn’t quite vanished in thin air. It seems to be reinventing and co-existing & one gets to hear less and less about a passionate Scott McNealy dream called `thin client computing’. Your views.

Jonathan: If you really look around the world carefully, users are increasingly utilizing tools other than a PC to connect to the network. A PC is an expensive method of connection. Phones, PDAs, wireless devices offer a more affordable, convenient, and power-efficient method. The PC will serve a purpose, but I believe the use of other mobile devices will drive network growth globally – especially in emerging economies. Leveraging the network to deliver services across multiple devices is the future. Companies not focused on this area will miss the wave of innovation that will provide new opportunities for economic growth and participation.

Q: Media has often devoted way too much attention to the Microsoft-Google battles, perhaps missing out on the emerging larger picture. Is your vision of the tech world bi-polar, or a multi-polar one?

Jonathan: There are many great companies delivering innovative solutions, with start-ups developing new technologies everyday. The bigger picture is that we are in `The Participation Age’ and only those that focus on providing new methods of connecting, collaborating and sharing will thrive.

Q: How has your own cozy friendship with Microsoft panned out in the past 18 months? Do you think Microsoft succumbed to the customers’ pressure to come onboard Sun-led Open Document Forum (ODF) and endorse its view of an inter-operable, open source document standard? Jonathan: We continue to partner and compete with Microsoft. Ultimately it comes down to customer choice. Some customers use technologies from both companies and it is our duty to enable the interoperability they need to
run their business.

The goal of ODF is to ensure access to documents, regardless of what format they were originally created in. Imagine not being able to access business plans, government documents or financial records, or on a personal level, photos or family correspondence because the format they were originally created in is now outdated. ODF removes that obstacle and allows for interoperability between formats to assure access in the future.

Microsoft has just announced that it will offer software, free under an open source license, that allows its Office users to view and create documents in the Open Document Format. This is an important first step and we look forward to taking a closer look at their prototype. ODF is the office document file format with the broadest vendor support, with more than 220 members of the ODF Alliance.

Q: Since you were closely involved with development of Solaris 10, what critical / fundamental impact do you see on the future versions of Solaris since it was made Open Source? It has already picked a lot of traction, but what’s next?

Jonathan: The open sourcing of Solaris has been a tremendous success. We have recently passed the one year mark and in that year OpenSolaris has grown to more than 14,000 members, with 29 user groups around the world, 40 communities and 27 active projects.

Solaris 10 has exceeded 5 million registered license shipments which is more than what its competitors have shipped collectively in the last 18 months, and more than all current Solaris OS versions combined. The market adoption is driving customer demand and I expect that to continue. Solaris 10 is the most advanced and secure OS on the planet and we are committed to its ongoing development. Solaris will continue to be the strategic center of our systems business and will remain an integral component in our open source strategy.

Q: You are an avid blogger, a rarity amidst top CEOs. When did you start blogging and did you envisage using it as a corporate tool right since the beginning?

Jonathan: While I am currently one of only two Fortune 500 CEOs with a blog, in 10 years I expect most of us will communicate directly with our customers, employees and the larger community through blogs. The Internet has revolutionized the way people collaborate and share information and blogging provides a vehicle to communicate with anyone, anytime, anywhere in the world. This effectively enables participation in communities you wish to cultivate, including employees, partners, the next generation of technology developers and leaders, customers, potential customers, to name but a few.

Blogging allows me to directly share my thoughts on a global scale and reach people I normally would not. Through my blog, I am able to maintain a dialogue and discuss everything from business and operational priorities to technology developments to company culture. And I am not the only one, there are thousands of Sun employees, including members of senior management such as Greg Papadopoulos, CTO and EVP, and James Gosling, father of Java technology, whose blogs not only share their perspectives, but also provide insight into Sun’s unique, innovative culture.


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