Posted by : Anonymous on Jun 02, 2004 - 06:54 AM Hardware

Sun Microsystems is expected to announce today that it will begin offering a subscription service for its computer hardware and software.Jonathan Schwartz, president and chief operating officer at the Santa Clara company, plans to announce Sun's network services at a speech before Sun partners and customers in Shanghai. Under the plan, Sun customers can choose to pay an annual subscription fee for Sun's computer servers, software and services.
"It's a new business model approach that lets customers pay per use," said Larry Singer, Sun's senior vice president of global market strategies. "Right now recurring revenue is 20 percent of our business. Over time, we'd like it to become 80 percent."
In launching the service, Sun is playing catch-up to IBM's "on demand" services and Hewlett-Packard's "adaptive enterprise" approach. But Sun will emphasize leasing Sun-owned computers and software to companies who operate their own data centers. For the most part, Sun will not take the extra step of outsourcing, or taking over the customer's data center and operating it for them.

"We will know if this succeeds by watching whether Sun's revenues grow," said John Rymer, an analyst at market research firm Forrester Research. "They are trying to change the relationship with the customer from being a box maker to one that provides continuous service."

Under the new model, customers state what kind of service level they want for their applications, such as a split-second response whenever an employee launches a program. Sun will then tell them how much that service will cost and it will provide them with all of the equipment and software needed to maintain that level of service. Among the customers for the Sun network service is Affiliated Computer Services, a Dallas-based systems integration company that installs Sun's equipment at customer locations.

Among the other announcements is the second version of Sun's Linux software, the Java Desktop System, which will have features that allow Linux desktops to be centrally managed.

Sun also is making an intriguing proposition for government customers. The company says it will price its Java enterprise or desktop software for governments based on the number of citizens they have and whether they are in developing or in industrialized countries.

"They're making the bet they can grow revenue through subscriptions where they haven't had an ability to generate revenue before," said analyst Dana Gardner at market research firm Yankee Group.

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