3 Questions: Is flat-rate software the next big thing?

Sun Microsystems has simplified its product line and instituted a new pricing model. This interview with Sun's directors explains why, and what they expect from the change.

By Ken Hardin

With Sun Microsystems' Ingrid Van Den Hoogen, director of strategic marketing, and Aisling MacRunnels, director of software ops and business models.Sun has simplified its product line, put everything on the same quarterly update schedule, renamed its Project Orion e-business suite Sun Java Enterprise System, and, beginning in November, will offer the complete enterprise software package at a flat $100 per employee with unlimited use by the enterprise's customers.

This interview originally appeared in the IT Business Edge weekly report on Maximizing IT Investments. To see a complete listing of IT Business Edge weekly reports or sign up for this free technology intelligence agent, visit www.itbusinessedge.com.

Question: What was the motivation for this pricing model?

Van Den Hoogen: We talked to hundreds of customers and they said, "Why am I doing integration, why am I having to cobble all this together?" We realized we needed to simplify things at all levels, not just at the component tree, but also pricing and licensing models. So we engineered out the complexity at all levels. Now, we have a single unified measure of pricing, a three-page contract that's $100 per employee per year for everything: portal, application server, software, everything.

Question: However, most enterprises are running a mix of business software. Do you see them moving the whole operation to your Java Enterprise System?

MacRunnels: We found that most of our customers tended to be using one or two point products in any department, in a very heterogeneous environment. We know our customers are not going to move to every product we ship overnight. Our intention is for them to start using some components and migrate to more as their other licenses come up for renewal.

Question: How many of your apps would an enterprise have to use to start to see savings under the flat rate model?

MacRunnels: We calibrated the price as what a large enterprises with lots of customers, such as a financial institution, would pay for two heavily-used products. For that same price, they get all the rest. For a classic enterprise, the calibration point kicks in at around four products.

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