Sun has become its own free software foundation, open sourcing everything from Java to Solaris, and acquiring the open source MySQL database for $1 billion in January of this year, as a way to grow its revenue.
It seems counter-intuitive, but Sun CEO Jonathan Schwartz has been betting the company on that strategy. Speaking at the Supernova 2008 conference, Schwartz explained that free software brings the marginal cost to acquire a customer to zero and helps drive revenue.
Schwartz showed a world map with clusters of dots representing all the people who registered with Sun when they downloaded ZFS (an open source storage file system) in the last 12 months. Each dot represents a potential customer that cost Sun zero to acquire, Schwartz said. MySQL adds about 100,000 dots a day to the map, he added.
Sun's customer funnel...a world of dots representing free software downloaders.
"The majority is going to buy hardware (to run the free software), and not just from Sun," Schwartz said. The challenge for Sun is when not enough customers choose Sun as a hardware vendor, and buy support services for the free software, to cover their operating costs.
Schwartz pointed to Thumper (Sun Fire X4500 Server), a server with 48 TB of storage running Open Solaris and ZFS that was on a $100 million annual run rate after two quarters of sales as evidence of free software driving hardware sales. He also shared a conversation with CIOs from major corporations and government agencies, who weren't aware that their IT staff had downloaded MySQL hundreds of times.
Those who charge for new customers by putting a price on software, such as Microsoft, are under siege, Schwartz claimed. He may be right long term, but Microsoft's business for Office and other products has never been better.
Schwartz said the Sun released a version of OpenOffice.org, a competitor to Microsoft Office, about ten years ago. The suite now has 110 million active users, but Sun hasn't turned that into a significant revenue stream.
"The audiences want the products for free....the only question is will they pick yours," Schwartz said. "However, if ZFS isn't interesting enough to pull the interest of the community, we and our partners can't make money. Free and popular tend to go hand in hand but they are not mutually exclusive."
Schwartz believes that the free software movement is in its infancy. "We are in the second inning. The first service for free was search, then news and now data center software, but a whole lot of products have yet to see their retail price affected by the network," he said. "Imagine a free phone with no guaranteed contract on the back end. That is all in front of us."
— Posted By Dan Farber