Sun Offers Per-User Pricing For SoftwareSun Offers Per-User Pricing For Software

Sun Microsystems reorganized its software lineup last week and launched aggressive new pricing. The software bundles feature data-center, desktop, and developer applications, which will be priced at an annual per-employee rate.

It's a move long overdue, Sun CEO Scott McNealy told attendees at last week's SunNetwork Conference in San Francisco. The cost and complexity of today's software have contributed to vendors "overcharging by a factor of 10 in our industry," he said.

Sounds like the first salvo in a price war. One of Sun's most obvious targets is the desktop revenue of archrival Microsoft. An estimated $40 billion to $50 billion is spent annually on desktop software, McNealy noted. If Sun is able to drive down the cost of desktop computing to $10 billion per year and realizes 40% of that revenue, he believes Sun will come out ahead. That's important for Sun, which has had nine consecutive quarters of falling sales. The computer-systems company said last week it will eliminate up to 1,080 jobs, or about 3% of its workforce.

The two most prominent bundles are the Java Enterprise System and the Java Desktop System. The desktop system, available in November, will include Linux, a Mozilla Web browser, StarOffice productivity applications, Java-based security features, and E-mail. It can run on any Intel-based PC. It will cost $100 a year per user.

The Java Enterprise System includes the company's directory server, identity server, application server, and portal server, in addition to server-based messaging, calendaring, and clustering apps. When the enterprise-software bundle becomes available in November, Sun will charge an annual fee of $100 per employee for all the software. Customers can combine the desktop and enterprise bundles for $150 per user annually. A third development-environment bundle will be available next year for $18.95 per employee. When the three bundles are purchased together, the total price is $155 per employee.

The software bundles and per-user pricing are aimed at attracting new customers. If successful, Sun may make its software available on other platforms, executives said.

Sun also moved to drive down the cost of its hardware, introducing its four-processor V440 Solaris-on-UltraSparc IIIi server for a starting price of $10,000. Texas Instruments Inc. has been running its integrated circuit-design software on Sun Solaris and a variety of Sun servers for more than five years and has been testing the V440. The company plans to move it into a production environment by year's end. Chris Davis, IT strategy manager for Texas Instruments' semiconductor group, chose the V440 "for its ability to run 64-bit workloads at a 32-bit price."

Sun has been criticized for sticking with its own hardware and operating system, while competitors such as Hewlett-Packard and IBM have embraced Intel and Microsoft. But the strategy gives Sun a unique position in the market. "Everyone is focused on commoditization, but it would be oversimplifying to see the whole world that way," says Tony Iams, a senior analyst with D.H. Brown Associates. "There's interest in industry-standard servers, but the servers that surround them, including those running Unix, aren't going away anytime soon."