A Tale of Two Vendors
Customer input is among the most vital of communication for any business. OEMs are no exception to this. In the ups and downs of the OEM life cycle, Sun and Dell aren't all that far apart. Both learned the value of customer input when it comes to server sales.
Sun Microsystems learned this the hard way in recent years; Dell, which interestingly enough has always prided itself on customer communication, is learning it now.
A humbled Sun and a defensive Dell were in New York City this week appealing to analysts, press and customers at respective technology days.
On the surface, the two companies couldn't be further apart. Long known for its following-the-herd strategy, Senior Vice President, Product Group, Jeff Clarke describes the Dell's standardization as its key differentiator. Dell's traditional sweet spot is the consumer and SMB space (though today, according to President and CEO Kevin Rollins, 80 percent of Dell customers are enterprises). In contrast, Sun has traditionally been seen as an innovator, and has historically looked to the high end.
As the OEMs venture out of their respective strongholds, into both crowded harbors and uncharted waters, their similarities may overshadow their differences.
On Tuesday, Michael Dell's insistence that CEO Kevin Rollins won't be browsing Monster.com any time soon, received the most press coverage, along with news of a delayed 10-Q filing and possible delisting, that "we're fully cooperating with and expect to have resolved quickly," according Dell said.
For Dell, a company whose entire business model is based on standardization, differentiation and value must come from other sources. Customer service is one such area.
Dell spokesmen sanguinely acknowledged that mistakes were made here. Complaints about service issues have been addressed in the form of the Platinum Plus Service plan. In addition to promising speedy resolution, the plan allows customers can track where they are in the service cycle for anywhere in the world. This reduces service time by as much as 30 percent, according to Rollins. Customers can also use the diagnostic tool to track energy consumption and the whereabouts of a given part.
To address customers needs in the long term, and reduce shipment times, Dell is in the process of building factories in Brazil, India and Central Europe.
The company also admitted to stumbling on the technology front, specifically Opteron. In addition to unveiling two AMD-processor-based desktops, Dimension E521 and the C521, the vendor shed a little light on when the Opteron servers it announced over the summer would be be available.
Brad Anderson, senior vice president, Product Group at Dell, told attendees that Dell will release two Opteron servers, a 2-socket and a 4-socket, by year end.
Anderson admits it will be difficult for the company to evangelize Opteron given Dell's previous position, but said that the company is benchmarking the new systems to determine where they will be superior to Intel and it will recommend them based on need. He added, "The processor wars are over. It is no longer about the components.
Clarke emphasized that, "We underestimated AMD's market acceptance and ability to deliver, and overestimated Intel's ability to catch up."
He also noted that the OEM interpreted customer requests for Opteron as really a request for "cool technology." Technology Dell thought Intel would be able to provide.
All of which begs the question, if customer input is such an asset to Dell, is it being fully utilized or is Dell really playing benevolent despot?
One vendor that stumbled into the pitfalls of the benevolent despot model is Sun. Its ups and downs of the past decade have been well-documented. "The network is the computer" was an easy sell during the first Internet boom, but when the economy cooled in 2001, the proprietary nature of Sun's hardware and software hurt both sales and reputation.
For several years, Sun vacillated like a pendulum on steroids. It would make money off of the hardware. No, the software. No, it was all about the services. In late 2004, it found its latest secret sauce, and the customer and analyst communities appear to approve of the the flavor.
In January 2005, Sun introduced an open source version of Solaris and launched the OpenSolaris project was launched. To date, there have been more than 5.9 million downloads of Solaris, according to President and CEO Jonathan Schwartz. Nearly 70 percent of these downloads were on x86 systems mainly those from Dell, HP and IBM. Solaris, Schwartz notes, is capable of running on 700 platforms, more than Red Hat Enterprise Linux, which he currently sees as the operating system's chief rival.
It's "all about providing choice," Schwartz said. Choice is what he found customers want more than anything, and that is the direction Sun has moved in during the past two years. He noted that Sun "must understand that companies are buying from multiple sources, and it's inappropriate to assume customers are all Sun."
Quite a change from a few years ago when Sun sought to own the server room from end-to-end.
"We're still listening," Schwartz added, "This is only step one."
The open sourcing of Solaris is part of Sun's strategy to drive value with volume by down the road resulting in the sale of services and other infrastructure that generate revenue, according to Schwartz.
He notes that, "The adoption of Solaris is a leading indicator of systems revenue generation."
It may be too soon to attribute Sun's most recent quarter to these indicators, but the systems vendor experienced growth where many experienced declines. According to the latest statistics from research firm IDC, Sun surged in the second quarter with 15.5 percent year-over-year revenue growth. Its share grew from 11.2 percent at this time last year to 12.9 percent.
IDC attributes the explosive growth to both Sun's UltraSPARC-based systems and its x86 Opteron-based products.
The Importance of Power
The Importance of Power
Customer feedback is even more valuable when the vendor takes a big picture view. Here, Dell admitted to faltering in its misinterpretation of customers' cries for Opteron.
In contrast, when Sun listened to customers and took the long view, it saw energy issues looming large. Sun put itself on course to be green.
In the past few months the factoid that 2006 will be the year in which the costs of power and cooling will exceed the cost of equipment has been bandied about by nearly all the vendors.
Power and cooling have become hot. Even Dell, with its exploding laptops, is concerned about energy efficiency. Its just-announced OptiPlex 745 desktop claims power savings attributable to the Intel Core 2 Duo processor as well as chassis-based thermal-management technology within the system that reduces the amount of power needed to cool it.
In addition, the ninth generation of PowerEdge servers released in June use 25 percent less power than the previous generation, according to Dell.
Matthew Keep, Sun product marketing manager, notes that as many as 80 percent of data centers, including that of the National Security Agency, are filled to capacity because of heat and power constraints.
Virtualization is one way to remedy this, but addressing it at the systems level is a deeper fix. Sun's UltraSPARC T1 CoolThreads processor (aka Niagara) sets out to do just that. The Sun Fire T1000 and Sun Fire T2000 Niagra-based systems were designed specifically to address this problem. Since their release in April, Sun has shipped 2,500 units 60 percent to new customers (which Sun defines as those who have not purchased a Sun system within the past five years).
On Thursday, Sun added a T1-based server to its carrier-grade Netra line.
In addition to the energy efficiency these servers offer, there is a cold-cash incentive for customers to purchase T1-based systems. In mid-August Sun announced PG&E customers that purchase a T1000 and T2000 server will receive rebates of $700 to $1,000 per server from the California utility.
More Alike Than Different
More Alike Than Different
Although historically their customers have been mined from different quarries, Sun and Dell aren't as far apart as you might think. Both depend on customers, and both see innovation as critical to their success.
Sun attaches caveats to the raw value of innovation, noting, "innovation only matters if customers want to pay for it."
Both realize that some spaces in which they are competing will be won not only by the products themselves, by product interoperability and the ecosystems that surround them. Therefore, listening to customers and addressing immediate and long-term needs is more critical now than ever.
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