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Mon 20 Oct 2008 08:00 AM

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Interview: Scott McNealy, Sun Microsystems

Scott McNealy, chairman and co-founder of Sun Microsystems, made his first visit to the UAE for 14 years.

Scott McNealy, chairman and co-founder of Sun Microsystems made his first visit to the UAE for 14 years to present the keynote address to the GITEX Global Conference. With 22 years at the head of the company that provided the hardware that drove the first wave of the Web.

You spoke in your keynote about open source, and its benefits to the industry and to customers, but how is Sun planning on making money from open source?

It is really hard to monetize anything that we do if everybody is speaking Windows or Websphere or DB2, so the first premise is if they are speaking a language you don't speak, you have no chance. By open-sourcing our software, we are allowing Sparc and Solaris and Java and MySQL and Net beans all to become very popular, well spoken languages, then I can try to make money in that language.

By making the alphabet free and open, the barrier to entry to that language is zero.

The second point is there's lots of companies that have been able to monetarize free. Google has free search, they seem to be doing alright, because they charge for advertising. Gilette - the razor is free but the blades aren't, here's a free cellphone but you've got to sign up for a 3 year subscription.

How do we monetarize free software - servers, storage, networking equipment, services, indemnification, the services is the new model.

The next thing is our R&D is leveraged massively. We do $2 billion but everyone else helps - HP ports Solaris to their machines, the cellphone port Java, and we license it back to them. We have all of these developers helping us invent OpenOffice 3.0 - we have a very small development team competing very successfully against Microsoft and you can't beat the price - its free.

OpenOffice has nearly two million downloads a week, that's marketing reach, advertising, customer acquisition that is very low cost, and then they register with us, and we can go and ask them if they want to buy a server with that MySQL database. There are some huge advantages to open source if you haven't built a business around proprietary software licences.

The model will never necessarily have the same margins that Microsoft or Oracle enjoy, but maybe they won't enjoy the same margins going forward that they have enjoyed.

Is there enough potential in hardware and services business to be able to capitalize on the open source portfolio?

It's not like we are new to this game - we started off with Berkley Unix, it was the first big open source platform, we took open source TCP IP, this all happened in 1983.

We have had 20 straight years cash flow positive of operations, we have $3.3 billion in the bank, we are gaining enormous market share in all of these technologies, as this stuff goes out there on the network as a free download - I think our market position is improving massively off a pretty interesting legacy of spewing cash and gaining share.

Do you think the financial markets see the same potential in Sun - the share price wouldn't seem to reflect that?

They have overvalued and undervalued us wildly over the last 27 years, and I don't really worry about it one way or the other, because it is all a cycle of fear and greed, that's their problem, not mine.

In relation to the economic situation, when everybody is doing very well, and money is falling out of the trees, and they are feeling really flush, they are not really upset about spending $400 on a proprietary office productivity suite.

If they don't have money all of a sudden they look for alternatives - do I really want to spend all that money for a DB2 database? Or do I really want to continue on with this mainframe. We actually like the downturns, because it creates much more motivation to move to our more effective, energy efficient, free and open source cost models.

We are pretty excited about the fact that we will see more design wins than we would have done, and then when everybody gets more flush we have a better chance to monetize a larger audience.

In terms of encouraging markets to embrace open source, how can you get the message through?

Well I'm talking to you, I presented a keynote here at Gitex, we are out evangelizing and telling the story, and the message is getting out there.

What about the markets where there is resistance to open source or low adoption, what are the barriers you face?

If you don't have the network, it is kind of hard to download free software. 80% of the world is not connected to the Internet, you really do need to get to some level of development of infrastructure to become part of the online community.

Your role in Sun has changed to more of an ambassador role, to promote the benefits of ICT to development, how is that going?

It's all stuff I enjoy doing, staff meetings I can do, but that's not a unique skill, I did it long enough. Somebody needs to do the travel - I fly 150,000 miles per year - it's hard enough to do the travel and then come home jet-lagged its hard enough to do a good solid staff meeting when you are cranky, so I save Jonathan [Schwarz, Sun CEO] from being cranky by going off and doing what I do. It's a great and fun job.

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