Interview: Schwartz smells the services

Gordon: Sun can explain [its products] in a way that [people] understand. I can tell [them] what their expense by headcount is. And now they're going to Microsoft, and Microsoft's going to say, "Well, that's not really the way you should look at it." I think we'll be very much in the driver's seat.

Free IT resource Open Source Business Conference (OSBC) May 22-23, 2007 Sponsored by OSBC Free IT resource TechNet: More ways to know it, share it, and keep it running. Sponsored by Microsoft

InfoWorld: Given that Nokia is about to launch its Nokia Enterprise Services division, do you think it or Motorola will become serious competitors?

Schwartz: Nokia's not going to compete with Sun, Nokia's going to compete with the carriers.  I think that may be a problem if Nokia's too aggressive.

InfoWorld: Do you think Sun has underestimated how desperate Microsoft is to win the cell phone war, given its alliance with Motorola?

Schwartz: It's not up to the handset manufacturer to determine what they put into a network, it's up to the carrier to determine what they put into the network. The reason why Microsoft has failed hasn't been because they produced a crappy handset. The reason they failed was because no self-respecting service provider would want to divorce themselves from their customers by giving the value to Microsoft. Why would they?  A carrier could get 100 percent of the revenue on phones that the carrier owns and operates.

InfoWorld: So Microsoft's PC and server business model does not translate to cell phone clients?

Schwartz: They have failed. Here’s my theory on Steve Ballmer's career. Since taking over Microsoft, he has presided over a 30 percent decline in Microsoft’s equity line. Since taking the helm at Microsoft, their stock price has only gone down. If you look at the number of businesses they have, they ship [apps for] PCs and laptops, [they ship] operating systems. They ship game boxes, they ship cell phones, [and] Microsoft TV set-top boxes.  But they have failed in every other business, other than their core market on the desktop. The only way for them to drive new revenue at a profit is to raise the prices in the market that we are directly targeting, which is that desktop. I don’t think they can pull it off.  They can’t raise prices in mobile handsets, they’re price sensitive. They can’t raise prices on set-top boxes. Game boxes, they might be able to raise them, but Sony's kicking their butt. The only place where they can go for incremental revenue growth is back into their installed base. We’re going after them, so I think Microsoft's stuck between a rock and a hard place.

InfoWorld: One of Microsoft's strengths, however, is the channel. Given that, who will be your most important partners, ISVs or VARs?

Schwartz: VARs, I believe. We made some really massive changes in how we work with partners.  If you serve a company with fewer than 1,000 employees, Sun will not directly approach the customer. It's partner-owned. So if you're a Microsoft VAR or a Dell competitor, all of a sudden you have a point of differentiation, because those guys are trying to squeeze you out by going direct.

InfoWorld: What value-adds do you see coming from partners?

Schwartz: Local expertise. They can serve you locally, they can speak your language. They understand your business and they understand what to do.