Jaskulski:
"We will not have that much substantial growth for this fiscal year, but the goal is to gain market share."
Competition in the computer server market is fierce as the top five global players - International Business Machines (IBM), Sun Microsystems, Compaq Computer, Hewlett-Packard and Dell - continue to fight for the No. 1 slot. A long-time leader in the sector, Sun recently slipped behind IBM. Andrzej Jaskulski, the 47-year-old country manager of Sun Microsystems Poland, talked to the Business Journal's Roseanne Gerin about the company's quest to regain the leading spot in the worldwide server market and its efforts to boost product sales in Poland. The following is an edited version of their conversation.
Q: What are the most important changes to Sun Microsystems Poland since you took over as country manager in 1995?
A: First of all, in 1995 we were simply a representative office. It was not a subsidiary, so the first major change was the transition from rep office to a Polish legal entity, Sun Microsystems Poland, which showed the commitment of Sun to the Polish marketplace. Then, Sun started its business in Poland in the educational sector. More than 90% of the revenue was (from) the educational sector in 1995 and in the beginning of 1996, and until now the educational sector (accounts for) around 10% of revenue, so this was a major shift to commercial business. To achieve that (shift) we had to increase the number of employees. In 1995 there were eight employees at Sun Microsystems Poland. Now there are 100. Then we moved from the workstations (computers used for engineering applications, desktop publishing, software development and other applications that require moderate amounts of computing power and high-quality graphics abilities) into the server business.
In the server business, we moved from low-end (servers) to mid-range and high-end ones. (In other words), from very simple systems into business and mission-critical systems (computer functions that are indispensable to a company's core business). That was a major change.
Q: Sun's main product has always been the high-end Unix (operating system) servers for big corporations. How has the market for servers changed?
A: We have been growing roughly 50% every year, so for the last five years we grew our business in Poland by a factor of 12. That's the proof that business is in Poland. We have sold a lot of (products) so far, and I hope we will continue to do that.
Q: Given the tight competition from IBM, Hewlett-Packard and Compaq, how have Sun's servers sold this year?
A: Fiscal year 2001, which ended in June, was the most successful year for Sun. We sold a lot of high-end servers - the flagship SunFire 10K (server) systems to many companies in Poland. It will be hard to repeat that this year. There is no secret that there is a worldwide recession. The competition on the marketplace is a challenge for any company anywhere, and Poland is no exception. I believe in staying in touch with the competition, which is (also) trying to build its business in Poland.
Q: How much have vendors felt the drop in server revenue this year?
A: There is still business in mid-range servers. We have new products and we are selling this kind of gear to the Polish marketplace. However, for the very high-end systems, the number of tenders and prospects is shrinking because of the recession. There are a lot of discussions and negotiations, and at the end of the day there is no product for anyone. So there is a slowdown.
Q: Can you quantify it?
A: Fifty percent less is my estimate for high-end systems only, not the overall business. But, again, we had the most successful year last year. For us, it's hard to say what the market really looks like.
Q: IBM and Hewlett-Packard recently introduced high-end servers that have outscored Sun's. How much more ground does Sun expect to lose to these two companies?
A: I do not expect to lose any substantial percentage on the market (to competitors). We should be aware that just two weeks ago our high-end systems outperformed both Hewlett-Packard and IBM systems.
Q: Sun lost its lead in server sales to IBM in the first quarter of 2000. How long will it take to return to the No. 1 position?
A: If you are talking about worldwide, it's hard for me to answer that question. Sun stays very much focused on the products, on the vision, and the long term. Sun is well prepared for new challenges. In Poland, we are still in the first league. Unfortunately, it's hard to get any reports from this market, which is described as a special Unix server marketplace. But Sun is and will be in the leading position on the Polish marketplace. It's hard to say (where we are on the market right now). (Regarding) the rumors about the merger of Compaq and Hewlett-Packard, there are still lots of questions about what will happen because it will have a big influence on the Polish market.
Q: About Hewlett-Packard's $21 billion bid for Compaq, members of both the Hewlett and Packard families said they would vote against the merger. But if other shareholders approve the plan, how much of a threat would the merged entity be to Sun Microsystems?
A: It's hard to say. It is true that the new company would be much bigger than it is now. I personally have a lot of doubts that one plus one equals two. There are many overlays of products so they will have to make compromises. If you look at the history, there's only a few mergers that have been completed successfully. It's really hard to say, but it could be an opportunity for Sun. It depends on how it would evolve and how it would be executed.
Q: Will Sun lose more market share if companies switch from Unix system servers and replace them with less expensive ones using Linux (the free open source operating system)?
A: If you look at the reports, Linux is still not perceived as being the real competition. It's not commercially mature enough to be installed on the enterprises of business-critical or mission-critical systems. It's hard to say that Linux is the competition. I treat it as some kind of competition. It's a good concept because it's an open-minded system, and everybody can contribute to that. For the time being, it's not being converted into commerce.
Q: So you wouldn't say Linux is the biggest challenge to Sun Microsystems now?
A: Sun is always committed to open standards and to some kind of competition. Sun even contributed to the development of Linux. There are a lot of technologies that have been used by Linux that are Sun technologies, so for Sun it's more aligned (with Linux) than competitive.
Q: Would Sun adopt Linux along with its Solaris operating system to fend off competitors?
A: Never say never, but there is no evidence for the time being.
Q: Sun is entering the fledgling market for Web services and software with the launch earlier this year of Sun ONE services, an area in which Microsoft is quite well ahead. Yet Sun ONE's offer has been criticized as being too similar to the products of IBM, Oracle and Microsoft. Your response?
A: First of all, this is the open network environment - this is what Sun ONE stands for - and this is an open (operating) platform for everybody who can contribute. It is much different from the other vendors. Sun is seeking many, many partners to contribute to Sun ONE. Sun doesn't own the platform Sun ONE - this is more for everybody who can contribute to the level of their future projects. This is all about the open standards, and world-specified investor strength and interfaces. So there's nothing hidden, everyone can come up with a new product at some time because everything is well specified.
Q: How can Sun grow given the worldwide IT spending slowdown?
A: In the world market, Sun has grown in two digit numbers for the decade. Year after year, we have grown more than twice compared to any competition on the marketplace. It is a slowdown. I believe that we will not have that much substantial growth for this fiscal year, but the goal is to gain market share against the competition.
Q: Sun Microsystems announced it would lay off about 9% of its workforce due to decreased demand for products - the first significant jobs cuts for the company. Are more cuts likely next year?
A: I do not believe that there will be any more job cuts, but again everything depends on the economy. Sun was one of the last companies to introduce layoffs. Our CEO Scott McNealy was against (layoffs) for a very long time, and he really expressed concern for (all) employees. But our short-term project is getting Sun worldwide back to profitability, so that's why we (cut jobs). But long term we are prepared to keep (our) sustained growth.
Q: What will Sun's role be in Poland's IT sector during the next five years?
A: We are already recognized as a business partner to the biggest enterprises in Poland. We developed professional services, enterprise services - or support services as well, and we would like to be business partners to those companies. We are focused on the platform and together with the partners we can offer solutions, so working with partners closely on major accounts. This is our role and our mission in Poland. If you look at the other products we have and the vision Sun has, talking about what we call the net economy Sun has a tremendous value added and our role is to bring it to Polish customers.
Roseanne Gerin
