True story. Back when I was in college in the late 1990s, Sun Microsytems was bad-ass. They were the company on the rise that was going to take down Microsoft, and I wanted to be there to help them. Unfortunately, the dot-com bust happened, and when I graduated, Sun wasn’t hiring. No big deal, I had other career interests by that point. However, I still was fond of Sun and was interested in what they would do in the future.
Unfortunately, all the future news I read about Sun was never positive. As each year passed, news came out about more quarterly losses at Sun and more layoffs at Sun. Eventually, Scott McNealy was replaced by Jonathan Schwartz. Inexplicably Sun did some pretty big acquisitions during this time too, perhaps most known is the acquisition of Mysql. Then the day came they Sun started trading at their cash levels. At that point, they were definitely going to be acquired. I personally guessed IBM would be the company to buy them out (I was close), but the winner was Oracle.
Based on articles I read online, interactions with Sun employees, and some personal observations, I’d like to discuss my opinions on why Sun failed.
Inability to adapt
This is one of the most often cited reasons. Shortly after the dot-com bust, Sun continued to try and sell their Sparc systems and Solaris. Unfortunately for them, the world had started converting to cheaper x86 and Linux systems. Sun took too long to figure this out.
Industry consolidation
As a whole, the computer industry has been consolidating since the dot-com bust. Major vendors such as IBM, HP, Dell, and Oracle began vertically integrating solutions and services for end customers, selling hardware, software, solutions, and all the consulting necessary. IBM and HP’s size afforded them the opportunity to make major acquisitions to better compete in this climate, where Sun was not able to. Slowly but surely, Sun couldn’t keep up the pace.
This is related to several of the points above. Sun attempted to offer the same set of solutions to customers just like IBM and HP, but ultimately could not offer the same level of service as their competitors could. Their size did not afford them the opportunity to do this. As an example, at the time of this writing (which is post Sun acquisition by Oracle), IBM has nearly 400,000 employees, HP has 310,000, Oracle 110,000, and Dell 96,000. At the time of their acquisition, Sun had 29,000 employees. I cannot find peak headcount numbers for Sun before the dot-com bust, but former employees have told me they recall the number being in the 80,000 range.
Inability to focus
Following up several of the points above, Sun failed in their ability to focus. As the industry was consolidating, and they didn’t have the size and resources to compete head on, Sun should have begun focusing on what they could do best. However, they did not. They went out and acquired new properties to continue to diversify themselves, such as the acquisition of Mysql (databases), StorageTek (storage), Cluster File Systems (file systems), and VirtualBox (virtualization). As another example, Sun put R&D; into completing the Ranger supercomputer. Elite end supercomputing has often been a research area handled by only the largest companies that could afford to take the research loss in exchange for press and patents. Sun was not in a position to be investing money in this area.
I have the impression that there were internal philosophical battles at Sun that could not be resolved. On one hand, you had staff at Sun that was loyal to selling their proprietary systems based on Solaris. On the other hand, you had staff at Sun attempting to make money via support of open-source products running Linux or Mysql. Sun appeared to have internal conflicts that ultimately put their staff at odds without clear direction. I heard stories of Sun sales staff attempting to convert customers from Linux to Solaris, suggesting a clear lack of focus in their sales staff. Why were other companies able to deal with this issue? I believe companies like IBM and HP were able to solve these internal problems because of their size, letting different divisions profit on their own. Sun employees had to try to operate in both environments. Other companies such as Dell were able to succeed by concentrating on just Linux as their Unix-like solution.
Poor Management
Ultimately, failure of Sun really falls into the hands of management. As I mentioned above, there were a number of signs that management should have recognized and taken action on.
My friends and I have debated at length on what Sun should have done. Some think they should have abandoned hardware to only concentrate on software. Others think they should have abandoned Solaris. By selling those assets, Sun could have used the subsequent cash to acquire companies like Redhat or BMC Software. That would have made Sun a much more interesting company, and if they had done that, maybe they’d still be around.
