If you believe that the storage industry benefits from strong management with the desire to compete, Scott McNealy's decision to step aside at Sun last week was long overdue. Despite any sales claims Sun might offer, the storage business at Sun has been the laughingstock of the industry for many years. With the changing of the guard at Sun, one might think that Sun would try to create new growth opportunities for itself by leveraging its enormous install base and selling storage products and services to their customers. One might think that Sun would look to HP for a few clues on restarting a storage business. It's possible, but I wouldn't bet on it.
Sun's history with storage has been a stumbling string of arrogance, ignorance and incompetence. They were too arrogant to realize that people didn't like installing their relatively expensive and complicated systems when all they wanted was a simple file server. Instead of recognizing a clear opportunity and capitalizing on it, they watched with disdain for over a decade as Network Appliance grew up and became a large company with products that Sun was too proud to understand and emulate.
There is little question that a company with the talent to create the excellent Solaris Operating System could have also developed strong volume management and file system software. For reasons I will never understand, they handed the golden goose to Veritas, which built the dominant storage and data management software company as a SUN OEM development partner. This would have been important intellectual property for SUN - and could have helped them create important storage networking products - but they mysteriously abdicated the opportunity.
Then there was the great SAN misfire. Sun was the first big name systems company with Fibre Channel products, but Sun initially saw FC as a long distance storage connectivity option and not as a new kind of network. They later changed their perspective, but failed to gauge the market requirements correctly, missing the target with underwhelming products. In trying too establish a unique identity in an industry with compatibility problems, Sun's SAN solutions became technology investment traps. This was certainly ironic for the leading company of the Open Systems movement.
Now, let's fast forward to approximately one year ago when Sun decided to buy Storage Tek (STK) for $4.4 Billion. At the time I commented that this was money that Sun probably should have paid out as dividends to stockholders. STK did not have any special new technology, nor did they have an orthogonal install base to create new customers. STK did have cash and they had what appeared to be a sizable services business in storage that Sun could presumably use to create a larger storage services business. The problem is, a heavy component of STK's service business was generated from maintenance on their aging mainframe tape equipment, which at best could only be useful for tactical business purposes. $4.4 Billion is a lot to spend for something without strategic value.
Apparently Jonathan Schwarz, Sun's new CEO pushed for the STK deal. Its not clear what he was looking for - perhaps some notoriety as a deal maker. It's not so difficult to understand how working in the outspoken McNealy's shadow could be challenging - and you can't blame an ambitious executive for wanting to establish his own authority and vision. It's just that the STK deal was so underwhelming, it doesn't inspire much confidence in Schwarz's abilities to navigate the storage marketplace.
Many Sun observers are looking to see if Schwarz has the courage and resolve to cut headcount at Sun. For me, a storage person, I'm looking to see if Schwarz will restructure the storage business. Sun badly needs a fresh perspective in storage with new leadership that has the authority to do what is needed. I'm not likely to be much of a believer until Sun brings in help from outside the company who have a Sun-less outlook on the storage business and can make objective assessments of the resources at hand. The pruning within Sun storage needs to be very aggressive and determining who stays and who goes would be a very difficult job. It starts with finding a leader who can cut through the internal politics and history and focus completely on market opportunities. But before that can happen, Schwarz needs to realize the necessity of cleaning the storage house – and before that can happen, Schwarz needs to commit to making storage a key part of his business strategy. As a Sun insider who learned from watching Scott McNealy, that's not likely to happen anytime soon.
-Marc Farley
