Sun won't shine on box-droppers

Sun Microsystems president and chief operating officer Jonathan Schwartz has predicted an "inevitable" demise for traditional IT resellers who don't adopt services or subscription pricing.

Schwartz, speaking to CRN on a business trip to Australia this week, said the future of hardware vendors and their channel alike would increasingly rely on services and value-add to the exclusion of box-dropping.

"They will become extinct. It's inevitable," he said.

However, the outspoken Sun president pointed out that few traditional box-droppers yet existed in any case.

Most had moved into offering what are often dubbed "value-adds", defined broadly as additional services and support that could maintain margins as hardware prices continued to fall, he said.

"In general, our channel tends to be well-informed," Schwartz added.

Sun announced last week it was investigating a margin-negative model for hardware, which it saw as a way to increase revenue. Schwartz told a US reseller conference that the company might depress margins on its products and then upsell to make more money over time.

That would help resellers, especially as developments in Sun's flagship OS Solaris was expected to add sufficient value to offset any investments into hardware, he was quoted in a US magazine as saying.

Schwartz told CRN that a margin-negative model for hardware fitted neatly into Sun's overall subscription-pricing strategy. It would work exactly the same way as "free" handset offers did in telecommunications contracts, he said.

"Telstra and Optus give you the handset for free. That is very margin-negative. But we will give the channel rebates and things like that to make up for it," he said. "We will actually put money behind this."

Subscription-based or utility-type pricing was the future of IT sales. Already, it was getting almost impossible to make any money out of hardware. However, final details of Sun's plan with respect to hardware in particular had yet to be worked out, Schwartz added.

"Resellers should be looking at Solaris 10 and understanding how that should give them an opportunity to migrate customers ... and how they will build this model and extend their expertise," he said.

Schwartz said Sun had been and would always "consistently" include the channel in its plans. As hardware margins continued to fall, service providers and other third parties would play an even more important role for Sun.

"Our message to the channel is you know you're our future. And we will invest in you to provide that," he said.

Sun's approach contrasted with that of HP, which seemed like it was actually trying to become a channel player itself as it focused less on its own operating system, and would place pressure on competing software vendors such as Red Hat, he said.

Solaris was a critical component of Sun's vision, Schwartz also added.

Michael Ang, Asia-Pacific vice president of US-based secure access vendor Aventail, disagreed with Schwartz' view that box-droppers wouldn't have a place in the channel of the future.

"Box-dropping will become extinct? That's a pretty strong statement to make. I don't think it will be as definite as that," Ang said.

Many products likely to remain on the market for some time to come were quite suitably and simply sold as commodity-type products. Also, certain types of customers would want bricks-and-mortar-type support buying IT products -- even laptops and PCs -- for some time to come, he said.

"If you're IT savvy, you can buy everything from the internet. But if you're not, I don't think you want to. You'll still want to interact with someone," Ang said.