Sun balances cost cutting, R&D requirements

Even though Sun Microsystems's research and development (R&D) budget will be flat this year over the previous fiscal year, it is unlikely to impact Sun's investment in its pet software projects, according to an executive of the company.

"There is a shift in Sun to greater R&D spending on software," Mark Tolliver, Sun's executive vice president and general manager for Sun ONE (Open Net Environment) products told IDG News Service on the sidelines of Sun's Asia South Media & Analysts Symposium here. "The big bubble in terms of hardware spending was getting the UltraSPARC III systems done. The next few generations will be speed enhancements and not huge new architectural shifts."

In a bid to cut costs, Sun is shifting more of the development work for its software projects to low-cost locations like India.

"We are trying to keep the engineering headcount the same although we are trying to make it more cost-effective," said Tolliver, who takes charge as Sun's chief strategy officer and executive vice president for marketing and business development in July. Sun's engineering center in India has 235 engineers developing Sun ONE products, and accounts for 25 percent of the engineers working on Sun ONE worldwide. The Bangalore center also has 200 more engineers working on issues related to the Java programming environment, Jini networking initiatives, and other software projects.

Sun is also finding ways to finance its software projects, by making customers pay for it. Its decision to price the latest version of its office productivity suite, StarOffice 6.0, was determined largely by the need to make Sun's software projects self-financing, according to Tolliver. StarOffice was initially offered for free.

However, it is unlikely that Sun will increase the licensing fees for Java anytime soon. "Our licensing terms for Java relatively speaking have been based on the notion of broad use, on proliferating the technology," said Tolliver. "There are investment phases and payoff phases, and you have to recognize which products are in which phase. The investment phase for Java was five to seven years. Java still needs Sun pushing it and continuing innovation. "Sun's alliance with AOL Time Warner Inc. (AOLTW) for the iPlanet E-Commerce Solutions helped Sun save costs, according to Tolliver. iPlanet products and staff were merged with Sun in March after the three-year agreement with AOLTW ended, and is now a key component of the Sun ONE initiative.

Sun is now finding that it is costing the company less to have the iPlanet project in-house, according to Tolliver. It is also helping Sun speed up the development of new products. "I am seeing significant acceleration now, as for example our engineering progress now is about 30 to 40 percent better than it was during the AOL days," added Tolliver. One of the reasons is that a great deal of time during the alliance was spent in consultations between the two companies, according to Tolliver.