In his inaugural blog entry for Sun, posted Jun. 28, 2004, Schwartz took the time to explain what a blog was--an iteration that's probably unnecessary in today's context--and explained why he regarded the online journal as an important communication tool. He also pledged to speak his mind, as well as listen to the company's customers, developers, suppliers and stakeholders, among others.
More than three years later, Schwartz has grown to become one of the industry's most-read tech blogger--read by 50,000 people a day--and continues to blog by the same principles today, as he did in June 2004.
In an exclusive interview with ZDNet Asia Wednesday at Sun's Menlo Park campus in California, United States, Schwartz discusses his thought process each time he begins a new post and explains why some CEOs should never blog.
Sun's head honcho also speaks candidly on why the company remains relevant in a Web 2.0 era flooded with user-created content and social networking sites, and has big plans to monetize this segment of the market.
Schwartz also admits and explains why the company was wrong about how it positioned its utility computing model Sun Grid, and how it intends to address the problem.
Q: You first started blogging at Sun on Jun. 28, 2004, and continued to do so when you became Sun's CEO. That made Sun the first--if not, the only--Fortune 500 company with a CEO who blogged. Has this change in role altered the thought process you go through as you write your blogs?
Schwartz: I probably think a lot more carefully now about what I would write. The hardest blog to write is, and you as a journalist would know, if it's the first article you write, you haven't found your voice, you don't really know what the market cares about, you don't really know your own comfort zone.
To me, I feel like I have found a voice that works for me and for the market to which I'm communicating. So I think it has changed quite a bit. And I also understand, and it has only increased in importance over time, how important what I say is to how the company is perceived and how our opportunity is shaped. Because I can quite literally make a statement on my blog, and remember that the Internet is an archive, nothing ever goes away... It would be easy to dip into competitive rhetoric, but of course I would never do that because that would limit our market opportunity. Today's competitor may be tomorrow's partner, look at IBM, that's a great example.
Your primary reason for blogging back in 2004 was to use this as a communication platform. Do you still see it that way?
The number one role of a leader is to communicate. And the number one role of a CEO is to be the chief communicator, to make sure that the people inside the organization know what is important, as well as our partner community and our customers and our shareholders. So I think my blog has only increased in its importance to me, and to Sun, based on its popularity and on how efficiently it allows me to communicate with the world.
It's localized into 11 languages now, from Arabic to Chinese to Japanese to Spanish and French. Those are now all our audience that I can talk to with very high fidelity.
Are there certain issues that are off limits?
Nothing is off limits. And look, to me, it's the same as asking if I would censor a comment. I would no sooner censor my blog than I would a comment. Everything is open. I want to be as transparent and as open to the market opportunity as we can possibly be.
Are there things you would never say in a blog but would in a press release, or the other way round?
I think press releases are Byzantine and antiquated. And I think what matters more is what [Sun's software chief] Rich Green thinks about a change we made to our software strategy, so let us go look at what Rich says on his blog. That, to me, is a much higher fidelity communication instrument than simply a press release that you, as a journalist or a customer, will just throw away and say that's just marketing.
Do you have a guideline, such as RegFD, that you watch out for? Is there like a bible you follow religiously in terms of blogging?
No, RegFD applies just as much to me showing up in a convention center to give a speech or to what I would say to a customer, as what I would articulate in my blog. RegFD just says we have to be fair in how we disclose information and to me, the blog is probably the most fair because it's the most accessible to everybody in the marketplace.
It's still not very common for CEOs, or at least in Asia, to have corporate blogs. How would you suggest CEOs brush away any concerns they may have about blogging, and would you say not all CEOs should blog?
I think the only people who should blog, first and foremost, should care about communicating to the marketplace, and can make the commitment to support that communication over a long period of time. The people who get into trouble blog because somebody tells them it's important, so they write two things and they stop caring about it and then nothing ever happens. And that's just a waste of effort.
If you care about communicating, then you should be a good communicator. And to me blogging is an enormously effective vehicle to communicate. I mean, in a day, I can get 50,000 readers. There's almost no way imaginable I could travel the planet to touch 50,000 people, and yet with a simple blog entry, I can reach out and solicit feedback from that volume of readers. And these readers are Sun's customers, developers and potential investors.
What we're working on now, and we don't have a good answer, is how do we engage--through all the localized translations--the feedback from the marketplace because right now, the comments are made in English only. I would love to get comments from a telco customer who speaks Arabic or a developer who speaks Chinese.
So the localized versions don't have a section for your readers to leave a comment, in a language other than English?
Any chance that might change?
I want it to. We're looking at ways to go do that.
And with StarOffice, are we going to see something come off from that?
I think we already have. StarOffice is only the commercial-supported version of OpenOffice. OpenOffice has such a vast user base which, by the way, is mostly outside of the United States and in developing nations, in developing economies, in developing companies. So I think the partnership with Google around StarOffice was simply to amplify the commercial viability of that as a solution. We really don't need a lot of help in amplifying the adoption of OpenOffice, in fact, we probably have a better software distribution than Google has. I think that's one of the things that certainly holds very interesting potential for Sun. We've reached so many consumers and so many developers that we can deliver technology to them that creates market opportunities.
Are we going to see a technology or product refresh for StarOffice?
You will absolutely see more coming down the pike. There're lots of opportunities for us to collaborate around how we store documents in the network and how we print those documents. And those are certainly areas we're looking at.
So problems over interoperability with Microsoft products are no longer an issue?
Well, I think it's a problem for Microsoft because with so many people using OpenOffice, that if a Microsoft user wants to send a document that's stored in what's already recognized to be the international document format, which is ODF (Open Document Format), and Microsoft is incompatible, that's just going to limit their market opportunity.
But of course, they have their OOXML (Open XML)...
Sure, but that just hasn't been recognized to be the international standard that ODF has.
I don't suppose you want to comment on the whole debate over OOXML?
I wouldn't really talk about OOXML other than to say I think the world has a standard for document interchange called ODF, and I'm not sure the world needs two standards for which side of the road you drive on. And I don't think we need two standards for document formats, I think one standard is always better. We think ODF is already so well adopted and embraced by governments worldwide because it represents safety to them. They'll never be locked out of access to their information, and that's really the standard by which they're measuring all other proposed standards.
Another of your favorite blog topic is about how the network is the computer. In fact, the phrase was coined by Sun's co-founder John Gage back in 1984, in which he described a distributed computing environment where services were delivered via the network, or the Internet. Would you describe it differently now?
Nope, I talk to John a lot about this. I think this is one of those few statements that only becomes more true every day, and becomes more relevant to people every day. When John made that statement in 1984, it was about tethering workstations together. Now, it's about tethering nine-year-olds or families together. What a fabulous slogan, that is.
The network is our life now. If anything, the two words that almost lost their meaning, while becoming more meaningful than they've ever been, is what is a network and what is a computer? They're now inextricable. Were they 20 years ago when John made that statement? Probably not. But today they certainly are. There is no computing device, of any interest anyway, that is not networked and there is no network that I know of where there's no outlet to a device.
Do you see a future where there's no longer that distinction?
My children don't know what a computer is. All they know is they'll reach for my phone when they want to play a game. And that anytime they see a display, they want to see their favorite movie character. So they don't know a world in which there wasn't an Internet.
And that links to what you've since coined the participation age, where you describe all technology to be a social utility. Can you elaborate on that?
I don't think most of our generation can any longer distinguish between the business utility of the Internet and the social utility of the Internet. I think we all say, yes, I use it to communicate with my colleagues at work and communicate with my family. It's not like we have two networks or necessarily even two devices. How many of us want to have a phone they use for work and a phone they use on weekends, or a laptop they use for work and a laptop they use for weekends?
So I think the network has become an inextricable element in our social lives. I think governments recognize that now, they understand that it's core to societal progress and political progress, as much as it's core to economic progress. These are all the reasons why Sun's engagement with governments around the world and engagements with the open source and academic communities are all opening markets and opportunities. It's because people understand how important this technology, called the Internet, is to their future evolution and success.
Does it concern you though, amid the buzz around Web 2.0 and social networking sites, that Sun isn't exactly a new media company?
I think we're on more devices today than we were five years ago. So unless you discount the value of mobile phones in social networking, I would have a hard time believing we're less relevant to social networks.
We play a prominent role in almost every social networking site out there, whether they're paying us for the software they use, or simply using our open source platforms. We're certainly more integral today than we've ever been. And I don't care whether it's Twitter or Ning, or their moral equivalents across the world, I think every day there're new sets of social networking technologies that are evolving. And I think at some point, we'll stop using the word social networking and they'll become technologies and services that enable people to communicate.
Is your move to put Sun's corporate videos on YouTube and establish presence in Second Life, also a way to put the company's footprint on all these new media platforms and technologies?
The core of a technology company that wants to be relevant to the Internet is visibility. Your technology cannot be esoteric, it can't be proprietary and it can't be bottled up. Nor can your company be invisible or proprietary.
Our moves to make our company transparent are just like our moves to make our technologies and products transparent. It's to engage more market opportunities. There's certainly some theatre involved in showing up in Second Life. It's fun, it's very engaging and its very entertaining for people. We just did a launch event in Second Life, and it turned out to be a wonderful way to describe what goes on in microelectronics device.
But again, there's no end point. We haven't seen the last opportunity to get the message out. And frankly, we haven't invented the last technology to help others do the same.
Let's go back to social utility, which brings me to your utility computing model Sun Grid. This was launched in March 2006. Is it where you want it to be today in terms of availability and adoption?
No. I mean it's not, just to be frank. Partially that's because we targeted the hardest problem to go after, and that wasn't necessarily the broadest market opportunity. We targeted shared high-performance computing among commercial customers, which is as much my fault as everyone else's.
The problem with that is, first of all, commercial high-performance computing customers don't want to share their utilities, and multi-tenancy is the core of any successful utility. So the utility that we can't deliver to the marketplace, shared, just didn't achieve the level of economic success we wanted. So what we did was, we re-vectored it to go after the academic community and began building APIs (application programming interfaces) to enable people to syndicate in computing infrastructure into their applications.
And so, Sun Grid or Network.com today, is much more about targeting people who want to leverage computing cycles through Web service APIs into the applications and services that they deliver. But that's not right now. I don't think that's the core of what most startups, for example, would want. And so that's an area we're focused on improving because we want to participate in that market opportunity.
But is it still a key part of your strategy going forward?
It is, it is core to where we're ultimately heading. I expect the majority of customers we serve won't buy a product from Sun, they'll use a product from Sun.
It's just a matter of tweaking your target markets?
I think it's about functional changes as well as changing our approach to the marketplace. We're certainly doing both. I also encourage people to look at Network.com based on what it is today, versus what it was when it was first introduced.
When you took over as CEO in April 2006, you said the main leadership difference would be a greater emphasis on growth and financial performance. With your latest fiscal year ended Jun. 30, 2007, bringing in revenues totaling over US$13.8 billion--an increase of 6.2 percent over the previous year--are you ready now to move to the next level of growth?
We have certainly put behind us any concerns about the fate of Sun. I think customers are more confident today than they've ever been. I think our technology reputation is stronger than it has ever been because of the success of the Niagara platform, the success of Solaris in the open source community and the acceptance of Java in the open source community.
But I also think it's time we start turning our attention toward growth as a dominant priority, as opposed to simply financial performance. What I had said a year ago was that restoring the financial reputation of Sun would be my number one priority, and I do think we're done. But now, we need to turn our attention to growing the value of Sun and growing the value of the markets we're going after. So I think you've seen me turn my attention toward partnerships, toward introducing new technologies that aren't necessarily in our traditional domains such as Magnum, and trying to open as much opportunities to Sun.
But there've been questions over exactly how one monetizes Web 2.0, user-generated content and social networking technologies. And you mentioned that financial investors can't grasp that concept either. So how do you plan to monetize it in terms of hard dollars?
I actually think it's very straightforward. If you look at your large telcos today, they look at basically five meters that you'll see Sun look at going forward. First, they look at the number of subscribers they have because the day you get one, you lose money since you have to subsidize their handset. Second, they look at the cost of adding a new subscriber which is basically the efficiencies of their sales and marketing activities. Third, they look at ARPU (average revenue per user) which is how much revenue you generate from that subscriber. Fourth, you look at EBITA (earnings before interest, tax and amortization), which is the raw earnings potential of the relationship and the business on a whole. Last, you look at churn which is simply the number of subscribers you're losing.
So if you look at Sun in the same way, we grow subscribers by driving new inherence to our technologies, by driving new Java, Solaris and Niagara users. We then try to monetize those relationships by cross-selling and up-selling and delivering more value, via software licenses, systems infrastructure and data center services. And then we measure ourselves at EBITA level, according to operating profitability of the overall company. And just as a telco can't grow if they never grow subscribers, we can't grow if we never grow developers. But unlike telcos who have to lose money when they grow a new subscriber, we don't have to lose money when we grow a new developer.
So I think there's a very strong tie between the adoption of our technology and our business models. The most basic example of that is, with most of the world's handsets running Java: (a) make no mistake about it, we make money on the Java that goes onto the handsets, and (b) we make billions of dollars on the revenue that results from all of those handsets wanting to talk to each other and share movies and connect to one other.
So to me, the business model is very plain and very obvious, but you can't look at any one in isolation. Just like you can't look at the telco and ask how much money do they make on phones because they may say they lose money on phones but no one would tell them to stop selling phones [because carriers make their revenues from delivering services via the handsets].
When you talk about making money off Java running on devices, you mean licensing revenue?
And you share that with the telcos and handset makers?
We share that with the carriers and handset manufacturers. But we're also very careful. I don't ever want to make Java an impediment to joining the Internet. I would just as soon see Java go free, which is why we made it open source and made it all freely available, and it's only customers who want support that will pay for it.
But there's nothing to stop any developer in the world today from just picking up the core Java platform and building a device. They can do that right now and not pay Sun a nickel.
So your strategy is to populate the world with Java devices and any Sun technology...
Yes, on the assumption that it will drive demand for the infrastructure that we monetize.
And the services that you provide...
And services we provide, as well as fuel a partner community that wants to do the same.
Eileen Yu of ZDNet Asia reported from Menlo Park, California, United States.