Computing's second Punic war.

Java, the network-centric computing platform, is Sun Microsystems's serious bid for business users. With it, CEO Scott McNealy is setting in motion a wider conflict over who will control computing's future.

That Microsoft is rapidly extending its hegemony over the personal computing industry is not in doubt. Like ancient Rome, it has built a formidable empire - the next frontier of which is enterprise computing. Thus far Gates and his allies at Intel have outgenerated opponents, creating in the minds of some the so-called Wintel duopoly. Although they differ over details, they agree on a common strategy: conquer corporate workstation and server markets, including the Internet and intranet business, then lay siege to interactive media. Intel provides the microprocessing hardware; Microsoft controls the operating system. Pax Wintelum.

Colliding with this force is the rapid acceptance of a new object-oriented computer programming language introduced in 1995 by Sun Microsystems called Java. Originally viewed as a clever bit of Web flash, it has evolved into something far sturdier and ideal for Internet and intranet computing. It has fired the imagination of both the computing industry and business users who see it as a path to lower-cost desktop computing and overall cost-effectiveness of enterprise networks. Since Java was designed to break the link between the application and the operating system, developers can create programs that run on any computer regardless of its operating system. No more separate programs for Windows, Mac, Unix, etc. While extending the life of legacy systems, it also opens the door to Network Computers (NCs) so-called dumb terminals, cheaper than PCs, linked to servers. Instead of installing new programs on every, PC as is done now, programs can be installed once on a central server and are available for use across the network. Java-philes assert this will significantly reduce corporate computing costs, arguing that the lifetime service and administrative costs of NCs are much lower than PCs.

If the network really is the computer, as Sun Microsystems's CEO Scott McNealy argues to anyone who will listen, then the battle for computing's future course is engaged. Like Hannibal, the great Carthaginian leader, Scott McNealy has sent his Java elephants over the Alps threatening Microsoft from an unexpected quarter. Along with Oracle's Larry Ellison, and IBM's Lou Gerstner, McNealy sees NCs breaking the grip of PCs much the way PCs displaced the mainframe. Lifetime cost comparisons remain at issue, but Java's potential is uncontested. All leading Internet software players have agreed to support it. IBM has put it on all of its computer platforms including OS/2, AIX, and AS/400. Conceding the inevitable, Gates has licensed it grudgingly, even as Microsoft offers the Java-like language, Active-X. According to Forrester Research, more than 62 percent of U.S. companies employ Java and 42 percent reckon it will be critical to their Internet computing. "Java has allowed Sun to transition its mind share, the way people perceive the company, from a workstation and server maker to a software innovator," says Patricia Seybold, president of The Seybold Group, a Boston-based IT consulting firm. "It's interesting that IBM is spending more money on Java development now than Sun."

"It's great that there's somebody willing to fight Bill Gates," says Randy Fields, president of the Park City Group, a Utah-based information systems firm, "but I don't think it's winnable. Nonetheless, it's caused Microsoft to change its strategy." Scott McNealy, 42, is not shy about taking on Gates's empire, nor about being controversial. The Windows operating system, he says, is nothing more than a "hairball on a desktop." With his toothy smile and fraternity boy appearance - he almost never wears a tie - McNealy is not the techie nerd of silicon legend. He studied economics at Harvard, earned an MBA from Stanford, and counts his father, a former American Motors executive, as a mentoring influence in his life. In 1982, McNealy and two other 27-year-olds founded the Mountain View, CA-based company which has grown to be a $7 billion maker of computers and software. Direct and plain spoken, McNealy encourages Sun employees "to have fun." Indeed, the company's April Fools Day pranks are legendary. On one occasion, McNealy found his car mounted on blocks suspended over the water fountain in front of Sun's Palo Alto headquarters. But hockey is the Columbus, IN-born CEO's favorite pastime and he conducts Sun's business as a contact sport.

The Javameister's challenge is to figure out how best to capitalize on Sun's current advantage. The company derives most of its growth from high end Unix workstations and servers, but is reported to be taking a drubbing from its low-end workstation line. (Second quarter earnings surged ahead 41 percent showing improved margins, but the company cagily declines to break out performance on Java.)

Can Java and the NC humble Windows as Microsoft toppled IBM's mainframes? It will be a neat trick persuading people to give up their precious PCs. And no doubt Microsoft will not stand by idly as Sun steals away Compaq, Gateway, and HP users. For the record, Hannibal, who as a youth swore eternal enmity to Rome, defeated every army the Romans threw at him, despite reduced resources and terrible odds. Should Bill Gates be worried? "I think Bill Gates is very worried," says Seybold.

- J.P. Donlon

HEADING INTO THE NEXT PHASE

Are we witnessing the beginning of the end of PC-dominated computing and the rise of Internet-based computing?

I think we're heading into the third, most interesting phase of computing. The olden days were about host-based computers - the centralized hairball style of computing - where you put everything, all the applications and data, on the mainframe. Then you put a dumb terminal on everybody's desk that could access the mainframe. But it wasn't very responsive and it ran slow. So they went out and put a personal mainframe on their laps - it's called a PC - and gave everybody their own file system, their own disk farm, their own 32-megabyte, 32-bit multitasking, multi-threaded operating environment with 10 million lines of code on the Intel Pentium chip. And all of this just to type our names or to send an e-mail - classic hairball on the desktop.

That's the PC model. Incredibly expensive, 10 to 12 or 13 thousand dollars per year. And, what step forward in user productivity have we seen? Personally, I got so frustrated with clip art and presentation graphics that I banned Power Point from our company 10 months ago. Our earnings have skyrocketed and our stock price has nearly doubled since that time. I have seen absolutely nothing but productivity gained by banning word processors with more than four features and Power Point-like graphics, or presentations graphics programs. I think if General Motors could ban Microsoft Office from their company, they could get the 1999 cars out next year at half price.

The third model is network computing. We've said for many, many years, that the network is the computer. This model says you use basic ASCII to create mail, because every computer in the world can read ASCII mail. You use HTML, the new hypertext markup language for Web pages, because every computer on the planet can view a Web page with a simple browser. And you write all your applications in Java, because every computer on the planet can run a Java application without change.

So now, you're network-based, you can run zero administration client models. You either have no desktop operating system, or you can use a "fat client," or PC, with a Java browser and just run the browser. That means you can keep your legacy environment. You don't have to upgrade your PCs. You don't have to spend the millions of dollars worrying about porting. And most important, you don't have to worry about security in this new model, because security is built into Java.

Does this new model require ripping out current systems?

No. That's the beauty. You can put a Java-based browser on your old PC and run in the browser. So I tell every CEO who will listen to me: Freeze your investments in mainframes. And I would ask every CEO to ask their managers for ROI analysis on any upgrade to a PC. I would love them to send me their ROI analysis and let me evaluate it. Because I have yet to see any investment analysis on a PC show anything other than a negative return. So I say, side-grade. That means putting a Java-based browser on your PC. That will maybe cost you 10 bucks a shot. Now, suddenly, you can build all your applications in Java and view them on every computer.

But doesn't this require a big investment in some kind of group of servers to support this?

No more than you need in the PC model. You might need a couple of servers to serve up applications. But you're doing transactions with PCs now, so you'd have the back-end machines to do those. You're doing mail, so you need back-end mail servers anyhow. You don't want to store any corporate information on your PC; you want that on a file server that's reliable, mirrored, and backed up every day. So, you need a good, solid network in any model.

So let's say you want to migrate to a network computing environment. Where do you start?

You've got to decide that all future investments will be in Java and HTML. So that when you create a page, you do it in HTML and publish it on the network. Then, instead of printing it and sending it to folks or sending it to them via an e-mail, you put it on HTML and everybody who wants to see it can go to that Web page and look at it. So, instead of filing the same document 30 times, or 30,000 times, in one organization, you bookmark it.

Next quarter, I'm planning to have a Java station on my desktop as my only computer. And I think it'll do just fine for me. It'll probably be rough around the edges for about two months. But then I will have a no-disk, no-CD, no-floppy, no-OS desktop operating environment.

THE PC: A WASTE OF SPACE

Would you miss the freedom of having your own system at your disposal?

I've never felt bad that I didn't know how to operate a telephone switch. I have a hard enough time with a six-feature phone. There are two myths about the current PC environment that I think CEOs could relate to. The first is that it's easy to use. The second is that PCs are compatible. PC compatible? That's an oxymoron. First, consider the security issues around a Windows-based computing environment. Then you think about the fact that it's not object-oriented, you can't reuse the code, you're stuck on Intel and Microsoft computers, and it isn't going to work in the zero-administration environment. It's a very compelling reason to start considering why are we spending $10,000 a year on this computing environment? And what is the ROI on any incremental spending?

Have you done your own ROI internally? And what have you found?

There are no PCs in our company. And it hasn't hurt our success any. We'll be pretty close to eight and a half billion dollars in our 15th year. We do have our own "fat client." It's a SPARCSolaris, instead of Intel-Microsoft. But we run it in the zero-administration client way. I have 350 applications available to me. There are no CDs or floppies in my office. And we are spending about $5,000 a year, including network costs, hardware depreciation, software amortization, and the systems administration cost. We think by going to Javastations we can cut that in half.

Is it your aim to have Java become the definitive industry networking standard?

We want it to become the language of network computing. COBOL was the language of mainframes; FORTRAN was the language of mini-computers and technical computing. C and C++ were the right-sizing languages. Visual Basic is the language of desktop hairball PCs. And Java is the language of network computing.

THE GATES FACTOR

Assuming that Java becomes the de facto language of computing in the future, how does Sun Microsystems directly benefit?

Today, in a proprietary Wintel world, only two companies - Intel and Microsoft - get to participate in providing the microprocessors and the platform for most desktop computers. In this new world, everybody can compete for every seat, for every client environment, and for every server environment. We'll be able to compete. Granted, we'll have lots of competition, but it's better than no competition. I'd rather compete and lose than not compete at all. We'll grow just fine in this new market. We've grown fine in the limited market. In 15 years, we've gone from zero to eight and a half billion dollars, in a tiny, little limited market. So imagine what we can do.

You've caught Wintel off balance by establishing this name for yourself. But you've also put yourself in the cross hairs of Mr. Gates.

I've been doing that for about 15 years. It's fun. Everybody on the planet is in Microsoft's cross hairs. The banks, the content providers, the network services providers, the Internet service providers, the software developers, the computer makers. Everybody out there has been in their cross hairs, so that's nothing new. He's got a planned economy, where he owns and controls and drives the strategy. I believe in sharing in the wealth and sharing in the innovation and making the market bigger. That's what market economies are all about. It's like Ford and Chevy. Coca-Cola and Pepsi Cola.

What about this so-called Net PC - not quite a PC but not quite a NC?

I call it a PC in a corset, with the wires pulled real tight and a real red face. It's still a chubby little computer tinder all of those wires. And a low-cost PC is another oxymoron. So as long as they're fantasizing that way, we're in good shape. We're going to have a lot of open-field running.

Allegedly, there is software that can reduce PC administration costs substantially as a near-term fix. Do you not regard that as a viable option?

Well, I would definitely try and do that, but I wouldn't allow any upgrades. I mean, moving to Win 95 or to NT is not going to solve your problems. It's only going to give you a bigger hairball on people's desks. Why pour money into the wrong architecture? The model we're proposing is one that's very tightly integrated with the Windows environment.

Does Java in a way disintermediate software creation as it is?

It maybe disintermediates some software delivery. Like, instead of Sneaker Net - running around handing out floppies - or instead of shrinkwrapping it. Netscape is the great example of that. So much of their software is just clicked down over the network. They also shrinkwrap, but it certainly augments network-based. I don't get any of my applications physically; I get them all electronically. I can bring 300 different applications to my desktop right there, just a mouse click away. I don't know where they come from and I don't care. They just show up.

A PLAN FOR THE FUTURE

Where do you go from here with Java and all its forms?

Last week we announced the 100 Percent Pure Program. What we want to do is make sure that anytime you write a Java application, it'll run on all Microsoft computers, IBM, Apple, Unix computers, Sun computers, NCs, and Java stations. And the real key is, we've got to protect that. Microsoft wants to hijack it. They try and get you to use CaptiveX extensions in your Java program, so that it will only run on Windows. But if you make it work better on Windows but it only runs on Windows, then you've broken it. Because porting is not a useful activity. If every one of us had a different written and spoken language, we'd have to re-port everything anybody ever wrote. The fact that we're all on one common language is wonderful; translation is a disaster. It's what causes more wars than anything, right?

A BETTER DEAL?
(Summary TCO Costs)

Life Cycle Costs (annual)      Win95        NC

Capital                        $1850       $980
Technical Support              $1066       $870
Administration                  $945       $440
End User Operation             $3464      $1799
DESKTOP ANNUAL COSTS:          $7325      $4089

Network Capital                 $682       $689
Network Technical Support       $638       $611
Network Administration          $552       $230
Network End User                $588       $392
NETWORK ANNUAL COSTS:          $2460      $1922

TOTAL COSTS                    $9784      $6010

% Cost Reductions                           39%

Source: Gartner Group

Several consultants had high praise for Java, but a few did say they felt that Java, to some degree, was still immature. What's your response?

In terms of security, it is infinitely ahead of Windows from a maturity perspective, because Windows will never get to that level of security. So you've got to be very precise about what you mean by immaturity. Granted, there are some things, like Java Wallet technologies that we just announced last week, which are becoming available in the next 60 days. Yeah, they're not there, but they're not there in the Windows environment either. I think the maturity question is just kind of a thoughtless, off-the-cuff statement to make, just so that they sound like they're adding some value on this thing. But they aren't.

The [NC] has wonderfully complicated and exciting, but doable implications for every company out there. And it's not good news for Microsoft. They make their money shipping desktop operating systems. This new model says the desktop operating system's a negative value-add.

When we see greater deployment of the network-centric model, will software and software development be cheaper?

I think so, because today you're paying for the cost of porting and you're not getting the economies of scale. Look how expensive Mosaic is. It was done by a couple of kids at the University of Illinois. They put it out on a Web server and all of a sudden millions of people got it for free. And the upgrades are near zero anyhow.

But what would be the incentive for software creators?

They all want to be Marc Andriessen, who's a 100 millionaire right now. Maybe not a 20 billionaire, but I know a lot of people who will do a lot of things to become a 100 millionaire. I know a lot of people who'd do a lot of things just to pay off their school debts. The incentive to work hard for $1 million or $10 million or $100 million is just the same incentive as to make $20 billion. At some point, you get past working hard for that reason. You're working hard for a reason that has nothing to do with money. Most people probably hit that at $5 million.

What are some of the exciting things that you are working on that we might see in the future?

We're building our coverage model better, because we've been too small to call on everybody. We've now got an incredibly compelling answer, but we've got nobody knocking on the door. So we're trying to just build the coverage models on a global basis, to allow us to go call on the global 1000 companies out there, because they're the ones that really have the most to gain.

Are there industries that have migrated to the network model particularly well?

Pockets. The trading floor has done it well and is moving aggressively because the ROIs are so high. The engineering workstation world is much farther along in this network model - not necessarily zero administration, but certainly on the network model. The telephone and cable companies have driven the zero administration model particularly well, as have all the utility models, the electric companies, and the water companies.

Other than Java, what financial or other goals have you set for yourself?

I believe goals only limit you. Because if we'd set a goal 15 years ago, it probably would have been to be a 100 million dollar company after 15 years. And I would have been thrilled to death with that. And I'd have set a personal goal that I wanted to get comfortable at making $2 million dollars. So, I learned a long time ago, goals can only limit you. So my only goal is to come in and work as hard as I can every day, go home and spend a little time with my little boy and my wife, pass out, and then come back and do it again the next day.

Is that really how you manage?

That's how I personally manage myself. We obviously have a strategic planning process where we've committed to our shareholders to goal our company to grow at least 15 percent per year in earnings per share, as a floor, for 100 percent payout. We certainly pay our management team to do much better than that, and bonus them accordingly. I don't know what our 10-year EPS growth has been, but I think it's significantly above 15 percent.

In your strategic plan, do you have any sort of long-term goals to get into other businesses?

No. The network computing business is great. We don't need to get into components like silicon or subassemblies like disk drives. We don't see a need to get into printers or into other computing models, like PC or mainframe host-based models. There are people doing all those things for us in a partnership role and what we really want to do is focus on providing the best client and server technologies for network computing, with open interfaces.

How do you see this evolving over the next 10 years?

Well, I'm certainly not going to rest until I know little Maverick can grow up in a world where the written, spoken language of computers is open, like English. I think the world would be a better place because of it. Every proprietary computer company has had to face the grim open reaper, except Microsoft and Intel. And I think they're staring him right in the eye right now, trying to play a game of chicken. And so far, the grim open reaper has won every battle and forced us all into being open. Now, it just happens that we were born into that religion day one. We just said we're going to publish all our interfaces day one. We faced the reaper the day we incorporated.

What do you make of all the Java-related commotion?

I think we're on to something. I was at a hockey game with my little boy Friday night. Sports Channel occasionally pans the crowd and picks out people. They almost never acknowledge who they're shooting unless it's Sylvester Stallone or Madonna or Michael Jordan. Suddenly, the camera was right in front of us and the red light came on. And the Sports Channel announcers say, 'There's Scott McNealy, a well-known season ticket holder for the San Jose Sharks. And there's his little boy - what's his name? I think his name's Java." It really hit me then that this thing had gone about as mainstream as you could possibly imagine, that they would be actually yakking about that on a Sports Channel broadcast. We've just been plugging along doing our deal here and trying to open up computing models, and suddenly it's become coffee-table conversation.

RELATED ARTICLE: Sound Bytes: "McNealy On..."

The power of the people...

"Most mere mortals don't deserve a telephone switch and they don't deserve a personal mainframe on their desk or lap or in their luggage. I mean, you don't have an electrical generator with a coal mine behind your house, right?"

Desktop bells and whistles...

"It is irresponsible for CEOs to give every one of their employees a CD player. They use it to load viruses. Windows is the petri dish of choice on the Internet."

PC investment...

"Unless you count employee satisfaction and thrill as psychic income and part of ROI, there is no possible way I can think of to get a positive return on investment by investing in more PCs."

Sun's benefit from global migration to Java...

"My child will grow up in a place where the written and spoken language of computers is not owned by one little private company up in Redmond, WA. That makes me happy."

Security...

"Windows is fundamentally stillborn on the security issue, and it always will be. It's done. It's toast. And if you don't solve the security problem, you're not going to be doing electronic commerce."

His father as influence...

"I'd sit at his knee and read his briefcase every night while he did [his work]. He was vice chairman at American Motors, president of AMF. So I got to grow up kind of like [race car driver] Kyle Petty grew up with Richard Petty. But you know, it didn't seem like an influence. It was just...life."

Microsoft's contention that ActiveX is an open, cross-platform alternative to Java...

"Yeah. And I've got some land in Florida I want to sell you, too...No. You write in CaptiveX and you run on Windows."

Gates vs. McNealy Head-to-Head

Ever since Sun emerged as a leader in the push for network-centric computing, Scott McNealy has been on Microsoft's tail. At virtually every opportunity, McNealy has expressed his disdain for the PC, for the proprietary nature of Microsoft products, and even for Bill Gates himself. Indeed, the Sun chief has taken Gates on in what seems an almost personal ideological battle over the future of corporate computing. Here's a look at the two mighty warriors - of strikingly similar ages, backgrounds, companies, but highly divergent philosophies - side-by-side:

Bill Gates

AGE: 41

PLACE OF BIRTH: Seattle, WA

EDUCATION: Dropped out of Harvard, junior year

FIRST JOB OUT OF COLLEGE: None (prior to founding MS)

YEAR FOUNDED COMPANY: 1975

AGE WHEN FOUNDED COMPANY: 21

NUMBER OF EMPLOYEES: 20,000

CURRENT RESIDENCE: 40,000-square-foot mansion on Lake Washington

FAMILY: wife, Melinda, and daughter, Jennifer (born April 1996)

IT INVESTMENT ADVICE: "I don't see much reason to dumb down the desktop machine. And I don't see the justification for businesses to invest heavily in new servers based on mainframes or clusters of minicomputers." (From The Road Ahead)

PHILOSOPHY OF EMPLOYEE MANAGEMENT: "The key question is, do you want to take away the individual flexibility that the personal computer provides?...People do play computer games at work, but they also doodle with pencils. Do you take away their pencils? That's not the way a modern work force is managed. You've got to trust people." (The New York Times, November 4, 1996)

Scott McNealy

AGE: 42

PLACE OF BIRTH: Columbus, IN

EDUCATION: BA in Economics from Harvard University; MBA from Stanford

FIRST JOB OUT OF COLLEGE: Foreman at Rockwell International Corp. plant in Ashtabula, OH

YEAR FOUNDED COMPANY: 1982

AGE WHEN FOUNDED COMPANY: 27

NUMBER OF EMPLOYEES: 17,000

CURRENT RESIDENCE: Three-bedroom house in Silicon Valley

FAMILY: wife, Susan, and son, Maverick (born November 1995)

IT INVESTMENT ADVICE: "I have yet to see any investment analysis on a PC show anything other than a negative return....Why pour money into the wrong architecture? Stop investing in mainframes. Stop investing in PCs. Leave the hairballs alone. Take all that money, start writing to HTML and Java, and build a great big TCP/IP network."

PHILOSOPHY OF EMPLOYEE MANAGEMENT: "To give every one of your employees a floppy is asking them to offload corporate mission-critical information, and maybe lose that disk in the hands of your competitor. What a disaster...Employees are going to squawk, because they love playing around with their desktop. But I'm not looking for activity in my company - I'm looking for productivity."