Sun Commodities and IT

President and COO of Sun Microsystems Jonathan Schwartz has an interesting take on the hand wringling going on wrt Nicholas Carr's article (and now book) "Does IT Matter?"

Jonathan has several points worth thinking about :

The world's largest companies are all in the commodities.

Oil & gas, Telco, financial services (bank and insurance). Because commodities are those products for which a universal and perpetual demand exists, and where opportunities for massive leveraging of scale exist. What are the exceptions?

Did some diging / url hacking and found this list on Forbes (after the ad) heres the top 20 : Citigroup (Banking ), General Electric (Conglomerates ), American Intl Group (Insurance ), ExxonMobil (Oil & gas operations ), BP (Oil & gas operations ), Bank of America (Banking ), HSBC Group (Banking ), Toyota Motor (Consumer durables ), Fannie Mae (Diversified financials )
Wal-Mart Stores (Retailing ), UBS (Diversified financials ), ING Group (Diversified financials ), Royal Dutch/Shell Group (Oil & gas operations ), Berkshire Hathaway (Insurance ), JP Morgan Chase (Banking ), IBM (Technology hardware & equipment )
Total (Oil & gas operations ), BNP Paribas (Banking ), Royal Bank of Scotland (Banking ), Freddie Mac (Diversified financials ), DaimlerChrysler (Consumer durables )

The only ones I'm might not list as being in a commodity industry are: General Electric, Toyota Motor, Wal-Mart,IBM, DaimlerChrysler. And even then i could argue either way.

The largest companies serving commodity markets are all technology companies.

Banks and Telco obviously are (although some do a piss poor job of it), and so are Oil and Gas industry. This is not inutility obvious, but on brief examination, it appears to be so.

Companies serving commodity markets must leverage their technology to drive business model differentiation. Technology is a must have, but only insofar as it enables disruptive market moves.

I'm not sure I’m willing to grant this one. A different business model (lowest cost, or high quality or whatever) would be a required for a top firm to get and stay on the top, although there might be others: natural monopoly, government monopoly, and preferential access to resources. Again how they got that edge might not be due to technology. I’m thinking of the US telephone system prior to its breakup, the aircraft industry, national airlines, or other “national champions” (steel?). Question: how many show up on the Fortune 50 list? I looked and could not see any.

Companies that win in commodity markets are intensely focused on standards.

He’s talking about the transition from or emergence from proprietary standards to de facto standards to more or less open (shared) standards. Interestingly, the speed this happened was greatly affected by patents or other intellectual property mechanisms. Internal standards are required by the scale these companies require. They often also require they supplies to meet these standards. Once in the wild they can become de facto standards. They also lobby low tier companies and consumers to adot their de facto standards to force the other guys to convert.

What's really commoditizing? Bandwidth. Not software, not hardware, bandwidth.

I’ll agree that Conductivity is commoditizing, but is that the only layer of IT that is? Not surprisingly he does mention that “Some technology products are certainly becoming interchangeable” with a dig at Websphere, but that that Processing power is increasing becoming a commodity.

Jonathan then tries to tie this back to Sun and make his case that Sun has a future in the Fortune 50.

If anything it makes the case for Sun to try to standardize more of their stack in order to gain edge over the competitors. Of course, one way to do a de facto standardization is to Open Source!)

It is also interesting seeing a CEO do the blog, and strike the balance between trivia and writting (or ghost writing) a column.

update : Alan Williamson noticed the big J's semi-blog too.

Here's more related chattering by the Blogsphere