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More from Sun CEO Jonathan Schwartz, on whether Google is too powerful

Posted by: Peter Burrows on March 30, 2007

In the course gathering some reporting for Rob Hof’s cover story this week, “Who’s Afraid of Google,” Sun CEO Jonathan Schwartz was good enough to give us a phone interview. As usual, he was eloquent and provocative—and extremely pro-Google (that couldn’t have anything to do with a desire to sell more servers into the Googleplex, could it?).

Given that we only had room in the story for one extended quote from Jonathan, I thought I’d post some outtakes. They follow, with some edited-down questions from myself, after the break:

Q: Is Google too powerful?

A: Absolutely not. Cisco and Microsoft have more cash, and IBM has a stronger balance sheet. Come on, they’re a successful company! Successful companies attract a lot of attention, and a lot of detractors. And it seems to me that most of the criticism is coming from the companies they're beating in the marketplace.

Q: But some people are concerned that Google is so rich and ambitious, that they could squelch innovation. As with Microsoft in the past, aren’t you concerned that Google could unfairly use its success in search to squelch worthy or even superior rivals in other markets?

A: You’re implying they have more leverage than anyone else, but they don’t. Look, they have earned every bit of their success. The switching costs of clicking over to Yahoo or someone else are zero. So Google is winning today, but they might lose it tomorrow...Unlike other companies in the past, they can’t assume success based on bundling or tying or creating a walled garden of some sort. That’s not their business model.

They live by the sword, and they could die by the sword. The companies that have arrested development of competition in the past did so by increasing switching costs and by getting customers locked in to proprietary standards. Ironically, some of those same companies are now the ones that are annoyed by Google’s success.

Q: You know Google’s founders and CEO Eric Schmidt personally. Explain why you, knowing them as you do, feel sure they will use their influence fairly and in ways that help rather than hurt competition?

A: They reason they work so hard is because they're always trying to earn the respect of their consumers. For example, I just loaded Google Maps onto my new phone. It’s perfection. It’s beautiful. (He went on to note that he and his wife had a contest six months ago on the way to a restaurant, to see whether she could get directions using 411 faster than he could get them via the Net. She trounced him, he said. But when they recently repeated the experiment after he’d loaded Google Maps, “I found it in a third of the time it took her to get through to 411,” he said.)

Q: So you believe Google is good for the state of innovation. What’s another example of this?

A: We’ve seen an overwhelming amount of interest in Open Office and Google Apps as an alternative to Microsoft. Sun and Google were the main instigators behind ODF (the OpenDocument Format, which he says is taking off with governments around the world, including Brazil, China, India and of course, the Massachusetts)… The marketplace wants competition. And this is not a small shift. It’s a tectonic shift in the way information is stored, shared and used.

Q: You always hear Google described as arrogant. As a supplier to the company, would you say this is true?

A: They would definitely fall into the category of hard-ass customer. They operate with brutal efficiency, and they are very demanding. But they’re also technologists, who are respectful of technical innovation. Are they any harder to deal with than any of our customers? Most of our customers tend to buy a lot from us (since they’re usually big corporations that build some or all of their IT platforms around Sun gear). As a result, they’re all demanding. Is Google any easier to deal with than Goldman Sachs? No. And the reason they’re so hard on us is because they want the customer experience to be brilliant.

Q: Another concern you here is that Google’s stock price gives it the ability to buy talent, giving it an unfair advantage when it comes to recruiting the best people.

A: Look, Silicon Valley is like a turnstile. One year you’re losing people, and the next you're attracting them. A few years ago, Sun was vacuuming up talent all over this place. Now, it’s Google’s turn. And a lot of the people [who have left Sun] will come back someday, or maybe they're working on some innovation [that will help Sun indirectly by moving the entire tech ecosystem forward]. And it's going to be a lot harder for Google to double that $500 stock price than it will be for us to double our stock price of $6. I’d say we have a better value proposition for new employees right now than they do.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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