Vinod Kholsa and Sun Microsystems

Summary of Vinod Khosla and Sun Microsystems

2014129051 Jihyeon Park

How Vinod Khosla established Sun

Background

Vinod Khosla is a founder of Sun, a small start-up company manufacturing workstation. Before Sun, Khosla had been a founder of Daisy Systems, an integrated vendor of CAE (Computer-aided engineering). Daisy was a pioneer in the CAE business and it provides engineers with the means to do circuit design on computers. Since Khosla worked for Daisy Systems, he began to question its hardware strategy because the company was building hardware for only one application. He thought if the company develop its hardware as a general-purpose computer, it could make much more money. However, Daisy couldn’t modify its manufacturing system so Khosla decided to leave Daisy in December 1981 to pursue the new opportunity.  

Preparation for setting up Sun

Khosla thought himself as a conceptual engineer. He started to look for someone who is a real engineer and that’s how he met a guy from Germany, Andy Bechtolsheim. Andy had developed the workstation concept in a fair amount of detail and had a prototype implementation of it. At first, Andy offered Khosla the license that values $10,000, but Khosla tried to persuade Bechtolsheim to be a member of co-founders and build workstations based on his designs. Khosla and Andy became the starting members of Sun, got funded $300,000 from Bob Sackman.

To build a business plan for Sun’s workstation, they needed a marketing manager. Within days of obtaining seed financing, Khosla had persuaded Scott McNealy to leave his job as director of operations at a small high-tech firm and run manufacturing for Sun. After that Sun had produced a prototype and made its first sale. To get more customers, Sun had to decide which kind of UNIX to provide. There were two options, Berkeley UNIX and AT&T UNIX. Even though AT&T was the industry standard, Sun picked the Berkeley one because it had better performance. Sun recruited the resident UNIX guru at Berkeley, Bill Joy and the participation of these guys enabled Sun in the months ahead to build top-notch engineering and software teams.

The main business plan of Sun was “Being general”. Sun never specialize in any one narrow function. Everybody said that with this standard product with a bunch of things thrown together, Sun will never have a proprietary advantage. Apollo, the leader player in workstation market actually took the opposite strategy, “Being unique”. While Sun depends on outside resources for manufacturing, Apollo vertically integrated in manufacturing because it had its own proprietary components.

Sun’s strategy to obtain customers

There were two classes of people who would use not-fully developed machine. Universities and OEMs. However, Sun, as a start-up, they had no credibility, so they decided to set a sales target of the universities and then go after OEMs. In the first year of full operations, Sun succeeded in developing a strong presence in the university market. Universities could really play with Sun’s machine because it was standard. Universities have become Sun’s mechanism for credibility and Sun could get a number of calls from OEMs. Sun finally had technological credibility. However, OEM market was very tough to enter, because of a strong competitor, Apollo. It has all the second-tier players as their customers and apparently, they are very satisfied with Apollo’s machines.