Jonathan Schwartz: From Sun CEO to Health Care Entrepreneur of Innovation

 
 
By Chris Preimesberger  |  Posted 2012-01-17
 
 
 

Jonathan Schwartz: From Sun CEO to Health Care Entrepreneur of Innovation


When you're meeting with Jonathan Schwartz, it's easy to feel that the only way you'll ever be the smartest person in the room is if he leaves it.

There isn't a gray hair in Schwartz's characteristic ponytail, yet the 46-year-old software developer and business executive started and led his own company (Lighthouse Design) while in his 20s, was CEO of a major corporation (Sun Microsystems) by age 40 and helped engineer the tremendously complicated $7.4 billion sale of Sun to Oracle in 2009.

Along the way, he became the most credible enterprise open-source software advocate to other large enterprises, extolling the virtues of Java, MySQL, Zettabyte File System (ZFS) and other development tools. Without taking anything away from Bob Young or Marc Ewing (Red Hat), Linus Torvalds (creator of Linux), Mark Shuttleworth (Ubuntu), Brian Behlendorf (Apache), Monty Widenius and Marten Mickos (MySQL), it's clear that none of those visionaries ever ran an $11 billion corporation.

Schwartz (left) also gave the Japanese haiku new visibility with his tweeted resignation announcement on Feb. 3, 2010, about a week after the acquisition closed:

"Today's my last day at Sun. I'll miss it. Seems only fitting to end on a #haiku:
Financial crisis/Stalled too many
customers/CEO no more."

These days, Schwartz, who resides in San Francisco with his wife and two boys, thoroughly enjoys working in private companies, where he doesn't have to deal with quarterly reports, analysts, and pesky journalists and bloggers.

"It's a big weight off my shoulders [not running a large public corporation]," Schwartz told eWEEK. "It [working in a public company] can be madness at times, but you know that going in. You can move so much more quickly and easily inside a private company and get a lot more done without having to account to anyone. Well, almost anyone."

It's a good thing, too, about the weight being off Schwartz's shoulders-literally-since he recently had much-needed back surgery. "This back issue was partly the reason I'm getting into what I call the intersection of IT innovation and health care with Picture of Health," he acknowledged.

New Company in Stealth Mode

In fact, Schwartz now runs Picture of Health (currently in stealth mode), a health care-related startup. Although Schwartz and his San Francisco- and Seattle-based team remain tight-lipped about Picture of Health, he did say that more would be forthcoming in the first quarter of 2012.

"At this point, we're not discussing anything except that this involves the application of technology to public health," Schwartz said. "We are, however, hiring developers and designers and software development generalists.

"The Website is up to recruit developers, and we're finding some truly dedicated people. One of the things about having your own private company is that you get to pick whom you work with, and you really want to work with good people. That makes it so much more enjoyable."

The site asks prospective employees if they can build "highly usable Websites as well as engaging interactive controls for data visualization." This is speculation, but it leads one to believe that the startup will use interactive infographics to help users build an actual picture of their personal health-one they can use to track nutrition, medicines, health history and other key metrics.

Schwartz is also on the boards of Moxie Software, Taleo and Silver Spring Networks (see sidebar at the end of this story). Moxie CEO Tom Kelly was delighted to bring Schwartz onboard to his company, an up-and-coming enterprise and consumer social networking and collaboration service that prides itself on immediate usability and corporate scalability.

"Jonathan means the world to us," Kelly said. "You can't buy that kind of influence and experience for your team. He's very intuitive about things, and when he's got an idea, you listen. He's been there, done that and is well-respected. He's going to help us tremendously."

Looking Back at Days in the Sun



Schwartz's first startup, Lighthouse Design, had developed software exclusively for Steve Jobs' NeXT Computer. But when NeXT began failing in the marketplace and the Internet began to explode globally, Lighthouse was acquired by Sun in 1996. Schwartz joined Sun and stayed there for 14 years.

Looking back, it's clear that Sun, a company loaded with brilliant thinkers, had well-known marketing and sales issues. Even more critical, it had a timing problem.

The company made boatloads of money for some 15 years in the 1980s and '90s by selling expensive proprietary workstations: server and storage hardware/software packages that only Sun and SGI could provide to big-ticket customers in financial services, the military and government. Some of the SPARC-processor-powered workstations cost $40,000 to $60,000 apiece.

In fact, the company was so successful that it very nearly bought Apple Computer in 1996, when it was at its lowest ebb -- before Steve Jobs returned to bring the company back to international respectablity.

Who knows what might have happened to a combined Sun-Apple company if the deal had gone through at $6 per share, as former Sun President Ed Zander and co-founder/CEO/Chairman Scott McNealy tell the story. But the deal did not take place. Later, Sun was slow in moving to less-expensive x86-based alternatives when Linux, Intel and Microsoft brought new products into the enterprise in the late 1990s, and the big-ticket enterprise market dried up.

When the tech bubble popped between 2000 and 2002, Sun suffered big losses, as did many technology companies. And when the world macroeconomic crash struck in 2008, a number of Sun's top customers were hit so hard they went belly-up.

"Fully one-third of Sun's sales were from the financial services sector," Schwartz said. "We were hurting big time."

In 2003 and 2004, Sun was losing hundreds of millions of dollars; by 2008, the loss was more than $1 billion a year. At that point, the downward spiral was unstoppable. Not even well-respected executives like Schwartz and McNealy could pull Sun out of its death spin.

Sun: Too Early to the Cloud

Another timing issue was that Sun was too early to the cloud (then called Web services and not understood by a majority of enterprises), providing enterprise-level online storage and computing capabilities before anyone else. The execution of those services had problems, and the original service was eventually shelved for upgrading.

However, the biggest issue was that most enterprises and consumers didn't have the bandwidth or on-site IT systems required to use these services efficiently, and many didn't trust housing their data in such a newfangled solution. That's how it often goes with pioneers.

"We were also a little early for big enterprises to start spending the kind of money you'd want to see," Schwartz said.

The vision that Sun had a decade ago is now being realized and refined by companies such as Amazon (with its Elastic Cloud services bank), eBay, Netflix, Salesforce.com, Microsoft, Hewlett-Packard, Dell, IBM and a number of others. "Amazon, as one example, continues to execute on that vision," Schwartz said. "They're doing brilliantly well.

"The cloud world hit CRM first, partly because Salesforce did such a great job. Now every other aspect of the enterprise is being automated."

A Caring Executive




Schwartz was considered by many of his professional colleagues at Sun as a caring and personable manager. High-ranking execs are required to have a layer of steel when it comes to personnel decisions, and Schwartz, naturally, had to deploy that layer on occasion.

"There were a few high-ranking Sun execs who didn't give a hoot about anything but themselves," recalled Russ Castronovo, a former Sun media relations officer who's now at Plantronics. "Jonathan was not one of them. I found him very enjoyable to work with." Other Sun colleagues echoed Castronovo's comments.

Inadvertent Impression?

To outsiders, however, the low-key Schwartz can give the inadvertent impression of being an "I know more than you" type of guy.

"Like more than a few executives, JS is a bit full of himself," said enterprise IT analyst Charles King. "Then again," he added laughingly, "if self-conceit were a capital crime, the old -Sun Quentin' office in Menlo Park  [Sun's locally famous sequestered former headquarters, now Facebook's home] could be repurposed as a federal prison and filled to overflowing with former Silicon Valley execs.

"But if you look at Schwartz's tenure at Sun, it doesn't require a great stretch of imagination to see his better qualities shining through. Schwartz fully understood the underlying value of Sun's software stack and its importance for differentiating the company's hardware solutions, and he began moving Sun in that direction at about the same time heavyweights like IBM and EMC were following similar paths.

"He also fully got the market's tectonic shift toward x86 [Intel processors] and what that would eventually mean to a proprietary box maker like Sun-something Scott McNealy and [Oracle CEO] Larry Ellison still appear not to have grasped," King added.

Schwartz's focus on open source and moving Solaris toward that model made him a figure of some ridicule-especially to people at Oracle-but one could argue that the effort simply may have been too little, too late, according to King.

"Finally, his search for a buyer for Sun [an act that incensed McNealy and numerous longtime employees] was, in retrospect, the best outcome the company could have hoped for," King said.

Looking for a Suitor



Schwartz realized early on that Sun wasn't going to continue to stay in business using its old formula, so, in 2007, he started looking for a suitor. This rankled McNealy, who later proposed taking Sun private, but the idea didn't fly with the board of directors.

By April 2009, Schwartz and the board had IBM set up as the buyer. All the due diligence was completed, but at the last hour, "IBM overplayed its hand," and the deal was off, Schwartz said.

Other sources said that some personal "golden parachutes" (lucrative guarantees to certain Sun executives to leave the company) got out of hand, so IBM pulled out for that reason.

Fortunately, McNealy had lined up Oracle and his multibillionaire friend Ellison as a fallback. After IBM dropped out, Oracle bought Sun and all its franchises for a sum in the neighborhood of $7.4 billion. The move put Oracle squarely in the full-service IT race with reigning champions IBM and HP and in a stronger position against the likes of Dell, EMC and Cisco.

Oracle Now 'Finding Out'

Since the takeover, Oracle has been battling to turn the Sun hardware business into a profitable one-something Sun hadn't been able to do in more than a decade. Oracle's 2012 second-quarter fiscal report revealed that the hardware business was down 14 percent over a year ago, so the struggle continues.

"I think Oracle's now finding out how tough that business is," Schwartz said.

The continuing difficulties Oracle has encountered with Sun reinforce that point and suggest it was fundamentally weaker than the company's most vocal proponents ever imagined, analyst King said. "Schwartz seems to have recognized those flaws and tried to deliver Sun to a suitor with the assets and incentive to get the company back on track," he added. "Whether Oracle will ever accomplish that is unclear."

Schwartz learned a lot while in Sun's executive chair. He grasped the importance of online communications (via blogging), social media tools like Twitter and leveraging the Web to improve corporate transparency years before other senior executives did. Those attributes make Picture of Health and Schwartz well-worth watching, King said.

Though Schwartz said he couldn't yet provide details on Picture of Health, he did say that focusing on health has been a "personal choice" for both him and CTO and co-founder Walter Smith, a former Microsoft executive.

"Health care is a deeply personal thing; it's tough to say the same about servers and specialized microprocessors," Schwartz said. "Mums, Dads, children, friends, loved ones, nurses, doctors, even insurance companies and governments-everyone cares about health and well-being."

New Chapters Opening for Former Sun CEO



Sidebar: New Chapters Opening for Former Sun CEO

Two years after the digestion of Sun into Oracle in January 2010, Schwartz's professional life is taking new turns into the private sector. He has stakes in hot IT markets such as enterprise social networking and collaboration (Moxie Software, board member), cloud-based job placement (Taleo, board member), smart-grid networking (Silver Spring Networks, board member) and health care (the forthcoming Picture of Health).

Moxie originally was named nGenera, but it changed identities in 2010. CEO Tom Kelly, who brought Schwartz to the company board in fall 2011, clearly is aiming his company to become the most user-friendly social media application suite available. Moxie offers both customer-facing and employee-facing software and has done exhaustive research on what users want to see in a social/collaborative network. Its main offering for internal social media is called Employee Spaces.

Silver Spring Networks, founded as in 2002 as Real Time Techcomm, filed with the Securities and Exchange Commission for an initial public offering. The company makes Web-enabled devices that connect homes with businesses -- items such as smart meters and electric-car-charging stations. It counts among its customers Florida Power & Light, Pacific Gas & Electric, and Baltimore Gas and Electric Company, among others. The company said that it currently has orders for 17 million of its devices; 8 million were networked as of June 30, 2011.

Taleo provides a cloud-based talent/training/salary/recruiting-management software suite. Its purpose-built infrastructure is designed to manage a large number of users and transactions while providing a high level of security. Because it is a public-facing system used by millions of candidates a day, Taleo has to deliver an easy-to-use and scalable result. The company has a diverse ecosystem of third-party services that include background checks, assessments and tax credit screening. So it's a full-time employment resource.

The company claims it has more than 5,000 customers, including about half of the Fortune 100 companies.


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