December 7, 1998
The Earth Moved: The AOL-Netscape-Sun DealBy Lou Bertin
t may not qualify as Microsoft's worst nightmare, but the alliance involving America
Online, Sun Microsystems, and Netscape surely has to be causing some sleepless nights in
Redmond.
The reasons why Microsoft is--or should be--more than a little concerned are, at once,
profoundly simple and tantalizingly complex.
First the simple stuff: All three companies have proven themselves very good at what they do. In
AOL's case, that's the creation, cultivation, and nurturing of a never-before-seen bloc of
consumers that's growing daily. In Netscape's case, it's the creation of browser technology that's
the envy of mass-marketers. (Do we need evidence of that beyond Microsoft's apparent fear of
Netscape?) In Sun's case, it's the company's ability to thrive in a cut-throat business by
providing customers superb technology, superb service, and--according to anecdotes I've heard
from a cross section of InformationWeek readers--a true sense of partnership with its customer
base.
Put those elements together, stir vigorously, and what do you have? Via Netscape, AOL gets
access to advanced Web technology--technology AOL badly needs and Netscape never would have
had the resources to market properly. Via Sun, AOL basks in reflected credibility among business
customers it wasn't able to attract on its own. And make no mistake that access to commercial
customers is critical to AOL being able to meet its ambitious goals for future growth.
AOL also obtains (likely at a significantly discounted price) backbone server technology that has
been long overdue and is necessary if AOL is to succeed. After all, what good is the ability to
support 600,000 simultaneous users if you've got 20 million people lined up? From Sun's
perspective, a company that bills itself as being "the dot in dot com" doesn't do itself any favors
if there's nothing under Sun's aegis that specifically addresses Web access and content, and not
merely Web technology.
On that level at least, the deal amounts to a classic "win, win, win" scenario for all concerned.
One of the criticisms of the AOL-Netscape-Sun alliance is that the cultures of the three
organizations are too diverse to work well in concert. Indeed, in the case of AOL and Netscape,
the divergence of opinions I saw when visiting various chat rooms in the days following the deal
was closer to open warfare than mere cultural differences.
All that aside, I am convinced the deal will work simply because all three parties have so much
at stake. Putting their individual concerns aside, the three have collectively created an
opportunity to prove a point each has made separately, namely that Microsoft's doings have
stifled rather than enhanced the availability of advanced technology.
That philosophic inducement is, I believe, as powerful a motivator as numbers on a balance
sheet, particularly when one is dealing with the likes of Messrs. Case, McNealy, and Barksdale,
none of whom suffer from any apparent lack of self-esteem and none of whom have been
particular fans of one William H. Gates.
There are times when issues do become personal, all the more intensely so among titans. This
isn't to suggest that the deal they struck was motivated solely by personal considerations or
some sort of vendetta against Microsoft. It is to say that Case, McNealy, and Barksdale have
superb reasons to do everything in their considerable powers to have their employees focus not
on the differences among the alliance members but to instead focus their considerable talents on
their common foe.
Six months ago, a deal among AOL, Sun, and Netscape would have seemed so far-fetched as to be
almost unthinkable. Somehow, though, the tectonic plates that support each of the three
companies shifted to make this alliance possible. And, as even amateur geologists (or residents
in earthquake-prone geographies) can tell you, the movement of tectonic plates is constant, but
under the proper circumstances, causes colossal amounts of energy to be released.
Such, I think, will be the case here with the only difference being that the energy released will
be of the creative and not of the destructive sort. So it is when once unlikely, once unthinkable
changes occur, and when the issues at hand become decidedly personal to the principals involved.
If nothing else, it's going to be fun to watch.
Happy holidays!
For more news and analysis on the AOL-Netscape-Sun deal, read "Three-Part Harmony?"
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