For years, Sun Microsystems Inc. had big problems shipping its workstations on time. Customers could wait weeks for orders. Things got so bad finally that Sun just gave up. It shut down its 18 distribution centers around the world and turned the work over to Federal Express Corp. and others. "A few people thought we were insane," admits Robert J. Graham, vice-president for worldwide operations. But Sun subsequently set shipment records.
Even as the company, based in Mountain View, Calif., has blossomed into a $3.6 billion operation, its management has heeded a simple corporate commandment: Thou shalt not do thyself what others can do better.
By hiring others to do everything from circuit-board assembly to customer support, Sun can focus on the things it does best: designing microprocessors, writing software, and marketing workstations. And to help keep those core functions efficient, Sun has split them among several independent subsidiaries, each chartered to make a profit. "That's the only way to run the computer business," says Chief Executive Scott G. McNealy. Indeed, it seems rivals such as IBM and Digital Equipment Corp. are beginning to agree.
Perhaps the best symbol of Sun's approach is how it handles its crown jewel, the Sparc microprocessor. When Sun created Sparc in 1987, it couldn't afford a chip factory, so it licensed Texas Instruments, Fujitsu, Cypress Semiconductor, and others to make them in competition with each other. Today, Sun could afford to make its own chips, but it still doesn't. Why? Because the $500 million that would require buys lots of engineering and marketing. Likewise, Sun avoids spending millions building and staffing factories by contracting work out to manufacturers such as Solectron Corp. While doubling shipments since 1990, Sun has cut its manufacturing work force by 10%, to just 2,000 people. And it has Eastman Kodak Co., Bell Atlantic Business Systems Services Inc., and others do the repairs on its machines in the field.
DIFFERENT LEAGUE. The results are dazzling. Sun's 12,800 employees generate $280,000 each in annual sales, topping all but Silicon Graphics Inc. in the workstation market and putting Sun in a different league from, say, IBM, which gets $188,000 per employee. Marvels Goldman, Sachs & Co. analyst John C. Levinson: "They blow everybody away on almost every measure."
Sun's don't-do-it-yourself approach has drawbacks. The SuperSparc microprocessor it developed with Texas Instruments Inc. was a year late, depressing profits. But later, it convened a task force of engineers, purchasing people, and others from Sun and TI to speed things up and get the new MicroSparc chip ready months ahead of schedule.
Still, it's unclear how far Sun can take its lean-and-mean model, especially as it moves into more complex computers. Recently, for example, Sun brought some circuit-board assembly in-house because outside contractors couldn't do it theway Sun needed. Sure, it cost more to do it in-house. But, McNealy says, it had to be done to get a new model out faster. Even in a deconstructed computer business, sometimes another rule applies: If you want something done right, do it yourself.