December 21, 2000, 4:29 PM — In its first major contract, Sun Microsystems Finance has negotiated a rental deal to supply British Airways with processing capacity.
At British Airways, Sun is providing $3 million Sun Enterprise 10000 servers, known as Starfires, and support for two years. British Airways can increase the processing capacity it uses, but need not. Payment to Sun is based on capacity used.
It's a variation on an old theme -- a vendor buys a company's assets and rents them back, charging for processing used, said Jack Benton, marketing director of Technology Partners International Inc. in Houston. But such arrangements usually have been for longer periods, during which the technology rapidly became out of date.
The deal is similar to others BA has had for 18 months with IBM and Amdahl Corp., said Jeff Brooker, commercial manager at the airline. "We did it because we want to pass some of the cost and risk back to the suppliers," he said.
To bill internal customers for processing capacity used, British Airways relies on a measurement Sun developed to calculate computing resources used and base charges on costs of anticipated total usage. That keeps BA from effectively penalizing units that are early adopters by making them pay for all the available capacity even if they don't need it, said Brian Whelan, European market development manager at Sun.
However, the flexibility and complexity of the deal may work against the airline by making the contract harder to oversee, said Peter Bendor-Samuel, president of consulting firm Everest Software Corp. in Dallas.
"It's hardly any work," Brooker countered. "We talk to the vendors, identify what it is we're doing and spell it out in the contract, and it works quite well."
But at the end of the two years, Sun will still own the Starfires, which will then be hosting many of the Unix applications the airline uses to run its business. Then BA must renegotiate the contract, or relocate the applications.
"With that kind of deepened dependency on [Sun], it's highly likely that [BA] will be doing business with them" at the end of two years, Bendor-Samuel said.
The savings British Airways will realize by having Sun quickly consolidate applications from several servers to one Starfire could balance the sheet, Benton said.
And although the deal might not fly in the U.S., British labor laws could sweeten the deal in the U.K., he said. When the job was done, it would be costly to keep staff on, costly to let them go, he said. British law dictates paying each two years' salary.
