Scott McNealy laid an aggressive dose of Silicon Valley thinking on bankers attending the Payments '99 conference Monday.

First asking his audience not to "shoot the messenger," the chairman and chief executive officer of Sun Microsystems Inc. outlined business approaches and methods of computing that are radically futuristic, at best, for most financial institutions.

He questioned some of the deals banks have struck with large Internet gateways, advocating that banks themselves play the sought-after roles of portals.

In an interview on the first day of Payments '99, the annual conference sponsored by the National Automated Clearing House Association, Mr. McNealy also recommended that banks get rid of all personal computers, throw out office-oriented software applications like electronic mail and calendaring, never again upgrade their mainframes, and outsource as much as possible.

He even challenged the very foundations of banking, saying in his speech, "Your primary business is being a portal, not being a provider of financial services."

The way to play at that game is to create a Web site that people never want to leave, he said. People leave because they want to chat, get e-mail, check up on their sports teams, and otherwise entertain themselves.

"So put those capabilities on your portal," he urged. "It's not expensive and it's not difficult."

Mr. McNealy derided the increasingly prevalent view of Internet banking as an "alternate channel," along with telephones, automated teller machines, and personal computers.

"As long as you think the new way is alternative, it's not going to work," he said.

Bankers should strive to offer secure, customized services over the Web that can be accessible from any device located anywhere, he added. "There is no reason in the world why there shouldn't be 'My Bank,'" just as there is My Yahoo. "Banks have the credibility, integrity, and brand to be a portal."

Using his own corporate identification card to demonstrate the capabilities of smart cards programmed with his company's Java language, Mr. McNealy securely downloaded electronic mail to a laptop. He noted he could have downloaded it to a television, cell phone, or other device.

Such cards, which banks might give away, would be customers' key to information stored on any back-end banking system, via any number of devices or appliances. All the data could be sent to a personalized Web page that customers could create.

Through Sun's alliance with America Online Inc., which recently acquired Netscape Communications Corp., banks could round out their offerings with Internet-based services such as e-mail, news, and electronic commerce.

"Give users reasons never to leave your site all day," Mr. McNealy said.

He said he does not pretend to have all of the answers for banks. Referring to PCs as "hairballs" and "activity devices," he gave little practical advice for getting rid of them.

"That's not my problem-we don't have those problems," he said.

Sun employees that want PCs have to buy their own, Mr. McNealy said. The company uses thin-client software, mostly Java-enabled browsers, and Sun workstations on its desktops.

Sun also has gotten out of mainframe operations. Faced with a $4 million bill to upgrade its three mainframes for year-2000, Mr. McNealy made the decision to jump to a Starfire server. In a quarter when 26% of Sun's business was conducted in the last 10 days, the company used up only 10% to 15% of the Starfire's power, and only 40% at the peak of business.

"Who needs a mainframe? We did it all on one Starfire, and never broke a sweat."

Mainframes are good for keeping everything going, Mr. McNealy said, but they're not worth investing in upgrades.

Now Sun is looking to get rid of its internal electronic mail software by outsourcing it. It has a bid out to major service providers to run Sun's e-mail.

This is part of Mr. McNealy's putting his money where his mouth is as he pushes streamlining and network computing concepts that are a departure from past norms. As he sees it, institutions already outsource functions like the telephone, electricity, and water.

Why not computing, particularly functions that can be downloaded over the Internet, like electronic mail, word processing, calendaring, auctioning, and electronic commerce? In fact, many of these services are available for free over the Internet.

There are only two functions Sun does not outsource: the "server farm," a vast collection of computer processors that simulate two billion transactions a week; and software development.

"This is why we are who we are," Mr. McNealy said.

Similarly, banks need to figure out what their "secret sauce" is, Mr. McNealy said, and then "outsource like crazy."

Sun has no plans to stray from its "secret sauce" of server hardware, which generates the bulk of its approximately $10 billion of revenue, and server software.

Speaking before a banking and payment systems contingent, he underscored the point that Sun will not follow Microsoft Corp., a server software rival, and Oracle Corp., a Sun partner, in offering electronic bill presentment software.

Mr. McNealy said Microsoft has no choice but to "compete with its customers" in initiatives such as Transpoint, the bill presentment venture it owns with First Data Corp. and Citigroup. Many of the applications Microsoft sells to run on its Windows NT server software such as word processing, e-mail, and spreadsheets are becoming available for free over the Internet, he said.

"We're in a good business to be in. You can't download servers for free over the Internet."

He bristled at the suggestion that Sun might want to use Microsoft NT software in its Sparcstation workstations. "Do you think Coke would ever resell Pepsi in its six-packs?"

He distinguished Sun from other computer companies that resell lots of software packages. "They are all broker-dealers," he said. "We are a product company."

Though Mr. McNealy frequently bashes Microsoft, the Redmond, Wash.-based company competes against only a small piece of Palo Alto, Calif.-based Sun's business-Solaris server software, which generates revenues of about $1 billion, according to International Data Corp.

Microsoft's 1.6 million shipments of NT in 1998 compared to only 167,000 for Solaris, which is the leading Unix-based server software. But Unix- based servers earned $2.9 billion of revenue, versus $1.4 billion for NT.

"The numbers hide the fact that a given NT shipment doesn't do as much work," said Dan Kusnetzky, program director of operating environments at Framingham, Mass.-based International Data Corp.

Unix-based servers support an average of 50 to 60 users and as many as several thousand, Mr. Kusnetzky said. NT servers support an average of 20 to 25, and as many as a few hundred.

Further skewing the shipment numbers, Microsoft creates links in its application software to force the selection of NT, Mr. Kusnetzky said.

Mr. McNealy did not appear concerned about the competitive threat of Microsoft, saying, "They're shipping print-and-file servers. They don't matter."

The Microsoft-Sun battle is of differing philosophies. Microsoft wants to own the "client PC"-Mr. McNealy's "hairball"-plus all the software that resides in it and the linkages to servers.

Sun wants software to move freely among front-end devices, networks and servers, and it wants to own the back-end servers that support it all. In Mr. McNealy's vision, computing would be as easily available as telephone features. Just as Call Waiting is automatically available without customers' having to upgrade their phones, so would new computing capabilities be.

"What you're seeing is a battle of different, grand visions," Mr. Kusnetzky said.

Except that Mr. McNealy is convinced that his vision is already reality.

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