In a move that chief financial officers (most of whom control IT budgets) may not be able to ignore, Sun has unveiled a new, cutthroat pricing plan for its Java Enterprise System (JES) and Java Desktop System (JDS).

Previously, JES (provisioning, applications services, clustering, e-mail, portals, directory, and other infrastructure services) cost $100 per user per year and, for customers of JES, the JDS (a Linux/Ximian/StarOffice-based alternative to Microsoft Windows and Office) was available for $50 per user per year. But now, JES is available for $50 and, for JES customers, JDS is available for $25 (both on a per user per year basis) through mid-2004. The company is even giving away JES to companies with fewer than 100 employees, in hopes of getting support and maintenance, Sun is also promising what Jonathan Schwartz, Sun's executive vice president for software, called "breathtaking" pricing for the academic community.

This go-for-the-jugular pricing begs the question of whether there's any price at which Microsoft's dominance of the desktop can be broken. Sun apparently thinks so.

According Schwartz, Sun's ultimate strategy is to deliver applications as Web services and use "disruptive pricing" to break Microsoft's hold on customers. "We are the low cost supplier. Sun's goal is to further compress the market through its pricing structure in hopes of gaining market share," Schwartz said. He claimed that the cost of JDS is 60 percent less than upgrading to Microsoft's current equivalents.

Sun doesn't have much downside in its disruptive pricing scheme, given its R&D cost for developing the software is manageable and it's an economical way to acquire customers and incremental revenue.

Sun executives estimated that the company's existing customers have about 10 million employees, representing a sizable opportunity for high margin software revenues if they can be convinced to adopt the company's software platforms. So far, Sun said it has signed up 50,000 users for JES.

"We are going after the lowest skilled, lowest value user--primarily transaction processing workers," Schwartz said. But future development will extend the functionality, targeting target students, retail applications, and high performance computing domains.

Sun also recently inked a deal to provide the Chinese government with up to a million Linux desktops over the next year.

However, Sun CEO Scott McNealy admitted that the China deal was more of a strategic move designed to prevent Microsoft from dominating the lucrative Chinese market. "We're not going to make a ton of money on the desktop software," he said.

Over the next several months, it will be easy to see if Sun is having success with its disruptive pricing model. It boils down simply to the number of customer employees they bring into the fold.

Pricing isn't Sun's only weapon. Sun is building relationships with influential partners that it thinks can help change the balance of power in the market. According to Schwartz, "[We] have enlisted EDS to support customers using the Java Desktop System." In addition to EDS, Sun appears to have cozied up to AOL and is now courting Wal-Mart. AOL recently announced the availability of a $299 desktop to AOL customers that sign up for a year's worth of service membership. That "AOL Optimized PC" includes a 1.7GHz Intel Celeron processor, 256MB of RAM, a 40GB hard drive, and is preloaded with Windows XP Home Edition and Sun's StarOffice software suite.

Meanwhile, Wal-Mart is looking into delivering a private-labeled notebook. Schwartz claims that "people who come to Wal-Mart don't want Windows, they want the Internet." Sun is negotiating with Wal-Mart to make the JDS a part of the new retail offering.

Don't underestimate this battle. Until another paradigm-altering phenomenon like the Web comes along in the world of computing (not likely for a while), this "test" by Sun of Microsoft's resilience and dominance of the desktop will probably be the last. In the next year, maybe two, you may be asked to pick sides, but mostly like we will see more hybrids, with both Windows and Linux desktops installed, as well as pricing compression that will benefit corporate capital expenditure budgets.

Meanwhile, McNealy wins unofficial Foot in Mouth Award.

Based on my own observations and, unanimously, the observations of those I informally polled (including the organizers of Comdex), McNealy scored a landslide victory over Microsoft's Bill Gates in a battle of the egos and the keynote speeches at this year's event. But one of McNealy's comments still stands out in my mind as something worth circling back to. Near the beginning of his Gates-spanking performance, McNealy asked, "How much of a commodity could anything be more than e-mail?" He apparently feels the same about customer relationship management (CRM). Answering his own question, McNealy said, "I would go to salesforce.com for CRM and I'd go to Yahoo for e-mail. Think about how much money I could save."

But apparently, McNealy didn't think about it for too long. Although Sun is in the red and could stand to save some money, the HP Proliant/FreeBSD powered Yahoo! Mail service does not serve as Sun's corporate e-mail system...which raises the question of why, if it's not good enough for McNealy, it should be good enough for you.

That said... if you're not outsourcing your e-mail yet, what are you waiting for?

Even though McNealy may have picked some bad examples, his point is well taken. E-mail is a commodity. Unless you have invested in some serious customization of your e-mail environment, does it really make sense to run your own e-mail systems? After all, when was the last time you found yourself tapping your fingers while waiting for your IT department to recover from some catastrophic server failure, e-mail worm, or virus. Chances are, when you look at what it costs to keep your e-mail systems running every year and the headaches that they cause, outsourcing that part of your operation and using a service level agreement to place the burden of 99.99% availability (for local and remote users) on an IT services outfit may prove to be beneficial in many ways.

If you can't take your cue from McNealy, then take a peek into academic circles where universities are turning to outsourcing to furnish inboxes to all of their students. According to a recent release from self-proclaimed carrier-class Everyone.net (which based on Sun's software), recent budget cuts in the state of California motivated California State University Channel Islands Web Services coordinator Peter Mosinskis to outsource the provisioning of e-mail services to the school's 2,300 students. To boot, raw e-mail isn't the only "service" Everyone.net's customers outsource. Spam and virus countermeasures--another cost center for most organizations-- re thrown in as well.

You can write to me at david.berlind@cnet.com. If you're looking for my commentaries on other IT topics, check the archives.