The history of Sun Microsystems reveals how important innovation and flexibility are to the success of a company. Innovation allowed Sun to build a company capable of taking the lead in its marker within the first few years of its incorporation and continue to grow dramatically. More importantly, Sun's flexibility and a willingness to adapt to changing environments enabled them to survive the bursting of the dot-com bubble that bankrupted so many tech companies. And both these traits—innovation and flexibility—allowed them to bounce back and recapture an influential presence in computer world.

Sun was incorporated in February 1982 with only four employees. For the next ten years, the company was mainly a hardware vendor selling workstations, but they did that single task quite well. They sold 68000 processor-based workstations running the Unix operating system, and using TCP/IP (now known as the Internet Protocol) at a relatively low cost. Five years later, they were winning the Workstation Wars of the 1980s and took the lead in the market. They maintained this lead into the early 1990s, when they expanded to servers.

The dot-com bubble of the 1990s led to booming business and dramatic growth for Sun Microsystems. New dot-com companies were starting up everywhere, creating a demand for expensive Sun-based server systems to handle high levels of web traffic. When the dot-com bubble burst in 2001, however, it hit Sun hard. Sales for hardware, Sun's primary market, dropped dramatically. No new dot-com companies were starting up and needing new equipment. Existing startup companies didn't need to upgrade their servers—when web traffic failed to meet their expectations, their existing high-end Sun servers could handle the existing load quite well. And as the dot-coms began to go out of business, their equipment was auctioned off, and suddenly companies needing high-end Sun servers could acquire them at a much lower cost than Sun was offering. Finally, Sun was also facing competition from a new server farm strategy that used larger numbers of small, cheap servers running open-source operating systems (primarily Linux) instead of the traditional strategy of small number of expensive, high-end servers like the ones Sun produced. As a result of all these factors, Sun experienced several quarters of steady losses, their stock fell to less than a tenth of its peak value, and Sun was forced to close manufacturing plants and lay off employees.

In addition to massive cost-reduction efforts, Sun managed to weather the recession through flexibility, adopting its competitor's strategies and diversification of it products. Sun developed a powerful but low-cost 64-bit system to compete in the low-end server market. They began to compete in the open-source world by donating 1,600 patents to the global open source community in 2005. Currently, Sun offers an open-source office suite (StarOffice and OpenOffice), an open-source version of Solaris (OpenSolaris), and turned their powerful platform Java system into an open-source project. Finally, they began to diversify their business away from mainly hardware and are competing in the “Software as a Service” Market. In 2005, they expanded their 3000-CPU server farm used for research and development, and made it available for commercial use, selling processing hours and storage at affordable prices.

Today, Sun Microsystems retains an influential presence in the computing world. Their history demonstrates the importance of innovation and flexibility to a company. Innovation allowed Sun to grow quickly and dominates their market. Their flexibility with their products and willingness to adapt to a changing economic environment allowed them to survive a recession. And both qualities allowed them to bounce back and stay ahead of the volatile and ever-changing tech market.