..... for SUNW and IBM, its their end-game
IBM and Sun Micosystems: their end-game for corporate PCs ... dominate the high-volume corporate PC market ... with servers, network computers and mass storage systems ... and let Compaq, Hewlett-Packard, Dell etc fight over the smaller number of fat-client corporate PCs and those used by very small businesses and individuals at home .....
The thin-client, or network computer will funnel billions of dollars of sales in servers and mass storage systems to both IBM and SUNW, who will own this arena. This is one of the significant reasons that IBM and SUNW are growing their mass storage businesses while others are running to catch them in both servers and mass storage. Compaq, Hewlett-Packard, Dell etc have emphasized the fat-client PC for too long ... and Microsoft and Intel are suffering from much of the same syndrome.
For SUNW, this is a piece of heaven as their network strategy inside corporations perfectly matches their external strategy for the larger external internet.
Later, IBM and SUNW will shift their strategy to totally eliminate the need for fat- client PCs.
Ken
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IBM Hoping To Fatten Up On Thin Clients
Date: 8/5/99, Author: Nick Turner - Investor's Business Daily
These days, no one expects network computers to make personal computers obsolete. But the once-hyped, then-vilified network computer, or NC, may be gaining more acceptance.
Today's NCs, also called thin clients, differ from the original models touted in 1995 by Sun Microsystems Inc. and Oracle Corp.
The original idea was that NCs would be easy to manage, because they wouldn't run their own software. They would instead access data off network servers using Sun's Java programming language. And they would be cheaper than any PC.
But the first NCs cost more than the cheapest PCs. And PC makers countered by adding features to their computers that made them easier to manage.
Now the vision for thin clients is different. Some thin clients do use Java, but many also use software from Microsoft Corp. and others.
And most makers of the devices see thin clients working among PCs, not replacing them.
Edward Petrozelli, general manager of IBM Corp.'s Network Computer Division, recently spoke with Investor's Business Daily about the NC's evolution.
IBD: What happened to the original vision for NCs?
Petrozelli: You had a lot of folks seeing them as PC replacements. Java was going to replace Microsoft's Windows. Thin clients and network computers were going replace all PCs. Folks were kind of caught up in it. It was a great concept. It seemed to fit very well with what customers wanted to do. And it fit well with the growth of the Internet and electronic business. A lot of the pundits, such as (Sun's Scott) McNealy and (Oracle's Larry) Ellison, said, ''Gee, this is where the next wave is going.''
I think they were right to a great degree. I just think it came a little bit slower than anticipated. And it's developed in a slightly different fashion with our customers.
IBD: So far, in what areas have NCs succeeded?
Petrozelli: The profile of the typical NC customer is someone who performs transactions. That could be a gate agent. It could be someone who works in a call center. It could be a bank teller. It could be a claims agent in an insurance company. They have a desire to work on an application that runs on a server. They also want access to the Internet. An example is Nissan Motor Co.'s North America Infinity business (a big user of IBM's Network Station thin clients). Their dealers want to be able to go ahead and order cars and do pricing and get financing. They also want to be able to look at the Web and send e-mails to customers.
Or someone like a Sysco Corp., who's in the food distribution industry. They're dealing with folks who need access to all of their inventory records and processing and their customer records. They've installed literally thousands of NCs. Or a Fred Meyer Inc., which started with thin clients in their pharmacy applications, but then began using them for integrated logistics and those kinds of applications.
IBD: PC prices are dropping fast, and they have features that make them more manageable. Will that keep NCs from having as big a role down the road?
Petrozelli: What we're seeing right now is the thin-client industry grow, even double, on a regular basis. But those thin clients will augment the number of desktop PCs that are coming up. NCs and PCs aren't in an either-or situation. This is not a one-size-fits-all kind of environment. Insurance companies, for instance, found that thin clients fit very well for about 80% of their agents. But 20% really required the horsepower of full-function PCs. They really needed the complex spreadsheets and an awful lot of the processing.
If I'm going to perform transactions, a thin client fits very well. If I require a lot of compute power and interaction at the desktop, I may
need a desktop PC. If I travel a lot and I'm a professional, I may need a mobile computer.
The beauty of IBM is that we're the Switzerland of clients. We're very neutral on whether it's a thin client or whether it's a desktop or
whether it's a mobile. We have the ability to offer all of those. It's given us a chance to mix and match with a lot of our customers and let
them optimize the technology.
IBD: Is there an image problem for NCs?
Petrozelli: I do think that network computers were pigeonholed into this Java-only spot. Instead, customers should think of thin clients as a computing architecture. The idea is that computing is going to be done on the network, or on servers. That way, customers can centrally
manage the computers. All of a sudden, it's easy to make sure the applications are there and available, that they're secure and that backup is done. I can do that all on some servers, and my users don't have to worry about it. Second, if I change applications, if my business transforms - boom - I change my software once on the server, and everybody gets the new application immediately.
And if I do this right, what I find is my total cost of operation goes way down vs. a PC. Analysts are seeing that the annual cost of a thin
client vs. a full- functioned fat PC is 24% to 31% less. And they found that thin clients can save businesses up to 80% in support-staff costs. Basically it takes one person to support 100 PCs vs. one to support 500 thin clients. Folks aren't using all the functions of PCs, so they don't need the complexity. They just want to come in, turn on their machine, get access to the Net and do their job.
IBD: But can't you find PCs out there that are cheaper than the average thin client?
Petrozelli: Although PC prices have dropped, they represent less than 20% of lifetime costs of operating a computer. And the other thing we're seeing, according to a recent study, is that 88% of PCs are still going for over $1,000. Even though there are freebies out there and very inexpensive ones, in a real business environment, the thin client has a pretty nice bottom- line impact.
Our entry-level Network Station, which debuted at around $800, is less than half that today. The same price drops in technology, components and chips in PCs are helping drop thin-client prices.
IBD: In five years, what will the breakdown be between thin clients and PCs in a typical office?
Petrozelli: There's a wide range of estimates - from NCs representing 10% of desktop devices to up to 50%. The Gartner Group says that 70% of users out there could use a thin-client device. How many will actually switch? We're expecting somewhere between 10% and 30% of devices will be thin.
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