InformationWeek, March 9, 1998
DESKTOP DECISIONS
Enterprising users are starting to deploy tens of thousands of thin clients to meet specific,
everyday business needs
By Mary Hayes
Thin-client computing is finally emerging from the hype that has obscured its true business benefits. After a slow start, thin-client vendors are landing orders for tens of thousands of machines to replace terminals and PCs. These vendors are winning by delivering clearly defined, low-cost systems that meet the needs of customers focused more on specific tasks than on the hardware itself.
Customers are winning, too-winning big financial concessions from vendors anxious to establish their technology. In some cases, customers are even helping to shape the future of thin-client computing.
Allstate Insurance Co., for instance, is expected to roll out 45,000 IBM Network Stations to its agent offices nationwide, in what would be the largest network computer contract to date. But Allstate was willing to go with the Network Stations only if the IBM machines could access both legacy data on IBM AS/400 servers and Windows NT applications.
So IBM engineers built an AS/400 add-on that lets the machines run NT apps. IBM now offers the add-on to other customers as a product. "This solution allows us greater flexibility," says Steve King, VP of application development at Allstate, in Northbrook, Ill.
NCs, however, aren't the only thin-client option. MedServe, a cooperative for independent nursing homes nationwide, is deploying more than 20,000 Compaq Computer 4000N NetPCs, under the largest contract of its kind to date. NetPCs were the only devices that fit the cooperative's specific needs for managing and controlling the desktop, says Brent Hiles, MedServe's VP of IT.
Besides endorsing the NC and NetPC technologies, these two deals paint a different picture from the one initially forwarded by vendors: that general-purpose desktop devices running Java applications would replace PCs. For one thing, Java-based thin clients are only now beginning to hit the market.
Instead, users are buying more-conventional thin-client products based on existing PC and terminal technologies. "Two years ago, vendors wanted us to believe that NCs could go anywhere," says Rikki Kirzner, director of solutions and market strategies for the Meta Group. "But the early adopters are putting these systems in where it's not a forced fit."
At the same time, vendors of thin clients are doing whatever they can to close large deals. Both IBM and Compaq went out of their way to clinch Allstate and MedServe. IBM offered what it calls "first-of-a-kind" financing based on the deal's size and complexity, including a set price per site for a hardware-software bundle. IBM's price made its solution "very attractive," says Allstate's King. The insurer says it's close to finalizing the deal; sources close to IBM say the deal has already been signed. MedServe was concerned that the price of Compaq's NetPC was little different from that of a standard PC-so Compaq negotiated until MedServe got a price it liked. Some suppliers say that vendors are even giving away hardware to get a foothold in big accounts.
LOOKING LOWER
Still, no one is suggesting thin clients will displace PCs as the standard desktop computer. Zona Research predicts that by 2000, NCs, Windows terminals, and NetPCs to-gether will comprise about 5% of the total desktop market. Dataquest had estimated that 400,000 thin clients would ship in 1997-but the market research firm is now significantly downgrading that number, largely because thin-client vendors that focused on more ambitious technologies haven't yet delivered.
IBM, one of the biggest NC proponents, is finding a fertile market among customers looking to replace AS/400 terminals. Even so, before the Allstate deal IBM hadn't completed any deals of more than a few thousand units. Smaller vendors such as NeoWare and Wyse Technology are succeeding largely in terminal replacement, with a focus on providing access to server-based Windows applications. Sun Microsystems and Oracle's Network Computer Inc., whose hopes rest largely on Java, have been even slower to market, and mostly still have only pilot installations. Sun cites just one sizable commitment, for a 900-unit deployment at an Australian government department.
PC VENDORS LAST YEAR PROMOTED
NetPCs-essentially centrally managed, sealed-box PCs lacking a diskette or CD-ROM drive-as an alternative to NCs. But some have already changed course, particularly since Microsoft and Intel have begun moving manageability features originally designed for the NetPC into standard PCs, a process they expect to complete with Windows NT 5.0. "Ultimately, the NetPC will fall by the wayside," says Andy Diamondstein, an analyst with Giga Information Group. NetPC features include the ability to limit end-user options and centralize software on the server.
The rapidly dropping prices of PCs are another reason Microsoft and Intel are changing direction. Federal Express, which requested vendor proposals for 20,000 NCs late last year, is now leaning toward a low-cost, managed PC option for many desktops because NCs can't yet deliver everything FedEx needs (InformationWeek, Feb. 16, p. 22).
PCS STILL PARAMOUNT
Thin clients are typically succeeding only for specific applications, and in many cases as complements to an existing desktop environment rather than as replacements. In a Meta Group survey of 52 large companies completed late last year, 87% said they expect to use NCs within three to five years, but only 13% predict all their client devices will be NCs. Meta says the survey data shows that IS managers think NCs are appropriate for host-centric environments such as banking, accounting, and insurance claim processing, while managed PCs are best for "variable, general-purpose end-user and collaborative computing environments."
Some customers, though, are choosing thin clients after considering PCs. Allstate was evaluating PCs until IBM came up with special software for accessing NT. MedServe found that NetPCs fit a very specific need. Because the cooperative supports a decentralized network of nursing homes that rely on off-the-shelf software applications, PCs appeared to be the only choice, until VP Hiles learned about the NetPC last year.
MedServe was in a hurry to find a standard platform for its member nursing homes, some of which didn't even have a PC, because of a federal law that goes into effect in June requiring electronic transmission of a standard patient form.
But members with PCs were having major IS administration problems, including illegal copying
of software. NCs were a bad option because the co-op didn't have a centrally managed, host-centric environment, and NCs couldn't support standard software without MedServe substantially beefing up the NT servers that will be installed at some 2,000 facilities. "We wanted to control what's going on at the desktop, and NetPCs are ideal," says Hiles. But for MedServe, NetPCs are only a piece of the pie: The co-op is also buying 5,000 standard Compaq PCs for other functions, such as CD-ROM-based training.
IBM users say the company's modest success with NCs-analysts estimate IBM shipped less than 100,000 last year-is due to its focus on solutions. Air carrier American Eagle was looking for thin clients to replace 365 dumb terminals. American needed to access inventory and parts-purchasing applications on an HP 3000 minicomputer, as well as Novell GroupWise E-mail. "Java NCs we tested weren't mature, but IBM's systems are capable of accessing these environments," says Duane Stanley, American Eagle's director of communications and systems.
Says Bob Dies, general manager of IBM's Network Station division: "The reason we're having success in the market is because we've done a better job of allowing customers to leverage both existing applications and new applications as they emerge." But Dies adds that IBM is betting on pure Java NCs, which will likely feature Sun's JavaOS. This month, Sun and IBM are expected to announce they are co-developing and marketing the JavaOS (InformationWeek, Feb. 23, p. 21).
In addition, Sun and Oracle's NCI division are developing an architecture to make their approach more attractive, including low-cost "thin servers" that would handle firewall functions as well as interactions with Java NCs, limiting the time and expense of updating back-end servers. Meta Group's Kirzner says it will take those kinds of software solutions to make Java NCs a hit, while current NCs are serving their purpose as jazzed-up terminal replacements. "IBM's current success [with NCs] all hinges on the fact that they sell AS/400 servers," says Kirzner.
One thin-client option poised for success is the Windows terminal-a hardware-software combination that provides access to applications on NT servers, using technology from Citrix Systems that Microsoft has licensed and plans to ship later this year. The client portion of the software can run on either PCs-enabling them to be used as thin clients-or specialized low-cost terminals.
Some users say the terminals have advantages. "When a desktop system goes down, you have to send out a new system," says Rod Crownover, network services manager for the western regional office of AT&T Wireless. "With the Windows terminal, you just plug another one in."
AT&T's retail outlets last year replaced 400 old PCs with Windows terminals from Wyse Technology. At $300 to $500 apiece plus the price of monitors, Crownover says the terminals are much cheaper than new PCs.
ENTRENCHED VENDORS
The most powerful, entrenched IT vendors, Microsoft and IBM, may be in the best positions to cash in on thin clients, says Rob Enderle, an analyst at Giga Information Group. "Windows terminals make sense because access to Windows applications is important," Enderle says. Among NC vendors, he says, IBM is most likely to make money "because they have a big chunk of the terminal market."
Early thin-client users are focusing on the tasks they must accomplish, rather than buying into the idea of an NC panacea-a $500, well-managed desktop that can do anything. Meta says the hardware decision should be the last decision made. "By starting with a network computing approach and selecting hardware based on the application, organizations will minimize both risk and cost," advises David Cearley, a senior VP at Meta.
That's one reason Meta says that beginning in 2000, PCs and NCs will be complementary architectures, and that it will be difficult to distinguish between the two. The result should be a broad range of overlapping desktop computing options from which users can select to fulfill the task at hand.
 with additional reporting by Tom Davey and Stuart J. Johnston |
