New Desktop Options

IS managers have an unprecedented number of choices for low-cost desktop computing

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By Bob Francis and Stuart J. Johnston
Issue date: March 17, 1997

The era of shoehorning expensive, overpowered PCs into every corner of the enterprise is coming to an end. IS managers are being presented with an unprecedented level of choice for low-cost desktop computing. The most recent initiative is the NetPC, a program led by Microsoft and Intel that is gathering steam following last week's release of a final specification. The result: Business customers now have four distinct options for desktop computing-the NetPC, the network computer, the traditional PC, and an emerging market of extremely low-cost but fully functional PCs.

As IS managers mull over their choices during the next six months, hardware manufacturers will scramble to align themselves with the camps. Driving all four efforts is Intel. The chipmaker, a zealous advocate of the most powerful systems based on its latest processors and one of the NetPC principals, is hedging its bets. Intel CEO Andrew Grove met behind closed doors two weeks ago with NC crusader Larry Ellison of Oracle to discuss a plan under which Intel would greatly increase its support of the NC camp. Such a plan would pave the way for vendors such as Compaq Computer, Dell Computer, and Hewlett-Packard-which have publicly dismissed the NC-to offer those devices using Intel technology.

The flurry of development is brou ght on by an insatiable need for greater control over desktop management and computing costs. Yet it understandably has some IS managers confused. "I don't know what these new machines mean," says Mike Thompson, IS manager at Integrated Device Technology Inc., a chipmaker in Santa Clara, Calif.

Indeed, a survey of 125 IS managers conducted last week by InformationWeek found that 43% of respondents don't differentiate between a NetPC and an NC.

Four Platforms
The categories are shaping up this way:

• NetPCs: Sealed-box devices backed by Intel, Microsoft, Compaq, Dell, and HP. While leveraging the network, they give users some control over local processing and storage. Pricing for the Pentium-based systems, which are due in late May or early June, begins at less than $1,000, but high-powered Pentium Pro systems will also be available at a higher price point.

• NCs: Thin-chassis units with no application storage that depend almost entirely on network servers for computing. Th ey're backed by Oracle, Sun Microsystems, and IBM. These units will be priced in the $500 to $1,000 range, excluding monitor.

• Low-cost PCs: Pentium-based desktop machines with at least 16 Mbytes of RAM, more than 1 Gbyte of storage, and complete network-ready and systems-management software. PC vendors are targeting a sub-$1,000 price point.

• High-end PCs: The systems IT customers have been buying since the 1980s. They are increasingly being relegated to more compute-intensive tasks such as content creation and financial analysis. Pricing starts above $2,000.

Some users are already making plans based on the new choices. Israel Gotay, assistant VP of computer operations for Sallie Mae Servicing Corp. in Reston, Va., says the company is close to replacing 2,000 workstations in its call center with NCs. The key selling points: An open platform, no-brainer management, and the lowest total cost of ownership among his desktop choices. "Maintenance, software distribution, and the constant obsolescence of software is just becoming expensive and troublesome," says Gotay.

But for many current desktop users, the traditional PC remains the answer. "For us, the future is Windows NT and Explorer," says Integrated Device's Thompson. "We still believe in a full-function PC." It's customers like Thompson for whom a sub-$1,000, full-featured PC holds promise.

While users consider their choices, vendors jockey for position. Sources familiar with the Intel-Oracle talks say Oracle chairman Ellison and Jerry Baker, president of Network Computer Inc. (NCI), an Oracle subsidiary, met two weeks ago with Intel's Grove to discuss a plan that would enable Intel to help PC vendors build NCs. The companies discussed the development of motherboards optimized for NCs, as well as pricing issues. NCs built under the Oracle specification already use the 133-MHz Pentium chip, but at their meeting, Grove suggested that NCI's partners start using faster Pentium chips.

According to one source, PC vendors have als o met privately with NCI in recent weeks to evaluate the viability of building NCs. Intel and Oracle declined to comment.

Of the four platforms, the NetPC seems to be the biggest question mark. "Right now, the NetPC is a lot of vaporware," says Gotay. Still, 9% of respondents in the InformationWeek survey said they plan to purchase NetPCs this year, spending an average of $262,000 each.

Oracle and its partners have done yeoman's work evangelizing the NC, and some buying has already begun. In all, 14% of survey respondents said they planned to purchase NCs this year, spending an average of $180,000. More machines are hitting the market: IBM is preparing to deliver its second-generation Network Station NC. Sources say it will be based on the PowerPC 603e chip, running the OS/2 for PowerPC kernel without SOM and the WorkPlace Shell; Netscape Communicator will act as the interface. The system will include 6 Mbytes of memory, so no hard disk is needed for a swap file. IBM would neither confirm nor deny the plans.

Says Phil Hester, VP of development at IBM's NC division in Austin, Texas: "We've got a very pragmatic view. We're developing these for customers who've decided to use intranets and Java."

Bill Raduschel, CIO and chief strategist at Sun, agrees. "IS managers who are moving to Internet applications are going to look for the cheap- est, thinnest desktop that meets their needs," he says. "We think the NC will meet a lot of those needs."

But many users say there's been too much talk and not enough action. "We waited for six months for IBM's [first] NC, and we've got better things to do than wait around for them to deliver," grumbles neQiniso "Quinn" Abdullah, director of global network and data center operations at S.C. Johnson & Son Inc., the consumer products giant in Racine, Wis.

Common Threads
Common to all four desktop platforms is an effort by the industry to reduce complexity and costs. For example, in the NetPC initiative, HP and Microsoft are working together to lo wer total cost of ownership via a software distribution program from the server that keeps the client from becoming overburdened. Another example: Intel last week announced the Wired for Management Baseline spec, an initiative for PC management that complements Microsoft's Zero Administration for Windows plan.

Though some features of Zero Administration for Windows will have to wait for NT 5.0 and the Memphis release of Windows 95, some capabilities can be delivered today, say Microsoft officials.

Many observers believe the NC and the NetPC will begin to proliferate throughout enterprises during the next few years-although neither is designed to replace the PC. For example, Dataquest Inc., a market research firm in San Jose, Calif., forecasts that NetPCs alone will account for 5% to 10% of the total worldwide PC market of 98 million unit shipments by 1998.

"They will have influence beyond the shipments," says Martin Reynolds, a Dataquest analyst, who believes that cost-reduction and management t echnologies built for NetPCs will be pervasive in all desktop devices. As for NCs, Reynolds believes sales won't exceed 3 million units annually by the year 2000-a far cry from Ellison's bold claim of total sales of 100 million units by 2000.

Compaq says it is solidly behind the NetPC. "We believe it will move the PC into the green-screen [dumb terminal] space, where we don't have a presence today," says Bob Jackson, VP of commercial PCs at Compaq.

Intel continues to work with its traditional PC vendors to help them build sub-$1,000, full-featured, network-ready PCs that offer more control over computing at the desktop than NetPCs. Two weeks ago, HP became the first major vendor to challenge that price point with such a machine; sources say IBM will follow suit in April with low-cost models of its IBM PC 350. Intel VP Will Swope says the company is working informally with PC vendors to lower component costs.

Still, IT managers must watch out for a few "gotchas" when implementing some of these plat forms. For one, customers must spend money to save money, analysts say. Because the NC is so dependent on the network, IT departments must have fault-tolerant servers to prevent departmentwide downtime should a system fail.

The drawback for $1,000 PCs: After the initial cost savings, management issues and costs remain about the same as with current PCs. Critics also argue that management costs for NetPCs will not be much lower than for traditional PCs. "Right now, the hardware could be free and it really wouldn't change your IS budget," says Jim Fulton, director of product marketing for Network Computing Devices Inc. in Mountain View, Calif.

Also, with NetPCs, many applications must have at least part of their code installed on the client as well as the server, requiring some rewriting to let users freely roam among networked devices. Organizations standardized on Office 95 should pay particular attention. Says Matthew Price, Microsoft's group product manager for Office, "We're focused on getting Off ice 97 running this way. We don't have support for Office 95 to announce at this time."

But the last word on desktop choices will come from users. Says Sallie Mae's Gotay: "No matter what we do, it's very important that we make the transition transparent to our users."

With additional reporting by Mary Hayes , Martin J. Garvey , Andy Patrizio , and Jeff Angus

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