Microsoft confirmed that it is developing a "lean" Windows XP client code-named "Eiger" for customers who want the security and management capabilities of Windows XP but who cannot afford new PCs.

The planned product will technically function as a thin client that access the Windows server terminal services over Microsoft's own remote desktop protocol (RDP) and Citrix's ICA protocol but also offers additional capabilities that the company puts somewhere between a "fat" client such as Windows XP and a traditional "green screen" thin client, said Barry Goffe, group manager for the Windows client product management team.

(In other RDP news, Microsoft said Friday that Sun Microsystems now has the rights to use the RDP protocol. That means that in the future, Sun Ray devices will be able to access Windows terminal services. More details to follow)

The "Eiger" offering for example, will offer six core capabilities, including the two thin client experiences over Microsoft RDP or Citrix ICA as well as "fat" client capabilities by including Internet Explorer, Media Player, mainframe terminal emulation and the security features of Windows XP SP2.

Observers say Microsoft faces competition from Linux in educational and SMB markets and must offer a lower-cost client experience for owners of older PCs.

"Eiger is not a general-purpose operating system, and it's not what traditional customers think of as a single purpose devices with zero management overhead," claimed Microsoft's Goffe said. "It's somewhere in between -- a mid client or lean client. We don't see it as competitive because our work around Eiger is not focused on competition but to help a select set of customers looking for a bridge solution."

The planned product, which is in "very early" stages of development, is not intended to compete against partners Wyse, Neoware or Citrix but rather will serve as a bridge to help customers upgrade to new Windows capabilities while holding off on new PC purchases, Goffe insisted.

Goffe noted the client will not run line-of-business applications or Office locally though those applications can be displayed to "Eiger" from a server.

Microsoft denied that its confirmation this week was in any way linked to Sun's announced intent to buy Tarantella, a Citrix competitor whose Secure Global Desktop will be integrated into Solaris in order to lower the costs and complexity " and improve the security -- of desktop management.

Microsoft provides Windows terminal services free in its Windows server but customers must purchase a pricey client access license to access and use them.

Goffe claimed he opted to discuss its "lean client" plans this week after the recent leak of an internal Microsoft Powerpoint document about "Eiger" and another Microsoft client under development code-named "Monch" that was posted to a web site operated by Steven Bink, an Amsterdam, Netherlands MCSE who runs a web site known as Bink.nu.

Microsoft's Goffe claimed the documents on the site are dated and that the second client alluded to in the document, a thicker client code named "Monch," is more of a "wish list" for a version 2.0 client beyond Eiger, he said.

Microsoft acknowledged that it is embracing the new client model to not only extend the life of legacy Pcs but to lower the cost of desktop management and reduce security problems -- the key selling points of many ISV partners ranging from Citrix to Altiris.

Microsoft said the "Eiger" client is still in the early stages of testing but it it could possibly be released this year.

Observers say it will be interesting to see how Microsoft prices and packages the Eiger client. Customers who purchase Citrix's Access (formerly named MetaFrame Server) server must also pay Microsoft for a client access license to access the terminal services that ship with the Windows Server 2003.

Observers note that many enterprise customers have bought into the server-centric model and software pioneered by Citrix yet it is known as an expensive implementation. With Linux moving into Microsoft's territory and Sun integrating Secure Global desktop into Solaris at no CAL costs, Microsoft and its ISV partners will see pricing pressures, observers predict.

Citrix said it is well apprised of Microsoft's plans and noted that the two vendors late last year signed a major expansion of their longtime alliance until 2010. The pact calls for the two to continue working together on terminal services and that calls for more exchange of intellectual property. The Ft Lauderdale, Fla. company makes money by selling concurrent user licenses that access its server suite.

"We don't see it as as competitive threat. By and large, it represents a purchase of a new Microsoft client and it's a great thing for us because it's another client we can serve," said Ross Brown, vice president of worldwide channels at Citrix. "Microsoft is trying to thin down the cost of Windows and lock down the security profile and reduce maintenance cost and we're on the server side delivering applications."

One ISV that offers application virtualization capabilities for server-centric environments such as Citrix said it is a wise move for Microsoft to fend off potential encroachment by Linux into its more cost-conscious and slow-to-upgrade SMB and educational customers globally. But, Microsoft will have to walk a fine line not cannibalize the hefty revenues stream that flows from Citrix sales.

"These are lightweight operating system specs designed to support thin client environments including mobile devices and are meant to interact with terminal servers," said Harry Riudda, CEO of Softricity in Boston. "They both run over RDP but Microsoft continues to enhance terminal services and lowers the delta between capabilities of Citrix MetaFrame. Microsoft has to be careful because it generates a lot of revenues through Citrix."

Another source close to Microsoft claimed the vendor is more interested in thin clients. "Thin clients are a big market for Microsoft," said the source who declined to be named. "Companies that are in the space like Wyse and Neoware use Windows XP Embedded (XPe), but they complain about the XPe setup configurations.

The big issue for Microsoft and thin client companies is testing and support. When there are 10 of thousands of thin client users, many problems can happen, which creates support problems. To eliminate the issues, it is in everyone best interest that Microsoft provides a standard platform. XP Embedded will always be there for those that want an even more customized version. The goal is to address the needs of specific vertical markets like thin clients."