From the February 2000 issue of Entrepreneur

The network PC is dead--or, at least, in a coma. Long live the thin client.

Certainly that's the hope of the long-suffering hardware and software manufacturers that are finally starting to get some traction under the idea that most computing power should be housed on a central server and accessed by "thin" networked computers (or "clients")--units similar to the PCs most people use but lacking the processing power to handle applications on their own--as opposed to the more familiar Windows/Intel-based desktops.

Thin-client providers include big-name brands, such as Data General, IBM, Oracle, Sun, Televideo, Unisys and Wyse--as well as younger players like Citrix Systems and Network Computing Devices (NCD), whose industry influence seems out of proportion to their size. These companies' thin-client networks are a substantial outgrowth of a type of consumer-oriented computer introduced a few years ago to thwart the Wintel duopoly. Those inexpensive workstations had little processing power or onboard software and used your garden-variety Web browser (preferably Netscape's) to retrieve small Java-based applications off the Web as needed.

This new idea foundered among consumers when companies didn't produce the applications for it, Java applets, as quickly as the hype suggested and the bottom fell out from under the prices of "real" PCs. But business users warmed to the concept when they discovered they could use Citrix's Winframe or Microsoft's Windows NT Server 4.0 Terminal Server Edition software to run Windows applications off LAN and Web servers. Sales of thin clients took off in 1999, and IT research firm IDC expects them to increase tenfold to more than 6 million annually by 2003.

Depending on the hardware, thin-client price tags can range from a few hundred dollars less to a few hundred dollars more than a budget Wintel PC. But getting to the real value of thin clients is a little more complicated than simply comparing price tags.


Mike Hogan is Entrepreneur's technology editor, and he can be contacted at mikehoganentrepreneur@juno.com.

The Value Proposition

If your computing investment constitutes a fairly large share of your capital assets and is probably the first to depreciate, you can't afford to pass up the newest business opportunities and productivity gains from computing and on the Internet. But productivity gains can disappear in the face of repeated upgrades of increasingly inefficient software that quickly obsoletes ever-more-powerful hardware.

Your PC's price tag is just the down payment on your computing bill--known as TCO. You pay it off with productivity lost in 15-minute to one-hour increments while you inventory, upgrade and trouble-shoot equipment, and train employees to use it.

GartnerGroup, which has been doing TCO studies for more than a decade, figures the cost of maintaining a Windows desktop is around $10,000 per year. It's paid in time--in lost productivity--rather than cash.

Actually, a large portion of PC support costs are caused by adding software which causes conflicts or disables other software on the system, according to GartnerGroup's Michael Silver. Its latest study predicts it will take three to five years of productivity gains to recoup the $1,500 to $3,000 it will cost to upgrade the average desktop PC to Microsoft's new Windows 2000. At best, you'll have paid off Windows 2000 just in time to upgrade to Windows 2003. Another way to think of it: If you're lucky, the return on your Windows 2000 investment will be zero. "Welcome to the upgrade treadmill," says Silver.

Gartner Group figures you can trim 20 to 35 percent of your costs with a managed client/server environment using thin clients, where you control the applications used by employees and only have to upgrade the server. Some corporate IT managers, who have been pulling their hair out over computer maintenance costs for years, report even better returns than that.

Fitting The Thins

If you've invested a lot in Windows hardware and software, you don't need the pain of a platform migration. But you don't have to switch from Windows to deploy thin clients.

Citrix now counts 15 million users in more than 100,000 companies using its WinFrame and MetaFrame servers to share Windows applications over networks--including the Web. One reason those numbers are bound to increase, says IDC's thin-client program director Eileen O'Brien, is that Microsoft has slashed the price of its Windows NT Server 4.0 Terminal Server Edition to about half that of the $400 to $500 per-user cost of the Citrix software. Both should become cheaper as thin clients proliferate on the job. In fact, Microsoft plans to include terminal services in Windows 2000.

And you don't have to change your entire operation to thin clients. You may need a Pentium III PC with 1GB of memory and a terabyte of storage to run your applications, but that doesn't necessarily mean everyone in your company does. In fact, analysts and corporate IT managers have recognized that once you achieve basic functionality, extra hardware and software choices can become a productivity sinkhole for many employees.

You don't even have to restrict your purchases to traditional thin-client vendors like IBM, NCD and Wyse. Wintel PCs work on thin-client networks as well. You can still use your Windows machines with the thin clients.

"Even if you want to use eMachines PCs, you could find a systems integrator who would bring in a Windows Terminal Server and set it up for you," says Silver. "There are always people to help, regardless of company size."

Thin-Tegration

The Westminster Group, a seven-person executive search firm in Westminster, Colorado, built its thin-client network around seven IBM Network Stations, but it comfortably mixes them with a few high-powered Wintel desktops used for specialized purposes.

The company doesn't maintain its Citrix WinFrame server; it's not even on the company's premises. Instead, it's at the offices of Planet Computer, the system integrator in Denver that sold Westminster the IBMs, installed the server, and maintains it all. Westminster connects with the server over an ISDN phone line that runs about twice as fast as a 56K modem.

The result, note Westminster co-owners Gloria and Tom Kellerhals, is their company reaps big benefits, meeting clients' needs quickly, rounding up and pre-qualifying job candidates, and sending mass e-mailings without the usual computing headaches or early obsolescence.

"I've gotten extremely tired of buying hardware and finding out six weeks later that Computer City has it at half the price," says Gloria, 49. "That drove me to thin clients. I don't want to fool with it; I just want it to do its job, and I'll do mine."

Westminster bought its specialized recruiting software (PC Recruiter) from a company called Main Sequence, and houses it on ASP (application service provider) Planet Computer server along with Windows applications.

"The advantages are centralized offsite management by competent professionals," says Tom, 49, "as well as ease and rapidity of software upgrades, virus protection and firewall security-- and virtually no maintenance."

He figures the $900 they paid for each IBM Network Station would have cost at least a cool $1,600 for comparable name-brand Wintel PCs configured with Ethernet adaptors and 17-inch monitors. The company's PCs are used mostly for processor-intensive Windows applications.

Pros And Cons

"Thin clients can reduce TCO," says Silver, "but the trick is using them for the right people and applications."

The best return on investment is most likely to come from structured-task workers who spend much of their day on one or two applications, such as executive recruitment or customer support. Bookkeepers, retail sales clerks or phone sales people are also good candidates for thin clients.

While application responsiveness is rarely a problem over the typical LAN, thin clients aren't a good choice for heavily graphical applications, such as Adobe Photoshop or Microsoft PowerPoint. Although Gloria reports few problems running all her applications over the Web, it wouldn't hurt to have a broadband connection--a T1, T3, ISDN, DSL or ATM line.

A touchier issue is deciding who will get the thin clients and who will get the "real" PCs. You're likely to get some initial resistance from the troops if you take away full-fledged Windows desktops and replace them with limited-functionality machines. On the other hand, thin clients can live happily alongside Wintel desktops needed for special purposes. This doesn't happen to be an issue Westminster struggles with, and, if you're lucky, it might not be one in your company either, especially for new employees who won't have to give up their PCs.

A more predictable concern is what will happen when--not if--your thin-client server goes down (as every other server does). Be sure to have a redundant server and an emergency service agreement with your systems integrator, says Silver. Westminster turned the management of its entire system over to Planet Computer at a cost of a few hundred dollars per month.

"When I said `client server,' I said, `That's it, I'm out of the race,' " asserts Gloria. "I am going to get the latest technology, do e-commerce and e-mail, and join the 21st Century; but I'm not going to chase the rabbit around the dog track anymore."

Ultimately, the greatest benefit the distributed computing model provides is more time for your business.