The death of the PC has been greatly exaggerated and the rise of the network computer (NC) will take place, but only in certain geographic and vertical markets.
One year on from Larry Ellison's original prediction of a new world in which the PC would be replaced with low-cost, easy-to-use machines that receive all their data over the phone line, the arguments have moved on considerably.
This year, the IT industry's most entertaining showmen, Scott McNealy of Sun and Oracle's Ellison, lined up against industry pragmatists Eckhard Pfeiffer of Compaq and Bill Gates of Microsoft. After the initial shockwave, which last year sent the PC industry reeling, and we were treated to summary dismissals of anything network computer related, both sides have softened their positions.
What had been billed as the battle of the giants over the future of the desktop turned out to be rather an anticlimax. Everyone now seems to agree that what users want is a variety of devices and whether they are called NCs or PCs is irrelevant.
Each of the main protagonists is claiming that whichever way the market goes, the vast majority of desktop devices sold will primarily be communications products.
Pfeiffer, CEO of Compaq, publicly accepted for the first time that the PC must become more like an appliance. While defending the strategy of offering increasingly costly and complex machines, Pfeiffer finally accepted that an industry which failed to address the spiralling complexity of business would only be showing its immaturity. And for the first time, both Pfeiffer and Gates said that the PC industry must concentrate on cost of ownership and ease of use as priorities.
This shift in strategy will take at least 18 months to filter down to the channel, but resellers should start asking what it means for them.
Selling PCs and related services has been the life blood of dealers that until now have been promised a future selling Intel-based servers and PCs. Pfeiffer was careful only to include the home market in his predictions of a model based on a high-spec PC surrounded by low-spec machines.
While Compaq strives to become a server company, the last thing it can afford to do is disenfranchise its dealer base with talk about appliances, which, by their nature, will be aimed at retail. Of course there could be a selling model where dealers sell servers and PC clients and retailers sell PCs and appliance clients. But it is unlikely that the market will be that clear cut.
Pfeiffer predicted the Internet would shape the market with customers advertising their needs and suppliers responding. 'We need to dispel the myth of lack of security on the Net. In future, someone will put a message on the Net that says: "I want a new notebook". This will start a bidding war between dealers to offer the best price, and the quickest delivery.'
Of course, the day users exist who know exactly how they want their hardware configured and what software they want is as far away as the speech-based PC.
Pfeiffer concluded that the network computer had its place in the IT industry. 'Compaq embraces the NC - there is no way it will replace the PC.'
Compaq's change of heart has more to do with market reality than a desire to provide users with cheaper products.
Ellison, having shaken everything up just one year ago, has obviously decided that those he derided as pariahs are not the devils he thought they were. 'The NC will not replace the PC, just as the PC did not replace the minicomputer, nor did it replace the mainframe.'
His partner in the new wave, McNealy, has yet to bury the hatchet with the PC industry. But this probably has more to do with his workstation business than any particular antipathy towards Microsoft and Intel.
His main thrust was that Java would save the day. McNealy is a great showman, but he currently has very little to say that he hasn't said already.
He began with his usual tirade against all things PC based, and these are among his gems. 'Do you really need five million lines of code to write your name? If you want to keep your kids off drugs buy them a PC. Everyone says you can't trust the Internet for banking or email. But today, if you want to send a letter or a cheque in the post, you write it out, seal it with spit and put it in a tin box. Then the government picks it up and holds on to it for a few days before passing it on.'
He did try to tempt entrepreneurs by promising that a lot of people would make a lot of money from Java.
But as John Gantz, senior VP of research firm IDC, said, it would be at least four years before Java applets become widely available, so this is hardly the time to get excited about it.
While Ellison and McNealy have won the argument that PCs or anything done by Intel or Microsoft will not be the last innovation in computing, and that indeed the network will be the computer, neither has presented a clear market strategy for the products they are pushing.
The NC as a set-top box for the home will primarily be a product for the US, where local phone calls are free, and where Ellison claims 70 per cent of the population is being disenfranchised from the IT age by high-cost PC hardware and software. There will obviously be a market for this, but Microsoft and the rest of the industry will develop low-cost PC alternatives.
For business sales, thin-client communication devices are likely to be bundled with server sales. But shifting users to a new architecture when most have just moved, or are thinking about moving to a client/server setup will be difficult. And it's unlikely to present serious business opportunities for at least two years.
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