Enter the NC

The network computer has been making its debut on the business stageDrew Cullen assesses its potential audience and examines the implicationsfor resellers

After all the hype, the first batches of network computers (NCs) are rolling off the production lines and making their way into customer sites.

Fujitsu Telecoms and B&W Speakers have taken on board fairly large consignments of NCs. Business Systems Group, the London-based top 10 corporate dealer, has also installed several NC units with four customers, which are all understood to be City institutions.

The NCs are supplied courtesy of HDS Networks, the Pennsylvania manufacturer, which has stolen a march on its rivals with the first NC to hit the streets.

The HDS@Workstation retails at a base price of #650 and integrates Internet access, Java, and PC, Unix and mainframe apps in a single box. The company is currently building up a UK channel for the box, through the good offices of its exclusive UK wholesaler Compass Distribution.

Compass is drawing on its experience as the UK's leading X-terminal distributor to peddle the NC to the mass of resellers. Marketing manager James Fox believes that the X-terminal market is now effectively dead.

'X-terminals were an excellent idea, serving multiple users from a centralised server,' he says. 'But the major objection, and the real reason why X-Terminals failed to take off except in niche markets, was the inability of the technology to run Windows apps. End users were not interested if they could not run an Excel spreadsheet on their terminals. The NC answers these objections.'

Compass has been running a reseller seminar programme and reports strong interest in the HDS NC. 'We hope to announce a number of signings in the next few weeks,' Fox says. Early authorisations include BSG and Compass sister company Xanadu.

The wholesaler is seeking resellers capable of handling very large server installations which already have a strong networking and server bias.

Fox expects target resellers to be turning over at least #5 million a year. 'We are not looking for fulfilment dealers,' he says.

'We are beginning to see the first truckloads go into customer sites with no more than 30 to 40 machines. The customers are in the evaluation phase. Realistically it will be March or April before resellers start making real money from HDS installations.'

The NC poses important questions for resellers. What impact will it have on their business? Should they scramble on board the NC bandwagon, or can they consign the concept to the dustbin?

The sales drivers for the NC promise a future in which corporates regain control of their IT spend on the client side while cutting support costs.

They also carry an implicit threat to traditional reseller revenue and margin structure.

Fox argues that resellers should embrace the brave new world of the NC.

'It is very hard to get to talk to a corporate, if the message is, "You need to change your PC supplier". With NCs there is a whole new angle.

You can talk about corporate intranets, Java as well as NT Server - all hot topics.'

Fox rejects the notion that the NC will undermine reseller revenues and margins. 'There is really very little margin left in selling PCs and, from a user point of view, supporting PCs once you get over 40 or 50 is a complete nightmare,' he says.

It is true, he acknowledges, that NCs on the desktop are cheap and carry little margin, 'But they are easy to install and easy to maintain. And behind the scenes, corporates will also need to purchase a thoroughly powerful NT Server, serving 30, 40 or 50 users. Resellers are selling very chunky servers - they need to be very highly specified to ensure high uptime And the NC also gets the resellers into networking projects.'

Roy Howitt, alliance manager at BSG, agrees. ' There is less money on the tin, but more money on the services. The design, implementation and network infrastructure of the intranet all generate strong service revenues.'

BSG is an enthusiastic proponent of the NC and says the concept has attracted an enormous amount of interest. Howitt says: 'So far, our customers are taking very small quantities, but the market is set to grow very quickly.

'The NC has no hard disk, little memory, and is a small maintenance item.

It is almost a mainframe concept. Switch it on and it will run. If it doesn't boot it is almost certainly a hardware fault. It is also a space saver. The HDS Networks NC runs NT, Internet and legacy applications on one screen. Some City traders used to have three screens on their desk to run different applications.'

The NC also removes user demand for 'the biggest, the best, the fastest, the newest PC as befitting their end-user status', according to Howitt.

'Users can no longer complain that they haven't got a Pentium - the NC just runs the software.'

And it addresses company concerns about security, he claims. 'Corporates are paranoid about viruses and staff taking information off machines.

With the NC it is much easier to address these issues centrally.'

Market research suggests that business resellers need to prepare for the NC market. Input, the IT research firm, forecasts that 20 per cent of all PC replacement and new sales in the business market will land in the lap of the NC market.

Input defines four types of information user and reckons there will be little NC penetration in the first two categories: information analysers (such as accountants and financial analysts) and information producers (such as journalists and market researchers) will be sticking to their PCs.

But Input expects big take-up of NCs for the information user and consumers categories, which encompass jobs like personnel managers and clerical staff. 'At the moment it is not cost justifiable to give everyone in these categories a PC,' James Eibisch, Input analyst says. 'Support costs are prohibitive. Many more people will have access to the NC than is possible with PC technology.'

Input recently completed a study of corporate attitudes to the NC, drawn from interviews with 220 companies in the US and Europe. Corporates, it seems, are growing weary of the constant round of PC upgrades and are keen to move on to intranet technologies.

According to Input, the five-year lifetime client support cost of a PC is $4,600 a year for corporates compared with $1,200 a year for the NC.

Application migration to the corporate intranet is an even more important driver, Eibisch says. 'Java is an Internet-specific distributed programming language. Software developers who use it can be assured that they need to write their program only once, because their applications will run without modification in native mode, whatever the platform. This will extend the market reach for cheaper client devices and will open the gate for the NC.'

Application migration and intranet design are seductive money-making prospects for resellers. The NC roll-out is an additional bonus. But how many are ready to take advantage of the demand for intranet design and installation?

Very few, if you talk to Simon Derrick, chairman of 2GL, the Southampton-based #8 million corporate reseller. 'There is a dearth of people who know what they are doing with the Net and doing it in a business-like way. While many of our rivals are still asking the questions, we have the answer and the telephone number.'

Two months ago 2GL set up 2GL Systems Interactive as a separate company.

According to Derrick, the SI team has 'an immense amount of experience in the design of intranets, and in delivering complete Web solutions.

This is introducing us to major multinational customers that 2GL could not have addressed before'.

Derrick is currently mulling over NC technology . 'We have our Internet/intranet strategy in place. Now we need to assess the role of the NC within that strategy,' he says.

BSG is further advanced in its NC policy. Howitt advises that a different approach is required to sell NCs, compared with the PC market. 'The NC is almost a concept sell,' he says. 'You begin with a study, looking at legacy systems and how to migrate current applications to an intranet.

People don't realise how easy that is. Then you drag in whiteboards and the like, as well as firewalling, and you end up with a very powerful system.'

Resellers don't necessarily have to be big to participate in the NC market, but they do need the ability to invest. Training and accreditation is expensive, as Howitt points out. 'You need a different set of development skills - Java, Active X and Jakarta - and if you want to address all market sectors you will need to invest in all the competing technologies.

'Resellers can decide to stick to one party for their Internet strategy - they could decide they are going to be Microsoft or a Lotus house - and they can achieve some good business. But they are restricting themselves to smaller markets.'

The NC market is set to gather momentum in the corporate arena, with hardware launches pencilled in by IBM and Sun. Fox expects the rush to benefit HDS Networks through increased acceptance for the technology.

'It is good to be first. It means that you get your foot in the door.

But other companies coming along will give a huge boost to the market.

I don't believe HDS has anything to fear from the opposition.

'Sun has come out with the Java Station, but its main interest is Java and its installed base, IBM is threatening a NC in the next few months but its stated intention is to replace its huge installed green screen base. HP too has a large installed base. And the X-terminal vendors like NCD will be hampered by their past. NCD will try to transmute the X-Terminal into a NC. But the first thing it will do is to go back to its X-terminal base rather than take a fresh look.'

The future looks bright for HDS Networks, Fox claims. 'HDS is a good product, well priced, and more to the point, it is available today.'

The NC is the easy bit for the reseller. The hard work is in investing in their Internet skills. The NC reference profile designed by Oracle, Sun and others fails to include Windows applications in its specification.

It concentrates instead on a machine that can run Java applets and access the Internet. The omission is deliberate, but many manufacturers, such as HDS Networks, will still come to market with Windows-enabled NCs.

The beauty of Java is its interoperability, which will ensure that there will be no standards war for the NC. So long as resellers stick to NCs which can also run Windows applications, they will be onto a safe bet in the corporate market.