Tuesday, April 23, 2024

In Tight Times, Thin Is In

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In an IT world top heavy with bad news, there is at least one, albeit little known, bright spot on the horizon: thin clients.

Sales growth over the past three years has been double digit (at a time when PC sales are lucky to achieve low single digit growth if any) and, next Wednesday, Hewlett Packard plans to tap this growth when it re-enters market with a new product line dubbed Warbird.

“Out of the HP merger (with Compaq) there was a recommitment to thin client space,” said Tad Bodeman, HP’s director of Thin Client Marketing. “This really is, from the ground up, an HP engineered and designed, architected solution that incorporates all the architectural issues that allow us to deliver a robust product right out of the box that doesn’t require a lot of customization on location, and has the ability to be managed with industry standard management solution.”

HP entry into the market is expected to give the entire thin client industry — just one-percent of PC sales worldwide in 2002 — a much needed boost, said David Rand, director of corporate marketing at Wyse, currently the leading thin client company in the industry with 50% market share. Prior to purchasing Compaq, HP used Wyse as the OEM for its thin client products.

“We think we’ll pick up more business from that — the fact they’re drumming up demand — than we could possibly lose by them selling products they are sourcing from another factory in China,” said Rand.

Bob O’Donnell, who follows thin client for IDC, predicts a 27% growth rate for thin clients in 2003. This comes on the heels of an ’01 growth rate of 22.1%, and an ’02 growth rate of 18.5%.

“I see this market moving forward at a very respectable pace and it starting to take a larger percentage of total PC shipments,” he said.

Of course, it’s easy to post double-digit growth rates when total ships are less than 2 million units annually, said O’Donnell. Still, he believes the trend away from PCs towards thin clients will continue for some time as companies continue to keep IT budgets in check and save money wherever possible. And even though most of the IT world barely knows the No. 1 and No. 2 players, Wyse and Neoware respectively, that will change as well.

“Thin clients, over the long haul, they do have a compelling value proposition,” he said.

So what is driving companies into the arms of thin-client vendors? In a word, money, or the lack thereof to be precise. But networks, call centers, the rise of hosted software and browser based access to applications, also play a part in the rise of thin clients, say industry watchers.

Cost Savings

At $4,000 over four years it costs about half as much to field a thin client (including maintenance, hardware and software) as it does to field a PC, so companies are looking to put thin clients in areas where they once may have placed a PC, said HP’s Bodeman.

The biggest deployments still occur in logical places like call centers, not the home office, but even that space is ripe for thin clients as broadband continue to push rich content computing onto the network.

“There probably isn’t a single company in the Fortune 500 list that hasn’t deployed thin client already, is in the process of deploying thin client, or has a thin client pilot evaluation going on today,” he said. This includes deployments of Windows Terminal Server and Citrix Metaframe as well as networked hardware/software installs from companies like Wyse.

This sentiment is echoed by Zeus Karravala, an infrastructure analyst at IDC, who sees the rise of thin client as part of a larger technology adoption trend brought about by the growth of broadband and WiFi networks that feed ever increasing numbers of peripheral devices like PDAs and laptops, not to mention the family refrigerator if some companies have their way.

“Those two things have really driven us going back to (thin clients) but as soon as those things catch up with processing power, then you can make the application more fat,” he said. “We’ll continue to go through waves of this every 10 to 12 years.”

Also, with HP back in the game, this should help drive sales in larger enterprises as the company begins to market in earnest reaching a population of IT managers heretofore untouched by the existing thin client players, said Bodeman.

“Typically they’ve got five to 10 salespeople nationally,” said Bodeman. “Most of them handle Latin America out of their North American offices and stuff like that. They’re not geared from an enterprise ready standpoint. When HP begins shipping this month, this new product line, were bringing this thin-client industry into today’s standards-based experience.”

Of course, Wyse’s Rand sees things a little differently, stating it’s Wyse’s domain expertise that will win the day and its tinkering with Windows CE, the preferred OS for thin client, that makes its systems work as well as they do.

“We’re the ones that live and breath this every day,” he said. “Reliability: if it means that it’s still a little bit of a craft to make it work perfectly, yes, absolutely. If there were system failures we wouldn’t be growing like we are.”

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