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Compaq passing on Windows terminals

The decision to stick with the Net PC for now reflects the difficult question facing computer makers in the so-called thin-client computing arena.

Despite agreements with Citrix to promote computing on Windows-based "dumb terminal" machines, Compaq Computer (CPQ) has no plans itself to come out with these minimalist computers and instead will concentrate its efforts on the Net PC.

The PC maker's decision to stick with the Net PC and pass on Windows terminals for now reflects the difficult question facing computer makers in the so-called thin-client computing arena. Like a number of vendors, Compaq is interested in the thin-client model, which shifts computing power to centrally managed servers, but it is not excited about products at the very bottom of the computer food chain, such as Windows terminals.

The Net PC is a stripped-down PC but still maintains many of the features that make it an autonomous computer. A terminal device, on the other hand, has only the most rudimentary computer functions and is completely dependent on the server computer to which it is connected.

The relatively small size of the thin-client market--ranging from 15 to less than 5 percent of the overall desktop opportunity--and the low cost of the devices has prompted the company to limit its platform bets.

"We looked at the terminal market and said, 'Well, it's still a relatively small part of the market,'" said Michael Takemura, product marketing manager for desktops in North America at Compaq. "Most of the customers we talked to said that the Net proposition in terms of cost of ownership is better than the terminal [proposition]."

Compaq will support terminal computing, Takemura added, by selling servers for terminal networks. Compaq has also agreed to work with Citrix, which designs software that serves as the communication network for Windows-based terminals, to promote terminal computing to its reseller and customer base.

Long touted as the next wave in computing, thin-client computing appears to finally to be coming to market. Under thin-client network architectures, computation functions and data storage are largely shifted from the desktop to a back-end server. This "dumbed-down" desktop structure ostensibly cuts costs because it allows IT managers to change applications or upgrade desktops from a central location, rather than having to upgrade networks desktop by desktop.

Currently, three thin-client models are vying for supremacy. Net PCs perform a number of computing functions at the desktop as well as store data. Network computers (NCs) provide some local processing but typically run on Java software environments that remain under development. Windows terminals, on the other, hand provide the maximum of remote control and the least autonomy on the desktop. All processing and data storage occurs on the server.

Windows terminals essentially are new-age versions of classic X-terminals. Only via Citrix's WinFrame software do they allow users to access Windows applications.

So far, Windows terminals are mostly manufactured by specialty makers such as Wyse Technology, said Mark Templeton, vice president of marketing at Citrix. About 500,000 units will ship this year.

Major manufacturers are moving slower. Hewlett-Packard has signed a license to bundle Citrix clients with its hardware, but has not announced products. IBM has a Citrix license, but it is limited to the OS/2 group, he noted.

Despite their supposed advantages, a ground swell of demand for thin clients has yet to appear, according to Kimball Brown, an analyst at Dataquest. By 2000, NCs and terminals will account for only 5 million desktops out of 130 million sold that year.

Takemura concurred: "We have estimated the entire aggregate of the market for Net PCs, NC, and Windows terminals to be 10 to 15 percent."

Brown also pointed out that the thin clients, especially NCs and terminals, come with inherent problems. Since terminals depend on servers, a network collapse means a complete halt to work. Data storage on servers also costs much more. Hard disks for desktops run about 3 to 5 cents per megabyte. Storage on servers from Sun costs approximately 50 cents a megabyte. IBM storage costs even more.

"If you are going to run Windows applications, I don't know if it is that good a way to do it," he said. Net PCs are the most autonomous of the three, he added, but are essentially just PCs.

Nonetheless, a number of companies are taking tentative steps toward participation in the NC and terminal markets. Last week, Intel said it was working on a processor for "lean clients," which company executives described as sub-$500 machines that operate on a subset of components. This matches the outlines of Windows terminals.

A number of companies, including HP, will use Comdex next week to demonstrate the type of functions that can be performed on terminal networks.

"It's becoming easier and easier to build a thin client. It's not going to take [Intel] that long," said Templeton. Microsoft is building system software. Now you have all the pieces in place for an EDS or Andersen to take to a GM or Procter and Gamble."