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Zona Research downplays NCs

In a survey of 137 senior IT buyers and decision-makers, Zona found that only 15 percent of respondents plan to deploy thin clients within the next three years.

While NC proponents Oracle (ORCL) and Sun Microsystems (SUNW) talk up network computers at Oracle's annual developers conference in Los Angeles, researcher Zona Research today issued some sobering numbers about corporate interest in thin-client systems.

In a recent survey of 137 senior IT buyers and decision-makers, Zona found that only 15 percent of respondents plan to deploy thin clients within the next three years. Of the 117 respondents with no NC plans, 44 percent said they're not interested in thin clients because they're not PCs, and another 44 percent cited bandwidth and network concerns.

"Overall, we have a period of confusion before the dust settles for customers as far as thin clients are concerned," said Zona researcher Greg Blatnik, who thinks the "rather low" figure of 15 percent accurately reflects the true demand for thin clients.

Zona expects thin clients to replace dumb terminals when companies want to extend use of legacy data and applications, and the consulting organization thinks users will mostly be clerical personnel, low-level managers, and supervisors--a profile similar to that of traditional terminal users.

"Thin clients are becoming a more complex issue for end customers," Blatnik added. "Customers have a lot more choices."

Zona's caution is a big departure from comments by Sun chief executive Scott McNealy and Oracle president Ray Lane at yesterday's Oracle OpenWorld conference.

"NCs are our destiny. We have made them our mission," Lane said in his keynote address yesterday. "The PC becomes a special purpose device for professionals who need to have local storage. But in the broader world, we have broad participation and the NC becomes the ubiquitous device."

Lane bristled yesterday when asked at a press conference whether Oracle is standing by chairman Larry Ellison's prediction that NCs would soon outsell PCs.

"It's not about replacing PCs. NCs will eat into PCs' market share, but we ought not to provide forecasts before people are building NCs at any significant rate," he said.

"I think you'll see valid forecasts when you have 20 manufacturers shooting NCs out the door with capacity to ramp up," Lane said. "I think there will be demand for 100 million NCs; the question is whether there will be supply," Lane declared.

Despite Oracle's enthusiasm for NCs, the company has so far deployed only "several hundred" to date. "We'll take all we can get. Supply is a problem now," said Lane, adding that he expects Oracle will have thousands of NCs installed in six months.

At Sun, McNealy said 3,000 NCs have been installed--including one he uses in his office--with a goal of adding 7,000 more within a year.

McNealy acknowledged that many companies doing JavaStation pilots are using them for dedicated environments, meaning they're deployed as replacements for terminals.

He also said Sun will give many employees more powerful machines than NCs.

"Sure, I'm going to spend $4,000 to $5,000 to upgrade machines for my software developers who make $100,000 a year," McNealy said. "That's totally worth it when the total cost of ownership of a PC is $8,000 to $29,000."

Zona's study found the ability of thin clients to run Java applications--an attribute the NC crowd is emphasizing--is not a strong selling point with corporate buyers. More than 70 percent of companies planning to deploy thin-client architectures want them to access Windows applications running on the server, Zona found.

In fact, Java-based NCs built on the Oracle-Sun specification were less popular than the Microsoft-Intel Net PCs, Windows-based terminals, or generic thin clients, a Zona category for other kinds of information appliances.

"That plethora of choices is holding up some purchasing momentum because customers want to test, evaluate, and seriously look at these products," Blatnik said. "Some are just becoming available; and some like Windows-based terminals are yet to have a final spec."