The new era of computing during the 1980s was defined by the personal computer (PC). Despite the extensive developments, improvements, and breakthoughs in this market over the last decade, more people, especially from small businesses, began realizing the downsides of PCs: They were difficult to operate and maintain, and they were expensive. It was during this time that the network computing concept was born with promises of simplicity and lower costs.
Network computers (NCs), in the Network Computer Reference Profile, are defined as having a minimum screen resolution off 640X480, a pointing device, a keyboard, and any kind of processor. They might have an optional hard drive. They use TCP/IP -based protocols, HTML, and FTP. The programming language is Java, which was created by Sun Microsystems, Inc. NCs do not have floppy drives and local storage areas for applications. They are connected to a network for application use with the help of a Java-based software system.
NCs are regarded as the most radical departure from the PC. They promise to be less costly than PCs due to decreased hardware requirements. The user can access applications on a network very easily using an interface is less complex than using the application on the local drive. This access-as-needed-basis keeps the maintenance costs of the system low and also monitors the reliability of the system more easily.
As of now, there are few Java-based software applications, like spreadsheets, word processors, and database applications, in the market whcih is a primary concern for businesses to shift to NCs.
Also, despite the increased reliability, NCs cause a business to be more dependent on a network making the maintenance and security of the network a big issue. When the network is down for any reason, the effects on the business are felt much more than with a single PC breakdown.
Net PCs vs. Network Computers:
The Net PC is a PC platform designed according to the Network PC System Design Guidelines which were co-written by Intel, Microsoft, Compaq, Dell, and Hewlett Packard. The Net PC guidelines were written to enhance the manageability of PCs while maintaining their performance and versatility. Threatened by the emergence of the Oracle and Sun NCs, PC manufacturers have embraced the idea of the Net PC and many have already announced forthcoming Net PC products.
The Net PC is designed to give businesses a highly centralized environment that can help them effectively reduce the total cost of ownership by deploying the best known methods of advanced manageability. "With its advanced management technologies, controlled configurations, and sealed case, the Net PC gives IT managers increased control over the distributed computing environment."1
The Net PC achieves its small size by eliminating extras such as CD-ROM and floppy drives, but what makes it efficient is its ability to pull resources from a server on the network. The NetPC is distinguished by its smarts since it can respond to commands issued from a remote computer and can share information about itself.
Net PCs are available at a wide-range of price points and performance levels, although still priced significantly higher than the latest NC offerings. Unlike NCs, however, the Net PC does not sacrifice desktop computing power, local storage, and application flexibility.
Nicknamed a "Browser in a Box," NCs are dramatically different from Net PCs. NCs are designed for a connected world where software and processing power is centralized on large network computers. However, the NC model is different from the traditional mainframe environment because individual users will have access to much more processing power.
NC backers are banking on the belief that companies won't think of the NC simply as a replacement for the desktop PC. Instead, they see the NC as a strategic shift from decentralized desktop computers to a richer, more feature-packed network that is as accessible and varied as the Internet. NC backers believe their advantage lies in the accessibility and flexibility of Sun’s Java software, which is small enough to give a range of devices from smart cards to computers access to the network.
With the development of Sun’s Java language, many companies have been pursuing aggressive strategies in order to capture a piece of the estimated 1.7 million network computer users expected this year (6.8 million anticipated by the year 2000). In addition, the major industry players recently agreed on a common set of standards, features, and functions known as the Network Computer Reference Profile I, for the industry to use in order to ensure future compatibility among manufacturers and their respective products.
Sun Microsystems, Inc. (Sun), recognized as one of the strongest player in the network computing market, redirected the network computing industry several years ago with its development of JAVA. Sun’s upcoming network computing plans are extensive with its premier product, JavaStation, planned for release by early 1999. However, there is some cautious optimism within Sun about JavaStation. In general, speed problems still dominate most of the debate within the industry surrounding Java. Sun is also concerned about the possible learning curve most users will likely experience during the transition from PCs to NCs. The move to network computing will require a dramatic product shift within the market, however, most providers are confident that the decreased cost, ease of use, and functionality will smooth the overall transition.
Oracle Corporation (Oracle) has also been recognized as one of the major forces in the development of network computing. Oracle’s recent efforts have focused around enhancements to its open, three-tiered Network Computing Architecture where an applications server resides between the network computer and a database. Oracle originally designed this structure to allow for multiple combinations of applications to be incorporated within one "open" operating environment. With the advent of network computing, Oracle believes that their hallmark architecture can be slightly redefined in order to fully capitalize on the benefits of the network computing movement.
Future plans for Oracle include a joint effort with IBM to combine the industry’s Common Object Request Broker Architecture (COBRA) and Java languages into a standard/foundation of software components for network computing. In essence, enhancements would be made to COBRA’s Internet Inter-ORB Protocol (IIOP) that would let visual development tools automatically generate Java interfaces for COBRA components.
Oracle has also implemented an aggressive international marketing campaign designed to take advantage of the global preferences for affordable computing and to propel them towards the front of the global network computing arena.
In mid-July of this year, IBM introduced two new network computers designed to meet the needs of the "middle, non-power" user (e-mail, Internet, and Intranet) market. The majority of IBM’s network computers have been developed to run optimally with its family of Lotus applications, however, with IBM’s recent investment of $150 million dollars for increased R&D, plans for an enhanced operating system (IBM’s OS/2 Warp) are in the works for use in a Java-based network computer available later this year.
Most recently, however, Lotus Development Corp., a subsidiary of IBM, released its eSuite family of products; the first complete set of business applications built for the network computing environment. In addition to supporting IBM’s future network computing needs, eSuite’s Java-based platform allows it to interact with any other open Java-based system.
Apple Computer, Inc. (Apple) has also decided to enter the network computing market with the introduction of its first product in January of 1998. The reemergence at Apple of Steve Jobs has placed this product line on the "fast burner." This move, Apple’s management hopes, will redirect the future of the company which has lost tremendous market share over the last few years in the PC market. Apple’s network computers will primarily be aimed at educational and publishing institutions.
When Wyse Technology (Wyse) dropped out of the PC market in 1994, it began an aggressive sales campaign that focused around network computing or "dumb terminals" as Wyse referred to it. As one of the first entrants into this market, Wyse currently claims to have 44% of market share and with the recent release of its Winterm, the world’s first Microsoft Windows network computing terminal, Wyse’s expectations have skyrocketed.
The most compelling advantage of NCs is related to cost. Corporate expenditures for information technology are growing at increasing rates, and many businesses are looking for ways to reduce their IT expenditures. The yearly cost of ownership for an average PC is estimated between $5,000 and $11,900, as PCs require constant software upgrades and users require substantial training. Similarly, the results of an internal investigation at Intel showed that, of the $9000 its spends on each PC, only 20% of the cost is for hardware, while the remainder is spent on connecting the PC to the network and keeping the PC up and running.
NCs may be a viable solution to the problem of escalating IT costs. For example, Oracle has recently released a NC starting at only $200. However, others are arguing that the cost of ownership issue can still be resolved with today’s PCs. Electro Scientific Industries (ESI) is one case in point. ESI trimmed much of its excess IT spending by resolving to buy from a single manufacturer and by simplifying the list of technologies that the organization was willing to support.
Overall, the introduction of NCs and Internet-based applications gives companies, as well as consumers, greater choice and flexibility in their IT purchasing decisions. For example, Sun's CEO Scott McNealy suggests that companies can "sidegrade" rather then upgrade their existing PCs, passing up new PC software for less expensive Web browsers that will encourage employees to access more applications through their companies intranet. Also, when buyers have more choices, computer manufactures are more likely to lower their prices.
NCs also provide a less expensive alternative for companies looking to centralize their IT functions. In fact, there is evidence of a trend toward IT centralization. According to the International Technology Group, 30.8% of companies surveyed in 1995 had a centralized IT function, compared to only 12.8% in 1990. Spiraling IT costs may be driver behind this trend; consider a multinational bank that amassed a $1 billion annual IT budget by maintaining over 900 distributed Unix servers supporting countless PCs.
Advantages:
Disadvantages:
What types of businesses are most likely to buy a NC:
NCs may also be attractive to busy top executives who may only require access to an Executive Information System on a company’s intranet. Furthermore, NCs may be appropriate for risk and operations managers who need to analyze information received from numerous foreign offices. For example, Lotus Notes is offering an intranet access tool called Domino that provides users with secure access to Notes through the company’s intranet. With this product, remote users can use a NC to quickly and cheaply send reports over the intranet.
An inspection of the current sales pitches surrounding NCs reveals a message of efficiency being used to sell this new product. The story goes something like this: because applications are run off of a central server instead of each individual workstation, fewer service personnel will be required to maintain the system. This view of network computing is certainly valid and will, no doubt, serve to create a point of entry for this product into the market. From an innovation standpoint, however, this efficiency tactic is not very interesting. It essentially says that network computing is the same as networking PCs but in a more efficient way. A question that may be more interesting to speculate on is what the introduction of NCs can do to increase the number of ways computers can be used for business applications. The following section will present some speculation as to the possible applications of NCs, especially when combined with other emerging technologies.
Retail
In the retail environment, network computing has the chance to revolutionize the way people shop as well as the way people interact with their retailers. The use of NCs, in conjunction with touchscreen technology and flat panel screens, will allow terminals to be deployed in a variety of locations that retailers would like to be able to get information to customers. In the grocery store environment, for instance, a NC with a flat, touchscreen can be placed on the edge of shelves. Such a deployment will allow a variety of functions which include:
Product information – nutritional information, etc.
Customer loyalty programs – adding a card swipe allows targeted promotions at the point of decision
Suggestive selling – suggestions based on the information being requested
Reminders – using the customer’s past habits to remind them of things they may need on this shopping trip
Promotion – the ability to communicate a message to the consumer concerning one the products they are choosing between
Directions – using a store plannogram to show customers how to get to a given product
Sale items – allowing a customer to access a list of those items that the store has on sale
Increasing choices – using electronic catalogs to offer items that are not profitable or commonly purchased enough to put on the shelves
Entertainment – allowing children to use the terminals for entertainment while parents shop
These functions and others like them are in the process of being tested. Some results of the effect of promotional messages at the point of decision are already available. Information Resources Inc in conjunction with Inter*Act Media have run limited tests and found that such promotion boosts both sales of the brand being promoted and the category as a whole. In this case both the retailer and the consumer goods manufacturer benefit from the use of the network computer in the aisle. A similar set of functions could easily be imagined in a department store setting or a specialty retailer (e.g., home electronics, toys).
Restaurants
The same hardware (Net PC with a touchscreen) with different software applications could also be used to a great affect in the food service industry. Already in some cafeteria settings, such systems are being used as ordering systems. By having people order using the touchscreen, the cafeteria employees can focus on preparing the food, delivering it to customers, and taking their money. These current applications, while crude, could easily be modified to fit higher end operations. Possible new functions include:
Payment functions - customers can pay directly with either a credit or debit card
Electronic menu information – specials, new menu items, nutritional information, etc
Logistics – linking of customer ordering to restaurant’s supply ordering process.
Drive thru – gone are the days of the fuzzy speaker, use the touch screen
Pre-ordering – in restaurants where long lines are common use the system to order food at the bar/lounge/waiting area before you sit down
Entertainment – the terminal could be used to entertain guests as they wait for their food by providing games or programming
Cross promotion – the terminal can be used to advertise promotional partners goods and services (especially in a fast food environment where movie tie-ins are quite common)
Such a system would increase throughput in most restaurants, add to the customer experience, decrease the need for labor, and reduce the amount of training required for new workers.
In the Home
NCs also have the potential to change the software market for the home user. It is possible to see a model emerge in which network computing is sold in much the same way that cable television is sold. Those not wishing to purchase a NC might be able to lease one at rates comparable to cable converters. The leasing company would not only sell the consumer the hardware but also access to their suite of applications. This will have a few positive consequences for the consumer. First, it will allow them to pay for only those applications that they need, when they need them. They will not have to purchase an expensive spreadsheet program for infrequent use. Instead, they can in essence rent the application from their service provider only when they need it. Secondly, this will reduce the amount of legwork the consumer must do to decide on an application. The service provider is put in the position of choosing applications from software providers and will most likely have greater time and resources to make an informed choice. Finally, this system will increase the bargaining power of the consumer of software. By forming what is essentially a buying group, the service provider is in a greater position to make favorable deals on software prices due to the number of buyers they represent.
This model of home network computing would probably be focused on those people who a) are not sophisticated computer users and/or b) are inclined to use their computer more as a means of communication rather than for its data processing power. Less sophisticated users are unlikely to have strong preferences for specific applications and would most likely prefer to have someone else making the decisions as to which applications are best. Similarly, those users who use their computers primarily as a communication device would prefer this type of service because it requires less of an upfront investment and because it more closely emulates the way in which they are used to paying for communications services.
Companies well positioned to take on this type of business would be cable television providers, telephone companies/utilities, and on-line service providers. On line service providers, such as America OnLine, are in an especially good position to offer this type of service because they are already providing a very similar service to people who already have PCs. Cable companies have a potential advantage in that they have access to the "best wire" currently coming into the house to provide quick service. Phone companies and utilities are likely candidates because of their extensive customer bases and the fact that they (especially phone companies) can market this as an extension of communications service rather than as a traditional computing purchase.
CASE: Oracle’s Network Computers, Inc. and 1-800-FLOWERS:
On April 7, 1997, Network Computers, Inc. (NCI), Oracle's software division, announced 1-800-FLOWERS to be one of the first corporate customers to replace the mainframe terminal environment with Java-based NCs. 1-800-FLOWERS is the world’s largest florist with more than 2000 employees. Currently, the telereps use mainframe terminals which are not Web-enabled and have limited functionality. One driver of this decisionis that, especially during holidays, the company’s sales increase dramatically and they have to hire seasonal employees. They anticpate that NCs will not require much training; therefore, there will be a reduction in the cost and time spent to train the temporary workers which, in turn, will also increase the volume of orders the company workers can handle. Additional cost savings are expected in the maintenance and administration of the system, since this will only be done on the network, not client side. Currently, 10% of company sales come from the Internet. With the addition of the Java and HTML-enabled network computers, this percentage is expected to increase.
"1-800-FLOWERS is an ideal example of how network computers can transport legacy mainframe shops right past the client/server, stand-alone desktop model and into the next generation of Java-based, network computing," states Jerry Baker, President of NCI.2
1 Intel, "The Network PC, Breakthrough Manageability Without Compromise," The Network PC White Paper, www.intel.com/bus...puting/netpc/netpcwp.htm
2 Halper, Mark, 'Are Network Computers The Way To Go?' , Business Week, 10/13/1997.
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Wyse Technology, "Wyse Technology's Ground Breaking Winterm Lauded for Technological Excellence," www.wyse.co.uk/pressre/t212595.htm