Here We Go Again: Thin-Client Vendors Look To Unseat PC

The era of the PC is almost over, and the era of the [thin client] is about to begin," Oracle CEO Larry Ellison said during a press conference in March 1996, echoing a declaration similar to ones often made by Sun Microsystems CEO Scott McNealy around the same time. Almost 10 years later, though, thin clients command only a tiny fraction of the desktop market.

Here we go again. Some vendors are saying that the increased availability of Web applications and growing network bandwidth will see--for real, this time--the thin client overthrow the PC as king of the desktop. Wyse Technology Inc. and Sun hope to forge the way, revealing last week an agreement to bundle and sell Sun Secure Global Desktop software on Wyse's thin clients and work together more.

"You're not just talking about a device, you're talking about an infrastructure for computing," Wyse CEO John Kish says. Wyse leads the thin-client market with $225 million in annual sales.

Thin clients eventually will make up 85% of the desktop market, Kish predicted at an event in New York City last week. A tad too ambitious? Consider that thin clients account for about 1% of today's desktop market. Research firm IDC projects that the thin-client market will hit 2.4 million units this year, up 46% from 2004, and reach 5.3 million units next year with total sales of $1.25 billion. Hewlett-Packard holds second place in the market, followed by Neoware Systems Inc., according to IDC.

Cost Factor The thin-client market has had its fair share of missed promises. About seven years ago, when "inexpensive" PCs cost more than $1,000, thin-client vendors enticed businesses with $500 price tags. But PC prices continued to drop; some now sell for as low as $300. The lowest-priced thin clients hover around $200, and some thin clients still cost more than $500.

Meanwhile, network-bandwidth limits, proprietary technologies, applications that don't run well over a network, and an unwillingness by many to give up the power of the desktop stopped the thin client's momentum.

The thin-client story line today focuses on low operating costs and security. With no moving parts or hard drives, they have lower support and software costs. Having a thin-client architecture saves the city of Dayton, Ohio, $60,000 to $90,000 a year on electricity costs alone compared with a conventional client-server architecture and more than $1.5 million in services and support savings, Dayton CIO Bill Hill says.

Thin clients have software, usually a Web browser or slimmed-down operating system, that runs on virtual memory and lets them access applications on servers.Does the thin client have another chance? Well, 100-Mbps Ethernet connections aren't far from the norm in some large companies, and people increasingly use the Web and rely less on desktop productivity apps on their hard drives. IBM and HP are touting a close cousin of thin clients, the PC blade (see story, p. 28). The online version of Microsoft Office, called Live, is set to ship next year. And don't forget security: Thin clients don't store any customer or company data.