NT terminals cost too much

By John Cox
Network World, 6/22/98

New York - The new breed of Windows-based terminals, touted as low-cost desktop devices, may run into a problem: customers who think the devices are still too expensive.

The perceived high cost of the machines, compared with steeply dropping PC prices, could slow - if not stall - the adoption of thin Windows desktops.

Makers of the terminals were out in force here last week at PC Expo, where Microsoft Corp. announced the release of Windows NT Server 4.0, Terminal Server Edition (TSE), a multiuser version of NT. Nearly all the devices demonstrated last week range in price from $599 to $1,289. Some models are priced higher.

However, Motorola Corp. and Acorn Group PLC have announced designs that could eventually let manufacturers drop prices to about $200.

For now, users are stuck with today's prices. "The terminal makers have just not gotten into the game and are way out of line on the pricing," asserted Bill Botti, president of Computer Networks, Inc., a Pleasanton, Calif., systems integrator that specializes in thin-client computing.

The prices are deterring users from replacing existing text terminals, sometimes called "green screen" terminals, he claimed.

"We could multiply by 10 times the number of [Windows-based terminals] we sell if we were at the right price point," Botti said.

A trio of TSE beta sites have looked at the terminals and decided they won't be buying them any time soon. The beta sites cited as reasons a lack of floppy disk support, slow performance compared with Pentium-based PCs, and falling PC prices.

"If I were looking at terminals priced in the $250 range, I'd be tickled," said Rick Smith, vice president of information systems at HOB Entertainment, Inc., the West Hollywood, Calif., parent of the House of Blues restaurant chain.

"I can buy a Pentium PC with lots of disk and RAM and pay $800 to $1,000 once I include a network card and some other stuff," he said.

Smith is going ahead with an aggressive deployment of TSE servers at the restaurant sites because he can manage these from headquarters and speed up deploying new applications. But the users will be sitting at PCs equipped with special client software to access the server applications.

"It's going to be a very tough market to crack without a distinct price advantage," said Keith Gray, senior geophysical consultant with Amoco Corp.'s exploration and product technology group. "I'm going to be buying PCs unless there is a compelling price differential."

The Administrative Services division of the University of California Los Angeles evaluated Windows-based terminals and was disappointed.

"They're a lot slower than PCs," said Jack Tchiligrian, software specialist with the division's IS department. "For the price and the cost effectiveness, we'd rather get a PC and let the user run everything else that's not running on the TSE servers."

Tchiligrian said he is not impressed by the terminal vendors' claims of improved management and a stable software environment. "We're using standard software, most of it Microsoft products, which are integrated and work fine," he said. "And whenever something breaks, we just go and fix it."

Microsoft itself has made it clear to terminal vendors that the company brings to the TSE market the same focus on market share, high volume and low cost that it brings to its other products.

"We think the [high-] volume devices will be in the $500 range," said John Fredericksen, Microsoft group product manager for TSE. "But there will be a market for, say, $800 devices, because some customers will want more management features or performance."

Relief in sight

It's unclear how long the vendors will be able to maintain their current prices, especially as two major companies, Motorola in the U.S. and Acorn Group in Britain, have announced Windows-based terminal reference designs that would cost between $70 and $110 for manufacturers to build.

"With the system case, power supply, and margins for the manufacturers and channel distributors, the $199 price for the finished system [excluding monitor] is quite easily achievable," said Steve France, Acorn's senior marketing manager for information appliances.

Motorola managers said two top-tier PC builders are in serious talks with them about adopting the Motorola Wincept design.

These manufacturers are attracted by the opportunity to sell tens of thousands of low-cost terminals that would have to be attached to more expensive and higher margin servers, according to Bob Morris, operations manager with Motorola's personal computing division.

That's what front-line terminal deployers like Botti are waiting for.

"The first guy who delivers a $500 Windows-based terminal to end users will get market share," Botti predicted. "And market share in an exploding market is the name of the game."