Picking the PC's new directions

As the 17th annual PC Expo takes stage in New York this week, the venerable personal computer is finding that its road to success has taken a few new turns.

The flames of the PC revolution 20 years ago were fuelled by the desire to democratise processing power for a seemingly unlimited number of tasks. Today, many IT managers are seeking freedom from the high cost and management hassles of corporate PCs and are discovering a growing number of alternatives, ranging from handheld PCs to server appliances. But although it is fashionable to say the PC is dead or dying, the platform is far from being overthrown.

The growing need for communication and the availability of cheap processing power is splintering the PC platform into a range of devices designed to meet a number of specialised needs, such as remote e-mail access and network-based storage.

"PCs are definitely becoming network access devices," says Steve Kleynhans, vice president of workgroup computing at the Meta Group, in Stamford, Connecticut. "There are a lot of devices coming down the road, but you won't recognise them as PCs. We're moving away from personal computers and moving towards personal computing."

But just as the PC is becoming more than a "mainframe on the desktop," the need for greater simplicity and usability has increased. There are signs that PC makers will react much as they did when they banded together to stave off the network computer. But it remains to be seen if the PC can prove its worth in the age of the Internet.

Forced change

When looking for proof of the changes ahead, one need look no further than the PC industry itself.

"In 1975 Bill Gates and Paul Allen had a vision: a PC on every desktop in every home. But in this, the third generation of computing, rather than pursuing a dream of a PC on every desk and in every home, what users want is to be connected to the Internet when they want, where they want, on any device," said Steve Ballmer, president of Redmond, Washington-based Microsoft, at a recent conference.

With that sentiment in mind, Microsoft is for the first time allowing something other than a PC to run one of its major operating systems by including Windows Terminal Server as a core part of Windows 2000. In doing so, the software giant is making it easier to replace a PC with a variety of thin clients, from simple display devices to Windows CE handhelds.

And Microsoft is not the only industry heavyweight recognising the shift in the PC market.

Intel has been spreading around its money, investing in such non-PC-oriented chip businesses as the Internet-device-oriented StrongARM chip, snatching up networking start-ups, and heartily backing the Linux community.

"I believe very much that there will be an appliance model," says Paul Otellini, executive vice president and general manager of Intel's architecture business group, in Santa Clara, California. "Intel wants to have an Intel processor at every one of those [Internet] connection points."

Too much for too much

So why would PC stalwarts such as Microsoft and Intel want to diversify away from the product that has been so profitable for them? Because customers are getting fed up with the soaring costs and complication of the PC platform and many IT managers view the business model as a self-perpetuating scam.

"It's a vicious cycle," says Brian Jaffe, director of IT at a New York-based advertising agency. "Developers build more complicated apps, and the hardware guys build stuff to run it. And the added costs don't justify the performance."

With Microsoft aiming more than 30 million lines of code at each desktop with the release of Windows 2000 later this year, the costs of managing PCs is not getting any better.

"In the area of complexity there is a real beef, and it is a real vulnerability for the PC model," says Roger Kay, a PC analyst at International Data Corp. (IDC), in Framingham, Massachusetts. "PCs have a tendency to fail, so there is a great longing from users for a simpler world. That is creating a big window of opportunity for other devices in the market."

PC makers are taking the complaints to heart. Compaq is currently working on a simplified PC that will run only Microsoft Office 2000, according to sources. And Hewlett-Packard, Dell and Compaq have this year announced thin servers -- fixed-function PC servers that perform a single task and rely on network-based resources for storage and data.

On top of specialised devices, such as thin servers, IT managers are taking advantage of the economics of the PC industry in the server arena by adopting PC servers for dedicated tasks such as Web serving and e-mail.

Meanwhile, NC makers are eyeing Windows 2000 as an opportunity to legitimise their products.

"The PC isn't going to be replaced by a thin-client company -- ever," says Jeff McNaught, vice president of marketing at Wyse Technology, a maker of thin clients. "But the post-PC era means that PCs are no longer the only good solution, and that era is being ushered in by Windows 2000."

Wily veteran

Despite the constant onslaught from competitors and the complaints of end-users, the PC has demonstrated impressive resilience in the past, and its makers have addressed legitimate complaints about the devices.

Three years ago, when charges of high cost of ownership and unnecessary complexity were lobbed at PC stalwarts by NC advocates -- most notably Oracle CEO Larry Ellison and Sun Microsystems CEO Scott McNealy -- the PC world responded.

Average selling prices of corporate PCs plummeted from $US2,453 in 1996 to $1,321 in 1999, according to IDC numbers. And two years ago this week the industry rallied behind the ill-fated concept of the NetPC.

Although the products themselves were a total bust, the hype that was generated -- and the development of better desktop-management software from vendors such as Microsoft and Intel -- was enough to stave off the thin-client onslaught and kill off any momentum that might have mounted behind network terminals.

But the same arguments are likely to flare up again next year when Windows 2000 lands its bulky code base on corporate desktops.

"Windows 2000 is the kitchen sink of OSes," says Meta Group's Kleynhans. "Deploying it is probably going to be a larger undertaking than Microsoft would like you to believe. The migration will be harder than you expect."

PC vendors, however, remain confident that the PC is a survivor and will evolve to overcome any challenge it may face.

"In the near term, there will almost certainly be technology disruptions that make us look at the PC platform in a different light," says Duane Zitzner, CEO of PC business at Hewlett-Packard, in Palo Alto, California. "The PC is capable of evolving with changing environments."

PC industry leaders point out that growing bandwidth creates a need for more processing power.

Onward and upward

Vendor confidence in PCs seems to be holding steady, but company bottom lines tell a different story. Support for the basic PC platform is waning as PC vendors fail to pull in significant profits from the highly commoditised products -- even in the traditionally high-margin server market.

Compaq will begin to push its newly acquired Alpha platform, which runs Linux and Tru64 Unix, over its Windows NT server products because the PC giant can no longer make sufficient revenues from the PC platform, according to company sources. Company officials have also told employees that active sales of 32-bit NT will "go dormant" until the release of a 64-bit Windows and the oft-delayed 64-bit Merced chip from Intel, now due in the middle of 2000.

In addition, IBM lost more than $US1 billion on its PC unit last year, prompting CEO Lou Gerstner to declare the era of the PC over. Nearly all major PC makers concede that not only is the Unix market not dying but it is in fact growing healthily, spurred by a pendulum swing back towards centralised computing.

Intel and Microsoft will continue to push the performance and reliability of PC servers in order to sell products in the more profitable high-end market. But breaking into the glass house has proven a difficult challenge for PC servers and their adherents. Windows NT 4.0 disappointed CIOs that were counting on it to be the backbone OS of their business. Instead, NT proved to be more of a department-level platform and Intel's vaunted Pentium chip has yet to provide the processing punch needed for power-hungry data-centre applications.

Companies are banking on the forthcoming eight-way processor architecture from Intel, 64-bit Windows in the offing, and the 64-bit Merced chip from HP and Intel to help make the leap. But in the process, the desktop PC may look a lot different.

"PC makers are really just moving the processing to a different place," says Eric Kuzmack, a senior IT analyst at Gannett Publishing, in Silver Springs, Md. "There is a lot of TCO [total cost of ownership] reduction when you do that, but you still have a Windows OS running on an Intel chip, which is what a PC is, it's just moving into the glass house."

But the move is slow, and with the exception of Dell, all PC vendors already have substantial non-Wintel offerings to serve the needs of IT's back rooms.

In the meantime, the ever-changing technology marketplace, spurred by the effect of the Internet, will continue to apply a full-court press on the all-purpose PC. Analysts are predicting another precipitous decline in acquisition prices, as well as a wave of technologies to simplify the PC interface, including voice recognition and 3-D graphics. But applications using either of these technologies will likely require more processing power and more robust operating systems. And the beat goes on.

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Dan Briody

PC World

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