Thin Is In

It was just a few years ago that India's PC adoption rate was in a dismal
state.This year, IDC stated that one in every 50 Indian owns a PC, which shows a
marked improvement.

Many vendors are zeroing in on to this opportunity at hand. While this
success story goes on, another parallel one is being spun, slowly but steadily.
Thin client computing, a technology that has been around for the past two
decades, is now making a comeback, and though vendors wouldn't say that this
market is booming as such, they agree that the market for thin clients in India
is opening up and offers huge potentials.

In a way, this market is all set to give the PC market a run for its money,
or at least make it sit up and take notice. At least that is what statistics
seem to suggest.

The growth in this market can be seen from the increase in the unit shipment.
According to IDC, in 2005, thin clients shipment worldwide increased about 43
percent from 2.4 million in 2004. This year the market is all set to see an
increase to 4.2 million, which is almost double the earlier figure.

Thin computing is a technology whereby multiple monitors are connected to a
thin client, which is basically a centrally managed computer without a hard
disk. It gives the users all the basic functions they would need from their PCs,
minus the problems associated with independent computers such as security,
software and maintenance.

So why did this technology, which has been around for a while now, never take
off in the first place? And if there are so many advantages it offers, then why
are there still not as many takers for it?

	"In BPOs and call centers, computer viruses are major threats. Data is critical and so is its security. Agents cannot forward the data or misuse it when a thin client is deployed"
S Balaji, Deputy GM-Marketing and Support, HCL Peripherals

Take two

They say there is a time for everything. But there are those who think ahead
and have to wait for their time to come.

Thin clients fall into this category. At the time when thin clients were
introduced way back in the 80s, the technology to support it was not as
advanced. Hence, thin computing, which was earlier known as 'graphical
terminals', took a backseat. Not to mention, this technology was very expensive
then (as it was till just a year back). Most applications were also not
web-based then and the available applications were mostly for plain server
architecture.

“Most businesses didn't have central server architecture. Only the big
companies, who understood the technology, deployed it back then. It was in the
late 90s that thin clients began to see success,” explained S Balaji, Deputy
GM-Marketing and Support, HCL Peripherals. HCL first dabbled in the thin clients
market in 1994.

Wyse Technologies, a leading player in this segment, has also been paying
much attention to the Indian thin computing market. Speaking about why the
technology was not highly successful when introduced some years back, S Adhikari,
Head-Sales and Business Development, India, Wyse Technology said, “At the time
thin clients were introduced, the technology available, or the backend, was not
so robust. The available bandwidth was not so good, mainframe was not reliable
and there was too much redundancy. People depended too much on CPUs. But today
we have broadband, robust server architecture, and virtual desktops and server
software.”

Agreeing that thin clients did not get its share of success back when it was
first introduced, Sanjay Peer, Director-Channel Sales, India and SAARC, VIA
Technologies added that it had come a long way since its introduction. Shedding
light on why thin clients are back in vogue he commented, “The entire ecosystem
of hardware, software, network connectivity and central storage around thin
client computing has evolved. Today, thin clients can be deployed across a wide
range of applications within many business verticals. MIS managers and hardware
consultants have started noticing immense benefits of deploying thin clients.
They are demanding thin client solutions from their respective solution
providers. All these developments are translating into higher levels of interest
and growing popularity.”

TC vs PC

Though there is visible interest in the technology today, what is surprising
is that Indians, who are quick adopters of technology, didn't lap up thin
clients or take the bait then. The answer perhaps is in the fact that people saw
it as a wait and watch period, or as Balaji of HCL put it, “No one want to be a
first time buyer.”

There was also way too much dependence on PCs. People were just getting
comfortable using PCs when all of a sudden a newer technology was introduced,
and users were unsure of using a PC without a hard disk or local storage.
Explaining the phenomenon, Adhikari said, “India is still on a learning curve of
PCs, and the curve is currently at 60-70 percent. Organizations in India are
still to learn the benefits of PCs, so while they are adapting to this
technology, another one has been introduced. Hence, with this new technology,
they may take time to adopt it.”

Earlier, thin clients also came with low memory. While some of the first thin
clients available came with 1GB RAM, today, thin clients are available with 1GB
flash memory.

Another problem is breaking the mindsets of people who depend on PCs. There
are many who do not know the benefits of deploying thin clients. For them, the
PC is at best cheaper and offers more utilities.

Though a thin client may not offer all the features that a PC may, its
advantages far out number its cons. “The PC prices are our competitors. This is
because we have to break a mindset. PCs are available at Rs 20,000. Thin clients
start at Rs 25,000, plus Rs 5,000 for a monitor,” shared Adhikari.

Agreeing with him, Peer added that it is also difficult for an end-user to
come to terms with the fact that his machine is no longer personal, hence the
mindset towards thin clients.

Advantage TC

According to Manish Dave, Director, Mumbai-based Apurva Computers
Technologies, a system integrator and one of the few Indian companies to
manufacture thin clients indigenously, the reason why India has accepted thin
client computing now is due to the fact that it is a price sensitive market.

“With a desktop, one has to reinvest in it every four to five years for
maintenance and upgradation of the machine, whereas thin clients require single
point upgradation and maintenance,” he pointed out. It was during a trip to
Japan where Dave first saw a Linux-based thin client and realized the potential
it had in a country like India. Today Apurva Computers Technologies manufactures
over 50 thin clients and 120 thin client LAN cards called Smart Station at its
facility in Surendranagar.

The advantage of deploying thin clients is that they offer maximum security
and high return on investment (RoI). Users don't have to worry about data loss
because the data would be stored centrally and not locally. Cost of maintenance
would be cut down drastically since individual nodes would not have to be
maintained.

Keeping in mind the power condition in India, thin clients offer hope for
business that has to depend on power backup for hours on end. “A normal PC
consumes about 360 watts, whereas a monitor connected to a thin client consumes
only 23 watts,” chipped in Balaji. In short, for a business that wants highest
productivity/uptime and lowest possible total cost of ownership (TCO) from its
equipments, thin clients would be an ideal option with its high RoI.

But the thin client is not without its failings, especially in its
perception. As mentioned earlier, the user could feel robbed of their privacy.
“But thin clients are a total productivity tool. However, they offer limited
high-end audio and video streaming capability due to which they are not suited
for business verticals like 3D graphics and animation,” added Peer.

Some of the first thin clients available came with 1GB RAM. Today, thin clients are available with 1GB flash memory

Market size

Currently, most vendors in this segment acknowledge that the demand for thin
clients is not all that high; hence the volumes are very low. According to
Adhikari, “The current market size of thin clients is $10-11 million, which is
approximately 50,000 to 60,000 units across India. We are looking at a growth of
approximately 30 percent YoY.”

International research agencies and various market intelligence reports
suggest that the thin clients market opportunity is anything close to four to
five percent of the total PC market size.

“On this assumption, India market potential is anything between 3,00,000 to
3,50,000 units. But the real numbers are a bit lesser than this primarily
because disk cannibalizes some of the demandless PC nodes in this space. Our
assumption is that thin client market in India is anything between 2,00,000 to
2,50,000 units as on date. The growth rates are much higher in the PC market,”
suggested Peer.

Target verticals

Without a doubt, the drivers of this market are banking, financial,
education and ITeS sectors. Thin clients are a need-based technology. Adhikari
cited an example of a Hutch store or Dominos outlet. Here, the employees do not
need CPUs at their workstations. Terminals are just required to take orders and
they do not need local storage.

Because of the nature of their business or the way they work, these verticals
prefer thin computing. Dave pointed out that the number of computers required in
these segments is very huge so they would have to undertake a lot of upgradation
and maintenance for each PC.

Balaji added, “In BPOs and call centers, computer viruses are major threats.
Data is critical and so is its security. Agents can not forward the data or
misuse it when a thin client is deployed.” The government (education side) is
another huge potential market, which has picked up in the last year, according
to Balaji. “I am betting on the education (government) sector. We support most
regional languages. This will drive our numbers,” he added.

HCL recently also supplied a large number of thin clients for a tender from
the Maharashtra High Court. Balaji pointed out that that though the potential
was huge in the government sector, it would take time for the deployments due to
policy addiction, and not to mention, bureaucracy.

While agreeing that the major demand for thin computing was coming from the
niche technology adopters such as BPOs and BFSI, Adhikari was of the view that
at least for Wyse, the driver was definitely not the government sector. “Though
the government sector is huge, unfortunately we are not focusing on it. This
sector is very price sensitive and wants very low prices, which we cannot offer.
For example, if a product costs $500, we can offer it at $480. But the
government would ask for it at $200. Since the volumes are currently very low,
we cannot offer it at such prices,” said Adhikari.

Richard Brown, VP-International Marketing, VIA Technologies and Sanjay Peer, Director-Channel Development, India and SAARC, VIA Technologies display thin clients from VIA

Channel window

Most vendors in this space have chosen a select channel route for their
products. HCL recently partnered with Ingram Micro for their thin clients. It
has SIs across the country (11 locations and 60 authorized service providers).
Wyse too, as its national distributor, has signed up Ingram. The disti further
identifies partners for the product from its network of 8,000 partners across
the country.

The irony is that if thin clients propagate low maintenance, how would this
deal benefit the SI who banks on post-sales service for revenue? According to
Sanjiv Bhavnani, CEO, Visesh Infotecnics it is, “Because of the high
configuration of thin clients, cost outflows reduce. Thus the customers are
happy with the service provided. In such a scenario, the demand for thin clients
increases and more people are willing to deploy it in their offices. Given the
rise in demand, even if the service revenues are affected, it doesn't bother
much as more people are inclined to install the features, leading to sound
profits.”

Agreeing with Bhavnani about the vast selling opportunities out shadowing the
service revenue, B Mukund, CEO of Chennai-based Mukund Infoservices said, “When
we have more opportunities from deploying thin clients we will not be
considering the amount received from servicing. The servicing revenue is not at
all a factor in our total revenue.” According to Mukund, HP and Wyse are the two
major vendors in the thin client market. “These vendors have an edge over others
in terms of superior technology and a better channel network than others,” added
Mukund.

So would the SIs in the segment recommend this business to others? “I would
definitely recommend thin clients as I feel it will find a strong customers base
in the years to come. From a users perspective, there is a definite market as we
are living in a mobile world and seeking better connectivity,” answered Bhavnani.

Vendors on their part offer incentives to their partners from time to time.
Incentives could be a trip abroad for meeting targets, or various incentives for
getting repeat orders.

Forecasting

Vendors and partners alike seem to agree that thin client is like a sunrise
market. Speaking about the road ahead, Peer commented, “We firmly believe that
India is going to be a one million unit market by 2011. All the ingredients for
fueling the market demand are in place. BFSI, government (including e-governance
and e-education) would contribute a major chunk of the numbers.”

Mukund added that the future of thin clients is very bright and that there
would come a time when this technology would be deployed in every home with more
enhancements. With so much growth and dynamics in the market, such as Cisco's
virtualization and SMC's centralized data storage, this market sure looks like
its going to be a hit. It is only a matter of time for this sunrise market to
boom.

Ruth Samson

ruths@cybermedia.co.in

(With inputs from Amrita Tejasvi in New Delhi)