By Ong Boon Kiat
Thursday, June 02 2005 10:55 AM
URL: http://www.zdnetasia.com/insight/software/0,39044822,39226083,00.htm

newsmaker Wyse's new CEO John Kish was explaining why he thinks the thin-client computing concept will become even thinner.

Thinner, or being able to work with less hardware, because the ex-Oracle and Ashton-Tate man is sure that the next wave of growth for thin-client applications will feature strongly the wireless handheld device market.

"I think," he said as he fished out his mobile phone from his coat to punctuate his point, "[this new mobile thin-client market] will be as large as the phone market, which is a multi-trillion dollar a year market"

		Kish on: Why Asia is hot The handheld device market A "Flash-less" technology Thin-client and open source

The fact that Asia's appetite for new mobile communication and innovation is currently unmatched partly explains why Wyse has embraced Asia in a such big way in the last 12 months. "It takes way too long for US carriers to catch up with this," he said.

The other reason for betting on Asia is Kish's belief that this region's potential for adapting to thin-client technology better than other parts of the world. Thin-client adoption in Asia, he explained, will grow faster than US over the next few years simply because there is a higher level of IT infrastructure building here. "Once you have a powerful network and backend, what you realize is that you don't need a powerful PC on the front-end. And so those companies are now seeing that thin-client model can be a very real alternative," he said.

Thin-client technology--seen mostly on pared-down desktop systems that rely on back-end servers to run their applications--was highly-touted when it first gained prominence as a cheaper alternative to PCs more than a decade ago. A pioneer in its field, Wyse released the industry's first Windows-based thin-client terminal in 1995. Last year, IDC credited the San Jose company with a market-leading share of 37 percent worldwide--in a market worth US$560 million a year--followed by Neoware and Hewlett-Packard.

Last year also saw Wyse nearly emptied out its development operations from US, paring down from about 100 to 25 developers. In the same period, the makers of increased the scale of its Asian development from nearly none to now a staff strength of about 150. "Going to 200 soon," Kish quipped.

"Asia is effectively now our only base for development, because we want to be as close as we can to the next area of growth," he said. The two dozen staff which still ply from San Jose, he was quick to point out, do only co-ordination work, leaving the heavy-lifting product development work largely in the hands of Wyse's 100-developer strong Bangalore branch and its three month-old, 30-man Beijing center.

But if the dizzying growth figures projected by analysts for Asia excite the man who boasts a Ph.D. in Mathematical Logics from the Johns Hopkins University, Kish is bullish also because he believes Wyse holds this market's next trump card: A thin-client technology that can work without Flash memory.

In Singapore last month to "check on Wyse's Asian investments", Kish spoke to CNETAsia about Wyse's new software architecture, and its plans to operate in Asia in the coming months.

		Kish on: Why Asia is hot The handheld device market A "Flash-less" technology Thin-client and open source

Why have Wyse transplanted its engineering operations to Asia?
The argument really was that if you look at the thin-client market as a whole, which has been growing at about 22 to 24 percent a year, and then try to figure where the greatest areas of growth would be in the next five, it is very easy to see that they are in the Asian markets.

Consequently, if you are going to put development teams somewhere, you put them as close to the [growth] markets as you can, you tend to get better response. Especially given the nature of some of the Asian markets, where you have to be very fast in the ability to make changes, and customize products. So we made the decision to move the engineering team here. The decision was to put the muscle where the markets were, and if I look at not just the thin-client markets base but other related markets like the consumer markets, China and India represent some of the largest markets in the world.

The company had traditionally not done a good job servicing these markets, so we simply made the choice to be aggressive here.

Are you here mainly because it is cheaper to operate here?
If I had to list three reasons why we are here, cost ranks only number three. The most important thing was proximity to the Asian markets. The second thing--and people laugh when I say this, but it is honestly true--it is easier to get high-level talent in Asia than it is in US right now. There are more software engineers coming out from the universities in China and India, than there are coming out of US.

For me, it's really the ability to recruit world class talent, in the market that we want them to work in. The less expensive part of the equation did not drive the decision. What drove the decision was: Where in the world can I find a hundred engineers like this, bring them up to speed, and get them going? And I tell you, you can't do that in Silicon Valley. There're just not enough people there. You can do that Bangalore, China or Eastern Europe. Those are the three areas where you see a concentration of engineers.

Why are you bullish about Asia's thin-client take-up?
Because the economies here are much more vibrant and there is a lot more infrastructure investment going on today. If you look at IT spending in Asia in the last few years, a great deal of it has been network infrastructure and back-end servers. Once you have a powerful network and backend, what you realize is that you don't need a powerful PC on the front-end. And so those companies are now seeing that thin-client model can be a very real alternative.

Another thing that's going on in Asia is that all the privacy issues are finally coming up. India, for example, is right now building its citizens' database and is having a hard time figuring out whom to give access of that database to, because it doesn't want people to steal information from it. Japan has a new data protection act. We'll see that, I think, cascading across Asia over the next few years.

How much does Asia contribute to revenues now to Wyse?
It is about 12 percent of our revenues. The goal is to get it to about 30 percent over the next two years. So that calls for a doubling each year in size. Europe contributes about 30 percent, with US accounting for the remainder. But if you look at the growth factors of the markets, the investments need to be made in the 12 percent market, not the 58 percent market.

We think that the thin-client market growth in Asia will be between 40 to 60 percent. The growth in US has flattened, between 6 to 10 percent a year, because the penetration is much higher in US. IDC reported a compounded annual growth rate of 22.8 percent in its last report, with Asia outperforming US.

		Kish on: Why Asia is hot The handheld device market A "Flash-less" technology Thin-client and open source

When you say Wyse wants to tap into Asia's consumer markets, how does thin-client--traditionally an enterprise technology--fit in?
One of the things that you'll notice when you think about the thin-client is that it really is a window into the network. It is a device optimized to let people take advantage of high-powered networks and servers, and to do that in a low-cost way, which provides high security, etc. Architecturally, the thin-client which sits on a desk and one that I hold in my hand isn't really that different in what they actually do and how they participate in the network.

The real difference has to do with what is resident on the individual machine. In a typical thin-client [desktop], all that is resident is the embedded operating system; for a phone, we embed the operating system and a set of applications. One of the initiatives that we've just recently taken is going to be to remove flash memory from the thin-client device and begin streaming the operating system and applications on boot up. We believe that the same paradigm will apply to the consumer market.

Explain the benefits of streaming thin-client applications into handheld devices.
If you look at markets like China, where you have six and half million new mobile phone subscribers per month now, the less expensive you can make the phone, the better it is for growth. And if you are trying to make the phones more cheaply, just like a thin-client, you can take out the most expensive parts.

Now the parts that you can't take out are the screen, and the processor. But you can take out the Flash memory, which is the third most expensive component inside a phone, or a consumer device. This is exactly the same thing for the desktop. So you'll see us removing the Flash to drive prices down for the enterprise thin-clients, and at the same time, enable a new type of computing for the consumer space.

How big can you see the thin-client hand-held market become?
I think it is as large as the phone market, which is a multi-trillion dollar a year market. The real question that has to be asked is if you have this device, where do you want things processed? When I lose my phone, the hardest thing about it is that I have to enter in my address book again. If all that were actually stored on the network, all I have to do is to turn on the [new phone] and it would be streamed down to the phone for me. If I am a CIO, I don't want data on my phone, because if I lose it, the data can be accessed by somebody else. CIOs tell me that one of the biggest headaches they face today is the BlackBerry. BlackBerries are just like the PCs of the early eighties: They are everywhere and not controlled. Everybody wants one, people buy them on their own but there's no way to control them. What they would prefer is, well, almost a thin-client BlackBerry--one that gives you the ability to do your mail but with nothing resident on their device.

But the BlackBerry users I know adore their devices, and many would not be persuaded to trade it for anything else…
Well, you know, I agree with you. And I love my BlackBerry. But if we sat you down in front of a thin-client terminal and a PC, and mix them up, I'd bet you couldn't tell the difference. And the same thing will happen with Flash-less phones and thin-client phones, because all that you respond to is "does it do what I expect it to do, can I make a phone call, or get my e-mail?". You won't care where the data was. As a matter of fact, I like the fact that my data is somewhere else.

Are you working with phone companies right now?
Yes we are. We have conversations going on with carriers in Europe and Asia. But interestingly, not with US carriers. It takes way too long for US carriers to catch up with this.

Who are you talking with?
I can't disclose this right now. But we will be announcing some thin-client phone trials in Asia by year-end.

How will your execution change, as your business moves from desktop to also mobile devices?
In the enterprise space, Wyse sells hardware which accounts for a good percent for our revenue and profits. In the consumer space, we won't sell hardware, just software. Interestingly, the device manufacturers have the same interest in this as the carriers. The cheaper they could produce their devices, the lower the price point can be, and the less the subsidies phone companies have to give them. So the economics seems to work for everyone. The real issue is in understanding how to roll these out into the markets.

		Kish on: Why Asia is hot The handheld device market A "Flash-less" technology Thin-client and open source

Let's talk about your "Flash-less" thin-client technology. How much can a service or equipment provider save by doing away with Flash memory?
For a consumer device, the Flash is the third most expensive component, and in a thin-client [desktop], it is the second most expensive component, after the processor. For the latter, [Flash implementation] accounts for about 30 to 40 percent of the cost. This includes the electrical system required to support Flash, like battery, etc, etc.

Do you derive any technical benefits by forgoing Flash memory?
Chief advantage is that the applications don't exist when the device is turned on. More importantly, the device can take a number of different identities anytime it turns on. For example, we have some very large customers which are in the process of shifting from Microsoft- to Linux-based apps, and they want one device to do this. So they don't want to have a device that already has an operating system on it because then when they want to go to Linux, they have to throw that one away, and throw the licensing fee away. So our devices are such that you can run XP on it one day and the next day, run Linux. You can also run Blazer, which is an OS that we have. For a thin-client, the embedded OS is actually very highly-optimized. You don't need all of the OS because a thin-client doesn't do a number of the things that a typical PC might do, like managing a disk, for example.

What you want to think about is a device which effectively is nothing more than a flat memory space, with perhaps some communications infrastructure and display. This flat memory space can be made to do anything. What we are doing is simply addressing that space on boot-up and shifting over to it OS or app fragments that we choose to run locally.

So this new streaming technology is to allow customers to optimize what's running on the device for their particular installation. So, as an example, in Japan, it just passed a data protection act which came into effect on April 1, making it illegal to store citizen's data on a PC. So all of sudden, there is a great deal of interest on how can we do computing without storing data on it--which is of course exactly how a thin-client is designed to do, the data is never resident on a thin-client, the data is resident in the network and the servers, and all the thin-client is that it is a windows to the network.

What is a flat memory space?
It is volatile memory that is addressable, meaning when you write program or application for it, you can grab memory pointers by yourself, and you don't have to do it with an operating system. Like I used to write database applications, and one of the things you have to do in a database is to define an area of memory that you are effectively caching data to all the time, and you address that memory directly. Just think of such a space as an empty floor. The OS will come in just like a chair where you can it place on the floor. And then the application that comes in will be put on the chair.

The advantage to that is that volatile memory is the cheapest form of memory, it doesn't require anywhere near the kinds of electronic overhead that you'll need with Flash memory, or RAM. Volatile memory is only about 10 to 15 percent the cost of Flash memory.

		Kish on: Why Asia is hot The handheld device market A "Flash-less" technology Thin-client and open source

Give us your take on the thin-client market in the last five years.
The thin-client market in the last five years was about one-and-a-half percent of the PC market. It was technology that we use for very specific applications and places, like call centers. Things where there were very specific needs. In a call center's case, it was energy consumption. I think the market did a good pretty good job of finding its natural centers of gravity in the last five years.

But we are now getting to a point where everybody understands that the devices--whether PC, or thin-clients, or phones--are going to continue to be commoditized in price. So the big question is: Where is the value of the thin-client? Is it in the hardware, or software? So removing flash memory will let us drive the costs of the devices down very rapidly. It will also let us begin focusing the thin-client market on software, because with the software these devices won't work. They require a network and a server. So that's the big change we see coming up. And being able to drop the price dramatically, that will give us a commercial advantage, as we not only look at the traditional thin-client market, but also PC replacement market.

Thin-clients now range from US$199 to US$600 depending on options. The goal is to take 30 to 40 percent off that range.

Do you still market thin-client technology the same way you did 10 years ago?
The value proposition is still the same. The difference is that the networks are more robust and efficient, and the back-end servers have become far more efficient than they were ten years ago. I do not believe that the thin-client is the replacement for the PC. I think there are natural application types where the thin-client is the preferred solution. There are many energy companies that use thin-clients because they are in hostile environments, like oil rigs. During the winter, you don't want to go out there to fix something that's broken. They prefer thin-clients because they don't break. The value proposition is still the same, but as the networks become more powerful, thin-client is just seeing a real upsurge in acceptance in these markets.

Last year, Wyse released thin-client support for Linux. How important is open source for you?
We now have a product suite which supports Linux fully. We have many Asian customers who are interested in Linux as an alternative to Microsoft. I can think of one very large country--China--which doesn't want to have anything to do with Microsoft. So we released the Linux client as an alternative for those customers. And we are seeing a real positive uptake in terms of our volume and sales for our [Linux suite].

How far can open source help Wyse's business?
I think it depends on what markets we are talking about. Open source will help us in most government contracts that we are involved with around the world, because most governments are moving away from Microsoft as a preferred operating environment. It will not, however, necessarily help in healthcare, where Windows XP and CE are defacto standards throughout the world, where many medical systems run on those operating systems. It will help us geographically, for instance, in China and France, where the governments there have taken a stance in favor of Linux. In other parts of the world, I think it will be neutral. I will tell you that we have a very partner called IBM, who is not interested in selling anything with a Microsoft operating system on it.

My belief is that open source is an important arrow to have in your quiver but it is not the only one that you should have. You really need to offer customers a choice.

Technically, do you find Linux easier to work with?
One of the chief advantages is the availability of drivers. With open source, it is easier to deal with proprietary hardware, like biometric or smart card readers, because you have a much larger group of engineers working on building these drivers.

Other advantages: It is lightweight and easy to use. It is a viable alternative, but I will not come out and say that it is better than Microsoft because I don't think it is. I think they are both credible alternatives, and customers will make their choices based upon a variety of factors.

It is not a religious fight for us at all. We are completely agnostic.