Annex Bulletin - 96-52

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A Halloween Opinion Column on an IT Industry “Trend”

“NC” Is a CEO-Driven Fad,

Not a Market-Driven Trend

Bringing Back Memories of “PC Jr.,” “Newton”

PHOENIX, Oct. 31, 1996 - “Trends are bottom-up, fads are top-down,” noted John Naisbitt in his 1982 bestseller book, “Megatrends.”

A Thin Client?

Source: Annex Research

Well, by that definition, NC (Network Computer - a cheap, scaled-down PC) is a CEO-driven fad, not a market-driven trend. If NC were what the end users really wanted (and it’s not), wouldn’t it negate the entire “PC revolution?” (which was truly a bottom-up trend). Instead, the NC is bringing back memories of IBM’s “PC Jr.,” or Apple’s “Newton” - some of the IT industry’s notable failures.

It all started with Lou Gerstner’s speech at the Comdex in November 1995. He said that IBM was building an inexpensive PC in its labs (which later the industry dubbed the “NC”), which the Big Blue’s chairman expected “to be shipping to select customers early next year” (i.e., in early 1996).

Last December, Microsoft’s Bill Gates also jumped on the NC bandwagon. And this year, Oracle’s Larry Ellison became the industry’s hype champion of the latest fad.

Luckily for IBM’s bottom line, Gerstner’s forecast didn’t quite pan out, although IBM did announce, what was dubbed a “Thin Client,” in July.

But this week, IBM and Intel made a joint announcement to deliver new network-enabled PCs early next year which would be no less powerful than the existing ones - hinting that IBM may (wisely!) be backing away from the NC idea.

Not so elsewhere in the industry. In September, Ellison predicted that the NC price will be $299, not $500, and that it would be out next month.

NC or Bust!

Larry Ellison

Well, this is the last day of that “next month” (October), and the only place we could hope to find such a $299 NC is in a Halloween “haunted house.”

Ellison also predicted that telephone companies would be offering NCs for free to subscribers in the next six months.

Anything’s possible, but we wouldn’t be holding our breath for it, either, come March 31. After all, aren’t the Baby Bells supposed to make money, too?

The ”Billary” duo (Gates and Ellison) have been joined this week by Sun’s Scott McNealy, who has also started to hype up the NC idea.

“One of the things I’ve discovered about this industry is that it absolutely thrives on hype; it just loves hype,” said the person who started all this NC hype - Gerstner - speaking at last year’s Comdex, obviously a quick study on hype.

“Why would anyone in their right mind want a Network Computer?” Ellison was asked by one of the attendees at the Agenda Conference last week, according Spencer Katt, writing in the PC Week (see 10/28/96 issue).

As Ellison started to answer the question, he was interrupted by the questioner. Then he lost it. “Jesus Christ, will you shut up... and who are you anyway? You’re the wrong kind of a person to judge this!”

Way to win friends and arguments, Ellison! And to show a customer who is boss. For, this exchange took place in front of some “500 industry honchos,” Katt explains.

The incident also illustrated what it might take to sell the NC: Ram it down the customers’ throats, whether or not they want them.

Because it’s good for the vendors. The “PC revolution” has liberated the end users from the shackles of the “glass house IT czars.” Now, the latter species has joined forces with the vendor community to try to wrest the control back, using the PC and network maintenance cost savings as justification.

But the end users don’t give a hoot about things like that. They care about the enriched functionality which makes them more productive in their jobs. Those are the goals which the customers’ CEO should also be striving for. Offering them an NC instead of a PC is like trading in a fancy cable TV set for an old AM radio.

Except, of course, for those customers who still get their news by smoke signals (read the “dumb” terminal users in large corporations). Everywhere else, the NC will be a tough sell, Ellison style - hammer down the throat.

The IT industry has progressed when it made its customers one of the following three value propositions:

The NC pitch offers the customer less function for less money. That’s an uncharted territory for end users.