Forget the OLPC: Here's a 30-children-per-desktop solution

500,000 students already using NComputing's PC-sharing tech

Consider the similarity between Angelina Jolie and the One Laptop Per Child project. Both garner gobs of favorable publicity for their humanitarian work that overshadow, in Jolie's case, her recent dry spell at the box office, and in the OLPC's case, its lack of a proven business model.

By that measure, perhaps NComputing Inc. is like Sandra Bullock, the low-profile star whose movies have nevertheless grossed more than $2.2 billion.

In the past 21 months, the unknown Redwood City, Calif., start-up has provided low-cost computing to half a million students in 70 countries.

While thrifty U.S. schools remain NComputing's largest market, more than 60% of its customers are overseas, in developing countries such as Brazil, China, India, Thailand and the Philippines, according to Stephen Dukker, chairman and CEO.

"We think our device has important social significance, too," he said.

Most recently, the country of Macedonia announced plans (PDF format) to serve all 420,000 of its K-12 students using a combination of PCs running Ubuntu Linux and NComputing's PC-sharing devices, which turn each computer into a mini-server that can be shared with up to 30 students in a single classroom.

"The cost to build PCs hasn't gone down. What has changed is that today's desktops are yesterday's mainframes," Dukker said.

NComputing claims that it can provide computer access -- whether for Windows XP, Linux or even Mac boxes -- for as little as $70 per student, a fraction of the $200 price tag that OLPC, along with competing laptops such as Intel Corp.'s Classmate PC and Taiwan's Asus' Eee, are struggling to meet.

OLPC is a 'cute photo-op'

Having failed to secure any million laptop orders from Third World countries, the OLPC now plans to sell two laptops for $400 to North American consumers -- one to keep, one to go to a child in a developing country.

Dukker claims he bears the OLPC project no ill will (though readers of a recent debate between him and OLPC's president Walter Bender in The Wall Street Journal may disagree). But he said he's not surprised by the OLPC's economic travails.

"The $100 laptop is a cute photo-op," Dukker said. "It's an endearing product and a well-intentioned initiative. But the price is an aspiration, not reality."

While that could be seen as a competitor's rhetoric, Dukker may also be one of the few industry figures with the credibility to deliver that message. While declining to reveal his privately held firm's revenue, he said that if NComputing were a PC maker selling the equivalent number of computers, it would be grossing more than half a billion dollars a year.

Thinking cheap in the precommodity era

Dukker spent two decades in the PC business, with two spirited but failed attempts to re-invent the PC economic wheel.

In the mid-1980s, Dukker was, as the Chicago Tribune put it in a pre-Web era, a high-tech "bad boy." His mail-order firm, PC Network, sold IBM PC clones for the then-unheard-of price of $500.

To maintain that price point, PC Network relied on adventurous tactics, such as sourcing parts and PCs directly from Asian manufacturers -- including some components intended for sale in countries beside the U.S. That tricky balancing act eventually resulted in PC Network's collapse into bankruptcy just about the same time that another firm, run by a college student named Michael Dell, took off.

After various industry stints, including running CompUSA's in-house PC brand, Dukker reemerged in the late 1990s as the co-founder and CEO of eMachines Inc., which introduced the first sub-$400 PC.

Like the OLPC, eMachines bets that high volume could make up for its razor-thin margins. That worked for a while, as eMachines briefly became the third-largest seller of PCs in U.S. stores. But reliability complaints and a slow post-dot-com economy wrecked that model, and Dukker was long gone by the time eMachines was sold to Gateway Inc. in 2004.

"I hear Negroponte say the issue is volume," Dukker said. "Well, as someone who has personally built 15-20 million PCs, I can tell you that if you add up the components [in a laptop], it is always going to be about $250-$300 in hard costs."

Building a healthier ecosystem

Tiring of what he now calls a "really sick industry," Dukker joined NComputing in 2006. The firm was co-founded by a former eMachines colleague who had developed a powerful, cheap video chip. Such chips had traditionally been used to connect several monitors to a PC to enhance user productivity.

But by adding ports for mice and keyboards, as well as installing some NComputing-written management software, NComputing suddenly had a device that could take advantage of all the unused processing power in a desktop PC and divvy it up among as many as 30 users.

Best of all, the NComputing device can be manufactured for just $11 for its X300 model, which can support up to seven users, and $35 for the L200 model that can support up to 30 users.

That allows NComputing to mark up its devices by several times the cost figures and still keep prices low while offering generous margins to distributors and resellers -- far better than the margins they get from selling PCs.

That helped attract Sean Owen-Jones, managing director of NCSolutions & Distribution (Pty) Ltd., a South African reseller.

"I discovered the NComputing product and knew that this technology would be a winner for the African market," Owen-Jones said.

In the last year, his company has sold about 2,500 seats' worth of the NComputing devices. Virtually all have gone into schools, including several in South Africa's poor Western Cape region (PDF format).

Owen-Jones said that although the OLPC is a "very cool idea," it is also an "unsustainable solution" in Africa. Laptops are too easily stolen, fragile and hard to maintain, he said.

"It's the same old concept of engineers sitting in a secluded environment designing a product without having experienced life on the outside of their intentions," he said.

Thin, teacher-friendly clients

In reality, NComputing's PC-sharing box is simply a kind of thin client or PC blade device. But Dukker studiously avoids using those terms. To him, they evoke expensive, hard-to-manage devices that vendors such as Wyse Technology Inc., ClearCube Inc., as well as Hewlett-Packard and IBM sell, and which only corporations buy.

By contrast, NComputing's devices are meant to be cheap enough for cash-strapped schools, and easy enough to troubleshoot that any teacher reasonably competent with Windows (or Linux) can manage them.

Users agree.

"Traditional thin clients require some knowledge of Linux or Unix. We were looking for something more user-friendly," said Barry Pace, technology director for the McDowell County Public School District in Marion, N.C., which used NComputing to add 1,000 additional workstations in 11 schools. "[NComputing] is more elegant. The wiring and everything is set up more cleanly. That made it feasible for us."

"The simple, appliance-like nature of this solution really reduces the need for training," said Scott Smith, director of instructional technology for the Visalia Unified School District in Visalia, Calif. The district has been conducting an NComputing pilot with one 30-student classroom for about a year and plans a larger rollout.

Brian Madden, a thin-client market analyst, said that ease-of-use could be a killer feature.

"If NComputing offers something that literally involves taking a couple of PCs and snapping them together like a stereo system, that could be huge," he said.

NComputing sells two basic types of devices. The L series uses Ethernet to support up to 10 users connected to a Windows XP PC, and up to 30 users connected to a PC running Linux or Windows Server 2003. The more popular X series device can connect between four to seven users to the host PC.

The limits of performance

Increasing the ratio of users per PC lowers the cost per student. Moreover, it means fewer PCs that can potentially crash (though, of course, every crash potentially affects more students).

The question is whether the traditional knock against thin clients holds with NComputing: As you add more users, especially those doing CPU-intensive things such as playing games or watching videos, will performance degrade?

Neither Smith nor Pace has tested the L series devices. But their view of how many users the X series device can support differed.

"When we tried connecting five to six students to a PC, we found the performance was at some level degraded," said Visalia's Smith. He also noted that if one student's application hangs or crashes, that causes all of the other students connected to that PC to freeze or crash, too. He prefers connecting just four students to a PC.

For Pace, on the other hand, connecting seven students to a single PC -- the district is using new Gateway (now MPC) 4610 desktops with 3.2-GHz single-core CPUs -- is working fine.

"If the CPU is maxed out, sometimes it takes several seconds for students to save a file," he said. "But it's really not a big issue."

The bigger problem, Pace discovered, is that, like the children that use it, NComputing isn't always great at sharing. Some popular but resource-intensive software such as Math Blaster and Google Earth couldn't be opened by more than one student on a PC. Also, at least one peripheral, a Bluetooth wireless tablet for teachers called the InterWrite SchoolPad, didn't work properly.

Pace was able to figure out some work-arounds, such as installing an application multiple times. And NComputing's engineers have been working with him to fix the problems. But he said: "You have to go into this knowing there are some limitations."

True costs (and false reporting?)

Still, the economic incentives are compelling. Schools already get substantial discounts from software vendors, especially Microsoft. For instance, Pace said an academic copy of Windows costs just $49 for his district, while leasing Microsoft Office costs just $16 per year.

Prices are even lower in developing nations, where schools may qualify for Microsoft's $3 software bundle, which includes Windows XP and Microsoft Office 2007.

But those costs can be reduced even more if schools choose to buy only a single software license per PC, rather than one for every student workstation as most software licenses technically require. Dukker said that NComputing is aware of the issue, but isn't in a position to enforce other vendors' licensing agreements.

"It's not our bailiwick, though we assume our partners are doing this right," he said.

Of course, the cost of software can be eliminated through the use of Linux and open-source applications, which about 40% of NComputing's customers -- including most of its nonschool users -- are using, Dukker said.

The rest of NComputing's users are on Windows, which can be even run on Mac hardware through virtualization software such as Bootcamp or Parallels, Dukker said, though that is not popular.

NComputing is also "green." Dukker claims that schools using the 30-user L200 device can make back the purchase price within one year on electricity savings alone.

The flipside is that schools used to holding onto their old PCs may need to upgrade to support NComputing, Dukker said, who recommends PCs no more than 2 to 3 years old.

And while schools can cut down on the number of PCs they use, they still need a keyboard, monitor and computer mouse for each student. That's not a big deal, said Visalia's Smith, citing the vast quantity of unused monitors and peripherals it can recycle.

The future

Beyond targeting schools, Dukker's goal is to start licensing NComputing's chip to be built into devices such as flat-screen monitors and cell phones.

As he sees it, PCs are only going to keep getting more powerful. Enabling other devices to cheaply and conveniently tap into that unused reservoir of processing power only makes sense. And it could allow hardware makers that license NComputing's technology to differentiate their products sufficiently to charge more and maintain their profits.

"We can help re-establish profitability to the ecosystem," he said.

Copyright © 2007 IDG Communications, Inc.

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