Q&A: eMachines Founder Touts Thin Clients For Education, Emerging Markets

The company's multi-user access terminal technology is fast finding a following in education, where the company has scored upward of 10,000 seats in North Carolina alone and emerging markets such as Brazil, China and India. Dukker spoke recently with CRN Editor Heather Clancy about his company's business proposition for the channel.

CRN: Where do you position yourself, competitively speaking?

DUKKER: In our current space, we don't have any competitors yet, which is the ultra light-weight, ultra low-cost PC access terminal device. ...

I guess the best way to describe our position is that our marketplace is those people who need a PC but can't afford it. Their needs are exactly the same as those of the PC user, the difference is they don't have the dollars to be able to afford it. Our technology, essentially as it is today at full retail price, basically allows our customer to get anywhere from high 3- to 4-to-1 on the same expenditure dollar seats or access for multiple people vs. the old way. The way we kind of like to describe it is that our technology has to be at least good enough for 50 percent of the people who use PCs today to be able to get our job done with our technology as opposed to using a PC.

In essence today, our primary target markets are the developing world and education, which basically has the most crying need for Internet access, computer availability, but the least available dollars to pay for it.

Inherently, our technology is also applicable to the enterprise and SMB space, but we recognize those markets take a long time to develop. They need to become familiar with both the hardware architecture and the software infrastructure. For us, those customers are also well-represented with alternatives in the marketplace. We really haven't focused on them as our principal marketplace right now. They will come into play within a few years as our organization builds the depth, as we have partners who have the depth to support the enterprise and commercial users.

CRN: How do you make the business case for a VAR or a systems integrator to carry your product?

DUKKER: The hallmark of a disruptive technology like ours is the scenario that I'm about to describe to you. ...

Let's say we talk about our $200 Ethernet-based device, and we talk to a potential VAR who says, 'Oh my God, I've just barely figured out how to sell $400 PCs, and now you want me to sell devices at $200 a seat? I'll go broke.' We walk them through a very simple mathematical exercise, which is what profit do you make on your $400 PC? Typically, they'll say their gross margin is $40 to $50, which is pretty abysmally typical of the low end of the PC space. So we say, on our $200 box, you actually make $50 to $60 of margin. So, then, the next question. What does it take to install a PC? Typically, a couple of hours, if everything goes smoothly. They've got to build the image, they've got to install the monitor, get the network all figured out. Our devices have no local intelligence. You set up your server once, and this thing takes about 10 minutes to install because all you do is plug a monitor, keyboard, mouse and speakers into it and plug it into the network. There's nothing to configure on the device. So they say, 'OK, that's even better.'

Then we ask the third question: What does your customer do with the $200 that they saved? Well, if it's a school, schools are not really looking to save money, they're looking to get more student seats of technology for the money they've been budgeted. So they can spend it on 20 student seats using conventional technology, or they can spend it on 80 or 90 seats using our technology. So the answer to the question of what does the school do with the $200 [they saved], is they buy a second one. So now the VAR has made $120. This is where we like to say that our business kind of lives at the intersection of commercial opportunity and social responsibility. The beauty is that the markets that need our technology the most get both to save money and, at the same time, because the real cost of goods of our technology is so low, we can create a business model at this very low end of the economic spectrum, which actually restores the ability of our VAR partners to make money.

NEXT: The software licensing implications