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NComputing Readies Channel Push

NComputing aims to drive more demand for its multiuser terminal solution in the channel but faces some resistance over potential Microsoft licensing issues.

The Redwood City, Calif.-based company, started in 2003 by the founders of eMachines, plans to launch a formal partner program by the end of the year to develop a wider market for its innovative PC sharing technology.

Its Ethernet-based NStation L100 and L200 network computing products, which have been on the market for more than a year, can transform one Windows PC into as many as 30 Windows terminals out of the box. And its Xtenda X300 solution, a PCI card and multiterminal box solution, allows users to instantly create seven Windows terminals from one Windows PC.

NComputing is expected to launch new form factors in 2007 and Windows Vista support in April.

To prepare for its channel push next year, NComputing recently announced a major distribution deal with D&H Distributing and a deal with Synnex in Canada, in addition to current deals with Ingram Micro and ICG.

D&H quietly started selling NComputing's products two months ago and has seen good results. Sales of NComputing products by the distributor's Computer Products Division and Education Division doubled from October to November, said Dan Schwab, vice president of marketing at D&H.

"We're very excited to be in business with NComputing and are encouraged by some impressive sales launch figures," Schwab said.

NComputing's channel chief said the company's technology gives resellers a unique opportunity to differentiate themselves in the market and make a good margin -- 15 percent to 20 percent per deal -- because they can deploy the multiuser terminal solutions quickly and easily.

"Many of the resellers we are targeting have chosen to exit the hardware side of the business, but our technology gives them a way to re-enter and compete very effectively against the likes of Dell or HP," said Steve Halland, general manager and vice president of NComputing North America.

The solution saves in hardware costs. But users can generate even bigger savings by deploying the solution without additional Windows client access licenses (CAL), and that's where the trouble can start, industry observers note.

In spite of those potential licensing issues, a number of solution providers that have begun reselling NComputing's products are happy with the ease of installation and the margin they earn on the product.

NEXT: The cost factor vs. Windows. NComputing claims its solution cuts the cost of a Windows desktop from $250 per desktop to as low as $70 per user.

"It's a good solution. It's economical and easy to use," said Juan Saenz, president of Los Alamos PC, a Los Alamos, N.M.-based system builder and reseller of NComputing products in the United States, France, Germany, Costa Rica and Colombia. "We're making a 15 percent profit."

Users can connect one NStation to a Windows PC as well as terminals, mice and keyboards and generate as many as 30 Windows desktops, one reseller in Canada said. "It's priced right and easy to install," said Jim Rowe, president and owner of MSP Systems, Calgary, Alberta, which has been selling NComputing's products for two months. "We save our customers a fair amount of money by not having to buy computers and savings in maintenance costs."

NComputing officially targets the education market and emerging economies, but some partners are targeting small and midsize businesses in the U.S. market.

One reseller noted that the solution is ideal for seasonal businesses such as accounting offices during the tax season. "Instead of buying PCs, you just hook up [terminal] boxes and then throw it in the closet for the rest of the year when they're not being used," said Glen Coffield, CEO of Cheap Guys, an Orlando, Fla.-based system builder and VAR that has evaluated NComputing's products.

"As an alternative to a traditional Microsoft or Citrix thin-client solution, this seems like an affordable and unique solution for SMB VARs and their customers," said Paul Freeman, president of Coast Solutions Group, Santa Barbara, Calif., which oversees a nationwide network of more than 100 solution providers.

The technology was developed by NComputing's Young Song, a co-founder and former executive at eMachines, and Klaus Maier, CEO of Hydrapark GmBH.

NComputing's solutions work like thin clients but use the company's homegrown Windows-over-IP and Linux-over-IP software and patent-pending system on a chip (SoC) technology to enable Windows PC sharing over the Internet.

Stephen Dukker, a co-founder of eMachines who now serves as NComputing CEO, said the overall cost of the solution with hardware and software comes to less than $200 per user, whereas a similarly configured thin-client solution from Citrix runs customers between $300 and $400 per desktop.

And Halland claims NComputing's solutions are much easier to install. "A typical thin client is notoriously difficult to set up and deploy, with specialized server requirements and lots of customization normally involved," he said. "Not so with our technology. We can have someone up and running in a matter of minutes vs. days or weeks. In addition, partners get any revenue related to both deployment and PC and network infrastructure and service requirements."

The future looks bright for privately held NComputing, whose founders had created the company -- eMachines -- that forced the cost of a PC under $1,000 in 2000 and revolutionized the economics of the entire PC market. EMachines was eventually purchased by Gateway, but not before it helped commoditize the PC industry.

But it may be more difficult for the founders of eMachines to bring down the cost of PC computing once again -- if it comes at Microsoft's expense.

NEXT: Licensing obstacles. Some partners and resellers have decided not to carry NComputing solutions because they see it as an end run around Microsoft's Windows CAL requirements.

"I am familiar with NComputing and declined to consider when I was contacted by them because of the Microsoft licensing concerns," said Andrew Kretzer, director of sales and marketing at Bold Data Technology, Fremont, Calif.

Nor-tech, a Burnsville, Minn., system builder, met with NComputing but declined to add the multiuser terminal solution to its stable of offerings because it didn't allow any value-added opportunities, executives said. But that wasn't the only obstacle.

"I think there will be some major problems with the licensing controversy of their product, and it will be very interesting to see how Microsoft responds," said Todd Swank, director of marketing at Nor-Tech.

Still, there's nothing in Microsoft's licensing rules that explicitly prohibits the use of NComputing's products, said one VAR who declined to be named.

Microsoft has not made any formal public announcements about NComputing, but several industry sources say Microsoft sales representatives are telling partners in the field that the product's use without Windows CALs is illegal.

Microsoft wouldn't discuss NComputing's multiuser solution directly with CRN. But in an e-mail response to CRN's questions, Microsoft said its policy prohibits any type of concurrent use without a CAL.

"Windows XP is not designed nor licensed for concurrent usage," Microsoft's e-mail statement said. "Windows Server has been specifically designed for multiple user scenarios and provides both technical support and licensing support for multiple user desktop access through Terminal Services. In addition to a Windows CAL, a Terminal Services CAL is required if customers use Terminal Services or Terminal Services-like functionality."

NComputing, for its part, said it's not advocating illegal use of Microsoft's software.

Customers can achieve a Windows desktop for as low as $70 per seat because NComputing's software is free and eliminates the need for hardware, but not Microsoft licenses, the company said.

"There are already millions of user Terminal Devices deployed in the industry without controversy," according to a statement issued by NComputing. "Our NStation Terminals simply provide a very low hardware cost per seat as an alternative to traditional thin clients and PCs costing upward of $500 each. While hardware costs are reduced, the use of Terminal Devices, including our NStation Terminals, does not circumvent the need for customers to obtain appropriate software licenses, and we are completely above board about this fact."

NComputing noted that Microsoft has been involved in several joint deals with customers, including the San Diego Independent School District, a school district in North Carolina and a distributor in South Africa.

Still, NComputing executives point out that customers are ultimately responsible for their own software licenses. "We don't know the answer to that question. Each client negotiates with Microsoft, and it's an issue between our customer and Microsoft based on the nature of their host life," Dukker said. "We opt out of participating in that process. "

One reseller in Brazil said NComputing's solutions stand on their own merits and agreed that it's up to the customer -- not the partner -- to meet licensing requirements.

"The PC expansion technology brings a new way to think about computer utilization," said Sulino Camargo de Oliveira, internal business manager for Ory Solutions Group, Rio Grande do Sul, Brazil. "It brings many important gains to our customers, including savings on purchasing, maintenance and electricity. Aside from that, the product has a long life frame because when we upgrade the system, it will work with the new host performance."

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