For several years, thin-client PCs, along with their PC blade cousins, were considered a niche market segment.
They were mainly relegated to call centers for temporary workers and lacked the graphics ability and IT infrastructure to support demanding desktop operating systems and applications.
The only top tier vendor that continued to engineer and sell PC blades and thin clients in this climate was Hewlett-Packard, which competed against two smaller companies—Wyse Technology and Neoware. Earlier this year, that market shifted for good after HP bought Neoware for $214 million, a deal that closed earlier this month.
Beyond combining two of the largest thin-client PC vendors, the deal provides an opportunity for HP to build on Neowares client and virtualization software to create a new centralized computing product that can provide an enterprise with a virtualized desktop environment that offers the same qualities as traditional desktops.
The question remains: If HP builds it, who will buy it?
The arguments for enterprises investing in a centralized, virtualized computing model include better security—since the operating system and applications are stored within the data center, making it less likely that a virus can infect a desktop or that someone could walk out of the office with important corporate data—and an easier way to manage hundreds of individual PCs.
The problem with centralized thin-client computing, said Bob ODonnell, an analyst with IDC, is that it continues to be a hard sell to IT managers, although the HP brand has more appeal than either the Neoware or Wyse name.
"One of the big challenges that you face when youre talking about virtual clients is that you are moving a big part of the desktop control into the data center," ODonnell said. "There are a lot of challenges here. There are psychological challenges and philosophical choice of which person in the IT department will maintain control. Theres also a list of technical and structural problems."
But Bill Bredbenner, the current chief technology officer of Neoware, said that the deal brings together all the essential technologies for effective centralized computing.
"Part of the beauty of the acquisition is that it bolsters and truly completes the whole portfolio, whether its PC blades, workstations, thin clients or a centralized computing environment," Bredbenner said.
"Pretty much the target audience is any enterprise out there looking for a centralized and secure computing solution. Theres been a lot of interest with government agencies, education and health care."
Neither Neoware nor HP are talking about how or when HP will integrate the Neoware products, especially the software, into its portfolio.
However, during a call right after the acquisition was announced, Kevin Frost, vice president for HP business desktops, said the companys investment in centralized computing would "accelerate," which could include additional acquisitions.
Lou Donofrio, vice president of marketing for Neoware, said the skepticism can be overcome and he pointed to IDCs own projections that the thin-client market will continue to grow by about 20 percent annually.
Desktops, by comparison, are expected to grow by about 4 percent, which shows that enterprises are interested in this type of computing as long as HP and Neoware can deliver on the infrastructure. (Even if thin clients reach 7.4 million shipment by 2011, these PCs will be only a small part of the more than 360 million worldwide PC shipments IDC projected for that year.)