Many of the best revenue opportunities in the computer industry involve service contracts. One such opportunity receiving a great deal of focus from leading technology vendors, including Intel and Novell, involves the management of desktop computers. This opportunity is expected to grow to over $4 billion by 2002. The primary market is seen as large accounts which would acquire tools like Intel's LANDesk. However, many organizations, large and small, would like to outsource all or part of their desktop computing environment. This proposal suggests you can put accounts of any size within your reach for such a service.
Why a "service"?
To the consultant, the value of providing desktop computing management as a service lies in the ability to create a recurring revenue stream which has high net revenue margins. The key issue to being able to deliver this as a service is the ability to control of your costs; expense to revenue. And the key to the ability to control of your costs may be the ability to control the hardware and software to the extent possible, without infringing on the user organization's ability to effectively use this business tool. The services model makes it possible to move this control from the user to the consultant.
That's what the Managed Client opportunity is all about. Outsourcing the entire computing computing environment; hardware, software, service and support, all as one comprehensive service. The result? A profitable, recurring revenue stream which can extended, expanded, and duplicated. The issue? Control. Control of costs and control of the computing environment.
The opportunity, in some shape or form and to some degree, exists in any business which uses PCs. Managing these business desktop computers is a difficult and expensive task which most organizations are ill suited to perform. Many users are comfortable with their applications, but not very aware of the PC itself and cannot perform problem resolution activities. Supporting these users is difficult and expensive.Both the hardware and software which make up the PC business computing environment have become characterized by "technology churn". Most often we are talking about software deployment associated with upgrades and "fixes" which need to be applied. This is also expensive. The autonomous "stand alone" nature of PCs is in conflict with the business network and has created serious business exposures in the areas of administration, operations, management, and even security. Despite the need for control in a business environment, most PC users can add or remove hardware or software from their workstations at their whim, with chaotic results.
Many businesses feel real pain associated with managing an IT resource. These businesses find themselves devoting time, people, and money to managing computers as technology. They would rather apply these resources to servicing customers, driving revenues, and meeting business objectives. They want to reduce the computer to the role of business tool. These businesses do not want to expand their skills to include Information Technology any more than is absolutely required.
So, the opportunity to "outsource" management of the desktop computer technology has great appeal. Some aspects of computing environment are easier to outsource than others. Operational management of PCs has been difficult to outsource because so much of this support, so much of the day to day operations, has to be delivered at the actual workstation. That makes this type of support expensive. It's difficult for the service provider to control costs if they are subject to dealing with "unscheduled fire drills" which require travelling to the user's premises. I've been told by a large service company that, although customers were interested in desktop management services, the company couldn't find a way to make the service profitable.
Again, the key issue regarding desktop management as a fee service is the ability to control the costs. Addressing that set of issues is a primary focus of Serenity Systems and Managed Clients. Reliable systems managed remotely. A network capable of running 24 hours a day, seven days a week, and able to be managed from anywhere the consultant chooses.
Information to support the marketing vision is contained in the Managed Client Document Library. I will avoid being redundant and direct readers to review the content available in those documents. But here are the basic issues which motivate user organizations to consider outsourcing management of their desktop computing environment:
There has been interest in the Managed Client model from accounts of all sizes. However, the initial focus of Serenity Systems will be in two areas. One is SOHO and the other is Small and Medium Sized Businesses (SMBs). Our target customer is actually the consultant providing fee services for these users. Current product packaging is focused on those smaller accounts which are likely to give control to the consultant. Accounts likely to have short decision cycles and which are ready to act. But consultants should keep in mind that these same technologies and products can be implemented in large organizations where the value proposition is more compelling and the compensation is more rewarding.
Serenity Systems has an Entry packaging which is targeted at up to five Managed Clients. The NOS on the server can be Warp Server Entry or even Warp Server for e-business. This means that traditional PC fat clients can share this network with Managed Clients. But care must be given to insure that the network remains responsive. SMBs are considered to be those accounts with up to 64 managed clients, and two servers would be recommended to support 64 Managed Client users.
These smaller accounts tend to be ignored by service organizations because the desktop management tools, like LANDesk and Novell's NDS, are a significant investment. Too expensive for many of these users. Companies like IBM's Global Services don't look to this space for revenue. To an extent, no company has provided tools to make desktop management for this size account a profitable business until WiseManager. No one is knocking down the doors of these smaller accounts offering this type of business model. And that makes the opportunity all the more attractive.
NOTE: In the 1Q2000, Serenity Systems will introduce Building Automation and Security Software (BASS) for SOHO to increase the value proposition for this space. In subsequent releases, BASS will be scaled up to meet the needs of larger accounts.
Serenity Systems offers special packaging for up to 5 managed clients. A space ignored by many services and products. Here the service provider can leverage the sort of services, tasks, and enhancments they do over and over for many small accounts, developing a significant recurring revenue stream. These are accounts which tend to make decisions within reasonable time frames. While larger accounts will do little or no acquisition until Y2K issues are resolved, these smaller accounts resolve Y2K issues by implementing new hardware and software.
Though the obvious opportunities may be in small to medium sized accounts, large accounts have also expressed interest in the WiseManager technology. But the sale to a large account is different. Smaller accounts want to depend on the consultant, turn things over to the outside resource. In the small account, the consultant can provide integrated solutions because there is not a significant IT investment to protect.
Large accounts have investments and infrastructure to protect. Decisions will revolve around fixing support issues, like software deployment. In large accounts penetration and access can be difficult. Serenity Systems is reviewing the possibility of a Joint Marketing Agreement with IBM which would allow IBM to initiate and participate in the sale, but the business must be closed by a Serenity Systems channel partner.
As you review the content of this document, please recognize that not all of it is appropriate to each market segment. Approach the material "cafeteria" style. Pick up those pieces which work for you, which are appropriate for the market you serve. Be aware of what you have left behind, you may want to revisit those portions when other opportunities arise.
Justifying the Expense, the Value of the Service
Managing the computers has become a significant business expense. Many customers don't know how much they are spending to manage their computers. They only appreciate that it's difficult and expensive. The ability to address and respond to that expense is an important factor in making this service profitable for the channel partner, the service provider.Larger organizations tend to understand Total Cost of Ownership (TCO) while smaller organizations may never have heard the term. Even large organizations may have a distorted view of their TCO. But you will need to gain some agreement regarding this expense. It is important to establish the activities which will be part of the services contract and to help determine the associated charges.
Please review the Total Cost of Ownership document in the Managed Client Document Library on this site. This information will help you in your discussions with your prospect. It includes a spread sheet which can help establish your prospect's possible TCO. I would recommend putting in a range of figures and developing a range of TCO. A definitive TCO isn't necessary and may be painful if not impossible to calculate.
Often what you are engaging in is the exercise of heightening the awareness of the user organization regarding their operational expenses. This information can then be used to justify the expense associated with the services contract, which is your fee, your revenue, your profit ... so, this exercise is very important to you. To assist you, do an Internet search on Total Cost of Ownership and come up with current figures and projections by analysts which should give your prospective user a strong motivation to get away from managing their own PCs.
Short TCO Exercise
Begin by explaining the basis for calculating TCO using documentation. Ask your prospect if they have ever calculated their own TCO and what it might be. Possibly they have some figures. If they do, compare their figures to industry figures. If not, simply bring forward industry figures. Start with the Gartner Group's TCO for a Windows95 Workstation, which is $9,500 per year. Most prospects will dismiss this as very high, not close to what they are spending. But you may have already established that they don't know what they are spending. If they do know, you can compare how they arrived at their figure to Gartner's methodolgy, which is certain to be more comprehensive.Don't spend too much time on this figure. The value of the Gartner figure is that it makes people uneasy. It is accepted by the industry. You don't have to defend the amount, it isn't your figure. You and the prospect can just agree, that $9,500 is a lot of money to be spent on each workstation, about $800 a month. Then bring up the IDC figure of $5,000 a year. Your prospect will feel better with this number, if only because it's half of the figure which scared them so much just moments ago.
If necessary, go to the information at the low end of the range, approximately $3,500. After mentioning two higher figures, most prospects are willing to acknowledge that they could be spending that much. This is probably because it's the lowest figure which is available, about $300 per month. The fact is, this figure really represents bank tellers and reservation clerks, groups which have low TCO because their work and environment is so specialized and controlled, making them easier to support. How do they compare with your prospective users?
The "Casual" User
The most expensive user to support is probably the typical "office suite" user. I describe these users as "casual computer users". Their computing environment is flexible to the point of being disorderly. They cannot resolve problems. In fact, resolution of a problem frequently requires a visit from a technician. And this may only happen after the generally unproductive "peer support" function is engaged. This involves asking other nearby casual computers users, "Did this every happen to you?" This scenario is common.
Most customers recognize this behavior. Many are guilty of it. All appreciate that it can lead to unproductive time involving clusters of users. Time which would drive up the expenses associated with using computers if it was calculated. But few organizations ever include this sort of behavior into their cost of computing, their Total Cost of Ownership. Still, it is something you want your prospect to consider because of the negative impact productivity, the rate at which work is performed. Time lost because of computer failures hurts the ability to service customers.
System Reliability
This time lost due to some sort of computer system failure is becoming more important. In the past, this time was so integrated into the general use of computers that people did not factor it into the cost of doing business. It was like spending time on hold when making a business call. But now, leave a caller on hold for very long and you can expect a comment about using voicemail. They have better things to do with their time.
The same is becoming true regarding time lost due to system failures. There is a heightened awareness and lack of tolerance regarding "crashes", including humor pieces about Miscrosoft selling advertising space on error messages and the "blue screen of death". This intolorance is spilling over to the mainstream press. ABC News recently ran an opinion piece on this topic.
The article, The Productivity Puzzle, commented on the lack of productivity improvements associated with using computers. Though I don't agree with some of the broad comments regarding how often a system may crash or how long it may take for the user to recover, the problem is undeniable. And it is difficult to ignore the closing comment:
"And until Windows gets replaced by a more stable operating system, we'll still toss away billions of dollars each year in computer crashes."
This point is important for two reasons. First, you need gain agreement on issues like this which reflect on total cost of ownership. Managed Clients can greatly reduce time lost due to system crashes. The primary reason is avoidance. Managed Clients can be implemented as a much more reliable tool; many causes of typical fat client PC failures have been "designed out" of the Managed Client environment. And recovery from a server should be more straight forward, less time consuming and traumatic, than recovery of fat client PC.
The second reason is because this represents a growing willingness by business users to consider moving off Windows. Moving off Windows is not an objective of itself. But moving off Windows does make the service model and the remote management of managed clients more feasible. Again, going back to the ability to control costs and the relationship of expense to revenue. Staying on Windows adds complexity which adds expense making the net revenue opportunity smaller. The willingness of users to consider something other than Windows is a noteworthy trend. It will be mentioned again when the issue of moving users off Windows is reviewed.
It is difficult to discuss TCO without discussing reliability; uptime and downtime. And it is difficult to discuss the PC computing environment without discussing Windows. And while these comments stayed as close to the TCO discussion as possible, we need to get back to that topic, specifically.
A Second Route to the Same Destination
If the customer is still reluctant to agree to the $3,500 figure, ask how much they pay for a full PC, hardware and software. $2,000? This is probably low, but most users are comfortable that they know and understand the Cost of Acquisition, the cost of buying the PCs and the associated software. The industry says Cost of Acquisition is 20% of TCO over three years. If the acquisition cost is $2,000, the TCO would be $10,000 for three years, or $3,300 a year or about $300 a month.
This second method, a different method but still using industry standards to arrive at the same basic cost tends to validate your position that the customer TCO is likely in the range of $300 per workstation and probably more. This is just a simple exercise to gain some agreement about what the desktop PCs may be costing the organization. I use words like "According to indusry analysts, the cost of acquiring a PC with all the software the user requires is about $2,500 ... how does that compare with what your organization may be spending?" And you may need to break out the costs, adding upgrades and outside support, and so forth.
Cost of Migrating to Windows2000
Earlier in this document I referred to technology churn and the technology treadmill. The expensive exercise of constantly upgrading hardware and software to 'remain current' with technology. The TCO has to absorb this expense, the cost of upgrades, software deployment, and migrations.
Windows2000 and Office2000 will represent the mother of all upgrades and migrations. You can find press releases on this topic on this site under the NewsWire which touch on these, and an commentary called Red Ink Rising written for an Internet magazine, 32bits Online. These items emphasize the message:
Windows 2000 is a money losing proposition for business users - the Gartner Group
According to Microsoft, the justification for Windows2000 is reduced TCO effect by the ability to:
- streamline help-desk operations
- make PCs more manageable
- provide control over software applications
And this will "significantly" reduce costs. It's worthwhile to note that these benefits are also the ones associated with Managed Clients. However, the Managed Client implementation is more extensive, more far reaching. The benefits, including the lowering of costs, are consistently greater with Managed Clients and WiseManager. And there's a kicker. Managed Client networks can be implemented at low cost .. in fact, a Managed Client implementation may reduce expenses immediately, Day 1. But the costs associated with migrating to Windows2000 are enormous.
IBM Global Services indicated that $15 BILLION will be spent on services revenue world wide ... coming out of user organizations. That figure is a small part of the overall expense, the part some groups will pay to third parties for assistance. The real cost to user organzations is likely to be closer to over $100 BILLION! And the issue is, there would appear to be not return on that investment. It's what analysts call a "tax" paid by Windows users.
According to the Gartner Group study, migrating from NT Workstation will cost $2,000. Migrating from Windows9X will cost $3,100. And there's a problem with these figures, too. They only represent the expense of upgrading the desktop. That is, these are the costs of the software and hardware acquisition for the desktop, and cost of servicing the workstation.
But the cost of upgrading the workstations is a relatively small part of the overall migration expense. To benefit from the features of Windows 2000, you need to upgrade the network, provide Active Directory, upgrading all the back end servers. This expensive network upgrade is required to create the "more 'managed' environment" which delivers the benefits, driving down the TCO.
But the TCO has to absorb the cost of migration. Even using the lower figures provided by Gartner Group, users would have to stay on Windows 2000 for three years to break even on the migration. But the Gartner Group also indicates that it doesn't expect any Windows 2000 user to stay on the product for three full years. So, according to the Gartner Group study, migrating to Windows 2000 never recovers the investment. And what should trouble the users is The migration expense could easily be twice the $3,100 figure used by the Gartner Group.
It is difficult to establish how many business users are likely to migrate to Windows 2000. But Microsoft claims to have sold 100 million copies of Microsoft Office. Let's say that represents 50 million business users, a figure Microsoft says is too low. If it will cost $5,000 to migrate a business user to Windows 2000, a reasonable figure based on the Gartner Group research, and less than half of the 50 million business users migrate ... the cost would still be in excess of $100 BILLION. An amazing expenditure when you consider that no one should expect a return on that investment.
Establish the Price of Your Service: Split the Difference?
At this point, customers should understand that staying on Windows is a dollar losing proposition. And it does not insure the user will have a reliable, secure, and available computing environment. The TCO of $300 per month is low for casual business users, the typical business desktop user. But this seems to be a figure which organizations will accept if properly set up. Try to get your prospect to agree to use it as a basis for discussion. A favorable TCO discussion is important as it will allow you some flexibility when negotiating a price point on the services agreement.
Point out that leasing a good business computer is probably about $100 a month for a two year lease ... and you may not own the PC at the end of that lease. You can go to Dell Computer web site to calculate sample leases. (Serenity Systems has leasing available to Channel Partners through "OneLease", Fidelity Leasing, to support the "free PCs" promotion.)
Now you are presenting your prospect with two figures ... $100 to lease a computer ... $300 a month to own and manage a business desktop PC. You propose to split the difference, provide the hardware, software, service and support for $200 a month. An immediate savings of $100 per month per user. No cost of acquisition for LANDesk and associated software, no training or costly installation process. No investment and tracking for a return on the investment over time. Instead, an immediate reduction in an operating expense. A cost savings that begins on the first day of the service.
Capital Expense - Operational Expense
This last point raises an important part of the value proposition, the operational expense nature of a services contract. If you sell hardware or software, you are selling a capital asset to the user. This means they acquire an asset and must begin depreciation. There are at least three issues that come immediately to mind:
- The emotional baggage associated with a "buy" decision. If a customer wants to buy something, fine. Sell it. But many times the act of buying, acquiring, makes the prospect feel exposed. Issues about how this fits with the infrastructure, skills, strategies, and so forth all can come into play.
You can get these issues off the playing field when the same products are positioned as a service, a contract which can be modified over time:
- Sell an application and one of the first questions is "What does it run on?" Answer "OS/2" and you hear, "We can't buy it on OS/2. Does it run on Windows? We only have Windows skills. We have to stay with Windows."
But offer the same application as a service and questions center on functionality of the application, terms, conditions, and pricing of the service. The entire frame of reference changes if the user doesn't have to "own" the application, simply use it.
Ever see a workstation which belongs to a service company in one of your accounts? Maybe it's ADP doing payroll or some sort of claims processing. Notice that these users tend not to care about the hardware or software involved. They learn the application but it's not their system. They are only concerned with what it does, how well it does it; reliability, availability, and cost. It's a completely different set of issues when the system belongs to a service agency.
- This can also be an effective way deal with "obsolesence issues". The user doesn't have to feel as though they are the 'potential stuckee'. And "buying OS/2" is not a selling activity most of us want to go through. As they say, "You don't have to sell Windows". So, don't force the customer to make the "buy OS/2" decision. Sell them your services instead of product.
- Internal organization procedures are frequently different for a "buy decision", the acquisition of an asset, than for an operational expense. Retaining a service is an operational expense. Decisions regarding operational expenses are usually made at the user level, where you have been doing your marketing.
Acquiring an asset usually involves a process in which the user is not the final decision maker. The decision may go up the executive ladder, over to finance, accounting, purchasing. Now you may see the sale you made to the user get killed by some group "upstairs" or "down the hall", which has been totally removed from your marketing activities. A group you have not been able to address. No need to expose yourself to this potential obstacle.
- Many organizations have a financial incentive to go the operational expense route because they have the ability to write off the service as it is delivered. There is no depreciation over time, the service is completely deducted from revenues as it is delivered. This can be a favorable bookkeeping and tax position.
The fact is, businesses face a tremendous exposure regarding access to the Internet. It is not unusual to hear news broadcasts regarding hackers, virus infected email and documents, such as with Chernoble and other virus programs. How can a Managed Client improve this situation?
The Managed Client provides access only to the Internet through authorized connections used authorized software. And the authorized connection can be protected with products like Norton AntiVirus for OS/2 and Injoy Firewall. Managed Client users are ahead of the game when it comes to security.
However, with Managed Clients deploying a software update is a drag and drop onto the client machine's folder. An operation which can be executed from a remote location. What could be very difficult in a traditional LAN of PCs is the very nature of Managed Clients.
And the security benefits extend beyond the malicious work of hackers. The Managed Client design protects the intellectual property of the organization. Software and data are protected and cannot be removed from the workstation and subsequently taken off premises. By the same token, unauthroized software and data cannot be installed on the workstations.
Managed Clients provide a technically elegant, available workstation to an organization at lower cost. And features like improved security and reliability are inherent to the basic design.
This is not an easy environment for businesses to administer and manage. Many would rather outsource the computer systems, or some part of them, to a technical professional. Doing so leaves them free to focus their resources on their core business services. This means driving revenue and servicing customers. After all, how much money do they make servicing their own computers?
One important value of the service is the ability of the user organization to allocate their resources in line with their business objectives and not to spend time, money, and resource developing technical expertise outside of their core business. The fact is, a technical professional can do the job better. That leads to the next advantage.
Let's take an organization which is willing to sign up for a desktop management service as outlined above, $200 per user per month. Let's sign up 30 workstations at this account and do the math. I have to be general, but I'm comfortable with my assumptions and figures:
Roughly a retail pricing of $36,000. The client has agreed to a services contract for 30 users at $200 per month per user, or $6,000 per month. The contract should be 24 months with a minimum six month commitment paid up front ($36,000 ... enough to cover the cost of acquiring all the hardware and software).
Substract the prepayment from the total cost of the contact ($144,000 - $36,000 = $108,000) and divide that amount into 23 equal payments, $4,695 per month. The customer can cancel with 30 days notice and the $36,000 paid upfront becomes a declining sliding scale early cancellation penalty. At the end of 24 months, you can give the customer the hardware and software ("free PCs") and the net revenue is over $100,000 for the two years.
First, consider that IBM OS/2 Warp Server and IBM Netfinity Servers were selected specifically to create a bulletproof 7x24 operating environment. You don't have to go with Netfinity Servers. The Netfinity Servers are not cheap, but they have great value. Consider that the model calls for remote management and the Netfinity servers include a warranty for three years of on site service. In our model, that's a great value and it allows you to add IBM service to your value proposition in your proposal to the customer.
OS/2 Warp Server for e-business is a powerful and reliable product. The OS/2 clients are server managed. These clients can be diskless, remote boot, no diskette drive or CD ROM. No moving parts and most opportunities for user errors have been eliminated. The corrective action for most of what remains is straighforward.
In the beginning, you can expect your pager to go off pretty regularly as the users get used to the computing environment you created. But with Managed Clients (OS/2), you won't be required to visit the account. You will talk to them about resolution procedures and you will use WiseManager to dial into the server and execute any specific resolution activites which may be required. This network is designed for reliability and availability.
After awhile things will settle down and soon your pager will sleep peacefully. Most users are "application literate". It's all the other things which caused them trouble and you have eliminated most of the traps they fall into.
This combination of reliability, server managed solutions, ability to manage, resolve problems, deploy software ... all remotely, make this very profitable. And you should expect more services business from these clients, billable service opportunities.
NOTE: In this model, OS/2 is an embedded OS. We can move users to any suitable OS without the major surgery which is characteristic of migrations in the traditional PC environment. Let's say that some months in the future we release a Managed Client environment on Linux, a real possibility. Should some of the OS/2 accounts want to "go Linux", you would be able to migrate selected users working completely "below the waterline". Your services and pricing could remain completely intact. You can tell the user, "Yesterday you were on OS/2, today you are on Linux, and you didn't feel a thing. Not even in your wallet." Amazing but absolutely realistic.
Currently a Managed Client environment for Windows workstations can be executed using IBM's WorkSpace on Demand Win32 Client Feature. While making them easier to manage, these products have no effect the inherent reliability or unreliability of the Windows clients or servers. You will be faced with the positives of the familiar Windows workstation, device support, and applications. The negatives will involve the reliability issues and the possible need to do more on-site support.
Serenity Systems recognizes that not being able to run Windows applications can be a real inhibitor. IBM's WorkSpace on Demand Win32 Client Feature is a response. Serenity Systems is currently working on Project Concorde, to allow a workstation to support Windows as a guest operating system. These are two responses to the issue, each with a set of advantages. Simple access to Windows applications can even be supported by Citrix MetaFrame if the requirements fit that environment. There are other responses, but all of them tend to complicate the environment, making it more expensive to operate and support. Best option is to set up a "Windows free" computing environment.
While users may have made peace with the reliability of Windows, as the service provider ... you may not have that luxury. The reliability of Windows can have a real effect on your net revenue. Will Windows components have a higher cost of acquisition? Will more service have to be provided on site, especially unscheduled visits? If so, you may want to have these considerations in mind as you price your services.
The specialized requirements of a Managed Client environment, remote management and reliability, make the selection of OS/2 a pure business decision, not advocacy. At some point Linux may meet these requirements. At that point, look for Serenity Systems to add support for Linux to the current product line.
More to the point, you make your money doing billable services. That revenue depends on the time you have available to perform those services. Time is limited .. hours, days and weeks. The time you have to spend going to the account to put out fires, time spent resolving problems, takes away time from those other billable services. This makes the reliability of the server, the clients, and the network more important than ever before. And this is addressed by supplying hardware and software selected specfically to support this environment.
The hardware and software are selected to support the user's business computing needs, but there may have been any number of options available. This specific model calls for unparalleled reliability and remote management, delivered today with OS/2, remote boot, and server managed clients. WiseManager functionality makes building and managing networks, operational support, software deployment, and other tasks simple. In fact, the functionality of WiseManager goes a long way to making this opportunity possible and profitable.
This demonstrates another valuable advantage of the services model. You selected the components which best support this environment, not the user. You delivered it as a service consisting of hardware, software, service and support. And it works well. Had the users selected the components, you might not have been able to make the model work at all.
When users buy, they select. But when the same things are implemented as a service, users tend to accept what you deliver, your platform. You control the environment to the extent possible. You need to do this to insure the installation runs 7x24 without you having to attend to it. You need an extremely reliable installation.
This is why Serenity Systems positions Managed Clients as a turnkey desktop management service, to include the hardware, software, service and support. From a marketing standpoint, it is described as permission to get off the technology treadmill. With this control, Serenity Systems and our Channel Partners can build the kind of reliable networks, client workstations, and support which allows the Channel Partner to maximize the net revenue while delivering a superior computing environment to the user at less cost.
This is a very complicated issue. OS/2 provides good support for legacy applications, but there will be "exceptions". There always are. Be prepared to modify the business model to accommodate some legacy and even "cultural" situations in an account. But there will be limits. Not all applications are suitable for this networked environment.
The Managed Client comes with a superior set of general business and messaging software, including PMMail, FaxWorks, RelishNet (calendaring and scheduling which can facilitate some project management, a directory, the ability to send notes to other users ... a focus on collaboration and teaming). The network is an intranet with mail services by Hethmon Brothers Mail Server, DominoGo and Apache. Serenity Systems will continue to review applications which can be used to create a compelling business desktop.
StarOffice is available and continues to receive recognition by the industry as an alternative office suite. In a recent PC Week item, Star Office receives high marks for functionality, features, ease of use, .. and now .. it's "free". In addition to StarOffice, IBM Lotus Smart Suite continues to be enhanced, improved reliability, networking enhancements, great function ... and excellent pricing. It makes a great deal of sense to "get off" MS Office, and two excellent options are available through Serenity Systems.
OS/2 is a superior application platform with support for DOS, Win3.1, REXX, Java, and OS/2 applications. Of course, the applications in question should be tested. Some "Win32 apps" will run and others will fail. It may be possible to replace them with other applications, or fall back to support for Win32 applications through solutions like Citrix WinFrame and MetaFrame. These are expensive solutions but may be what it takes to support the user.
The "OS/2 community" continues to explore ways to support a range of applications, incuding the Project Odin, a project intended to facilitate the running of Win32 apps on OS/2, or EverBlue project for support of Linux applications. There is also the possibility of rolling your own solution by leaving some PCs running Windows and allowing the Managed Client users to pass through to those PCs using a product like IBM's Desktop On-Call, or CrossTec's NetOp, perhaps even VNC.
Something to consider in these discussions: a key function, a critical capability of the Managed Client model is the ability to implement, facilitate, and manage change. Even the change of the OS can be addressed. Today, no other operating system provides the "out-of-box" business solution, the reliability and the manageability provided by OS/2. But, a properly implemented Managed Client solution can facilitate the migration from OS/2 to Linux and Java, or any other platform, even Windows.
Remember the Principles of Data Processing? The Operating System is the traffic cop which moves data and information around the computer, from storage to memory and so forth. That is the correct role for the OS. The Managed Client returns it to that role. As the prospect considers making the right decision, assure them that they are making the right decision for today and enabling themselves to manage change tomorrow. It's the truth. While a Windows implementation ties them and commits them to an expensive proprietory environment, the Managed Client as implemented by WiseManager offers the flexibility to implement change ... including the possible migration to Windows, if appropriate.
If users want to run their Windows applications, the issue really is ... "OK, how much is it worth to you?" There is a real possibility that this connection to Windows is so strong that the Managed Client will not be a solution. These clients may need to remain on Windows and be supported by Warp Server as traditional Windows users, or Project Concordeusers, or managed as Windows clients under WorkSpace on Demand. The downside of these issues is, as long as it remains a Windows machine, it will be less reliable and a more expensive system to manage.
However, Serenity Systems will support the need of Channel Partners to select the right systems for their customer engagements. The services and pricing for Windows should be different than the Managed Client workstations. The actual terms and conditions of your contracts are between you and your customer. IBM WorkSpace on Demand Windows Client feature is a possibility and can be sold by Serenity Systems as part of a Managed Client engagement.
It may not be possible to overcome the Windows mindset ... but, then again .. it may be. Trends indicate that there is now a greater willingness among users to consider non-Windows solutions. Years of using Windows, sometimes beyond its capabilities, has created a "familiarity breeds contempt" situation with users. People no longer argue the need for a more stable platform. A non-scientific Windows NT Magazine instant poll asked its users how many times they have has to rebuid their NT systems in the past year. The results may not suprize you: 60% said "more than three times." And that figure, "more than 3", was the highest option available ... it could have been 4 times, 8 or12. No way to know.
These respondents are not Windows bashers. They are Windows NT users. And that simply is not the type of reliability we can afford to have in building this computing model. We can't. You can't. The users can't. And there is another note of caution, a trend which demonstrates that it may be a better time to consider SOTW (Something Other Than Windows). That would be ... where is the development taking place?
According to an item in CNET, Gartner Group reports that the number of developers who consider Windows their primary platform is dropping from 65% in 1998 to 40% next year. I think it is wrong to see this as a migration from Windows. I think it is more correct to think it is an expression of a concern that developing for Windows alone is risky ... and that is a significant message. It means a growing number of non-Windows users needs to be considered by developers.
It may not be possible to talk an organization out of Windows. But, if it is the right thing to do, it's worth a shot. First, explain the technical and money issues that are required to keep Windows support as part of the equation. Convey the realistic message that it can be done, you always want to say yes to a customer. But it will have an effect on costs and reliability. Explain that, by freeing your hands to select other applications, their business may benefit. After all, are they in business to service customers or to use Windows?
NOTE: I recently spoke with a colleague selling an airline reservation system. The user wanted Windows, like they have in the airline offices. He asked if they wanted their reservation system to go down as often as the PCs in their offices. They elected to keep this application off Windows. And these products are available for you to use in your engagements through our partner, Flight Data Management
It is worthwhile to take the time to explain the software churn, which has become such a part of the Windows product cycle. Users are familiar with the activity, but it is still a good idea to discuss it and bring it into the proper focus. MS Office is a clear example of how software churn can effect users. Many users were happy with MS Office and had no desire to move to Windows95.
But these users needed to exchange documents with other users who had made the move to Windows95 and Office95. Next thing you know, they had to upgrade to Win95, Office95, and probably a new PC. And this upgrade was driven by the reality that Microsoft had found a way to use file formats, like word processing documents, to leverage product churn. It happened again with Office 97. Now Office2000. And how many users will find themselves compelled to upgrade ... for a reason other than the desire to use the new feature set?
There are two reasonable alternatives to Microsoft Office. One is the Lotus Smart Suite product, which even has the option of changing the interface to resemble MS Office, so former office users can feel more comfortable. Serenity Systems can offer extremely attractive pricing on Smart Suite.
And I'd suggest taking a hard look at Star Office as a replacement suite. A recent Information Week lab review of StarOffice said it a reasonable alternative to MS Office. Star Office is significantly less expensive, but has similar functionality. It also provides a similar look and feel as MS Office, so little or no time is spent on learning the new suite.
As people consider migrating to Office 2000 at a cost of betweem $200 to $400 a license, our Managed Client offering can include Star Office licenses at no cost to the user and if Smart Suite is acceptable, Serenity Systems is prepared to provide very attractive pricing on this Lotus product. Both these products provide the same functionality, and look and feel as MS Office. Both run on Windows ... but both allow the user to cut the Gordian knot which tied them to Windows.
The Information Week review of StarOffice does give MS Office some points for more functionality, though principally in areas not likely to effect most users. For example, Excel was considered superior to StarCalc. But no real spreadsheet user should be using an office suite spreadsheet. We offer the best spreadsheet in the Intel space, and that product is Mesa/2 from Sundial Systems. This product is available in a trial version for people who need proof, but I'm convinced.
Users really do need to consider alternatives to Microsoft Office. Other products frequently do a better job of being able to exchange documents with the various versions of MS Office than MS Office, itself. Something Microsoft could do but perhaps finds the revenue available through the churn of users upgrading software to be more attractive and important than protecting the investment their customers have made in Microsoft software. These statements are opinion only, but should have some appeal in de-fusing the users' manic desire to run Windows. Using Windows and other Microsoft software is an unhealthy obsession for many business users.
This is sometimes associated with protecting their investment but it doesn't always accomplish that objective. You should carefully assess the number and type of PCs available and how reasonable it would be to attempt to support those machines. Not every PC is a suitable platform for a Managed Client.
Just as it would be unwise to let changes in file formats dictate the computing environment, PC hardware should be placed in its proper place, its proper role in the computing environment. The PC itself is not the significant expense in the computing environment. And the fact that Serenity Systems promotes "Free PCs" to participating businesses is directed precisely at handling this objection.
This is where the ability to support the environment is so important. To be fair to your customer, look at how much time it would take to assess the existing PCs. Perform the systems and application testing. Then add those expenses to your contract. And I do not recommend taking the cost of the PC out of your Managed Client services pricing, even if you agree to use their PCs. But your contract is an instrument between you and your customer. This is your decision to make and you may choose to make it over again with each user.
The position I recommend is "The PC hardware is not the significant expense involved in desktop management. I know what to expect from the Managed Client hardware and I know it is supported. I would need to test, modify and support your PCs myself and that adds expense to the equation. So, the cost of the services contract is actually higher with your PCs ... it doesn't save any money. At the end of the services contract, if you want the Managed Client workstations, I will transfer them to your organization and continue to support them."
And many users are OK with the idea of replacing their hardware. Sorry to say, it happens all the time. They can appreciate the mixed bag of hardware they have acquired over time creates support issues that creates. Chances are they were looking at upgrading much of the hardware when they started to consider outsourcing the desktop management service.
Having said that, lets say you have a prospect who just bought a bunch of one type of computer. And it was expensive, say IBM PC300PLs, one configuration with one set of components under the covers. Displacing the new PCs is a show stopper to the services agreement. You are comfortable with the configurations, drivers, and support, and you want to go ahead and protect the user's investment, use their existing hardware to the extent possible. Fine. Do it!
As I said, your services contract and your pricing is between you and your customer. Because of the range of systems available, Serenity Systems will only continue to test and support a limited number of workstations systems. Managed Client software only, unbundled from hardware, is available to channel partners.
This is part of the value proposition supplied by Serenity Systems. We have developed an environment which you can install with your customers. We selected the components specifically to support this business model. We knew we needed a reliable server which would support remote access. We chose OS/2 Warp Server. The most reliable, cost effective NOS available. And OS/2 Warp Server excels in support for other servers and clients.
Serenity Systems has worked with IBM to determine the most suitable hardware for this environment. IBM has a great deal of experience supporting similar requirements for large banks rolling out automatic branch systems or enterprise accounts with similar programs. As a result, Serenity Systems offers to preload Managed Client packs on IBM Netfinity Servers, chosen for performance, reliability, name recognition, and serviceablility, including three year on site service warranty.
At this time, Serenity Systems does not mark up these servers or charge for the preload. This is done for the convenience of the Channel Partners, and to assure Serenity Systems that the components for the installation will work well together. At the same time, Serenity Systems actively recruits Channel Partners with exceptional technical skills who want to develop their own server solutions. Therefore, the Managed Client software is also available on CDs to be installed on servers selected and configured by the Channel Partner.
Unlike the servers, the Managed PCs selected and tested by Serenity Systems should be considered as a requirement. Before substituting other client hardware for supported systems, please contact Serenity Systems to discuss the possible support issues. Supported systems have undergone significant testing and we feel it is appropriate to deliver the client as an integrated hardware and software solution. Special Bid processes will be required to buy Managed Client software without the associated client workstation.
It is Serenity Systems intention to offer Managed Clients on several client workstation platforms to allow user a choice. But, because of the enormous diversity of PC hardware, the specialized environment of Managed Clients, and the concerns regarding hardware device support for OS/2, Managed Clients are positioned has one product consisting of the client workstation and the associated software required to particpate in a Managed Client environment.
I'm going to provide an excerpt from a recent email which is essentially a summary of this white paper. I contacted this consulting firm regarding desktop management. Glenn Hudson went to their offices to give them a WiseManager demonstration. The first question he was hit with was, "Is this available on NT?" and they were not happy with the answer. Part of this, perhaps the major part, involves the desire to run Microsoft Office, back to the issue of running Office or exchanging documents with other Office users.
Dennis, I have to admit I've been thinking about your meeting and the concern expressed over our decision to use OS/2 as opposed to Windows9X, NT, and subsequently, MS Office. I understand this is a serious obstacle which may cause your organization to pass on this opportunity.I appreciate the significance of our choice and the response it can engender. The OS/2 - NT issue has spillover into business model, product issues, and marketing. It was a considered, deliberate, and necessary decision to insure the profitability of our channel partners.
I was discussing desktop management as a fee service with a large Canadian consulting firm which does "perform service" work. They indicated that there was customer interest in such a service, but they had been unable to crack the code on how to do this profitably, and that's the rub.
To make money at this, you need to be able to count on setting up an intranet, perhaps with Internet access, and addressing security and reliability. It has to run 7x24 and be capable of remote management and problem resolution. If you sign a service contract to manage these desktop systems, and then have to spend a lot of time at the account doing problem resolution ... you'll lose money, maybe a customer.
If you had a number of desktop management services contracts in effect this week, how much money would you have lost because of "Melissa"?
So far, the Windows type solution has involved Novell, SMS, and Intel's LANDesk. These are expensive and do nothing to address the issue of the reliability and security of Windows, itself. It improves the ability to manage the Windows stations, but at what price? How many accounts can afford this type of a solution?
Let's face it. If this was easy, everyone would be doing it. At the end of this note, I'm going to include part of an IDC study released this week. The study comments on the growth of NT and Intel servers at a time when the overall server market is going down. But it also comments that "server vendors are having to tweak their wares to overcome what some call the inherent unreliability of NT, which many users claim results in 20 percent downtime." (Note: At this point, I will not post the IDC material, until I'm sure that I'm not violating any copyrighted information.)
I will not comment on NT performance. Your organization is familiar with this environment. You don't need my opinion. But I was not surprised by the comment in the IDC report. Earlier last week I was talking with someone who is working on a large Notes installation. He was chuckling about the quandry facing Lotus because the NT servers, which Lotus pushed at this organization, are running at 75% availability. The OS/2 servers, which everyone seems so anxious to get away from, are running at 99+% availability.
Now, either this rings true to you ... or it doesn't. If it does, then you understand that we put this on OS/2 because this is the way to make the services profitable. Not a little bit profitable ... very, very profitable. I can take you through some sample numbers which demonstrate that every 10 workstations can drive net revenues of $30,000 for a two year contract. A 30 workstation installation will generate net revenues of over $100,000 on that 2 year contract, and the net revenue rises 38% to $72,000 in the third year.
This is because, in my example, all the software and hardware reverts to the user at the end of the two year contract, which takes away from the net revenue. Certainly, you don't need to be that generous, but I wanted the example to make the point that this is a lot of money. Every 300 workstations on such a contract can be driving $500,000 a year net revenue.
You simply can't do that if you try to implement this under NT. That doesn't mean that NT can't play a role. With Warp Server support for NT servers and workstations (as well as DOS, Win3.1, Win9X, Apple and even *IX, Novell, and Linux), you have the ability to write a great deal of services into the contract for these other products.
All I'm saying is, so far ... there are reliability issues with Windows workstations and servers which hurt the net revenues. And that is what we are in business for ... net revenues. I was faced with the relatively ugly choice of offering folks a chance to make money on OS/2 ... a hard sell, or cobbling something together on NT which just seems to be a poor choice for this particular business model.
Don't "sell OS/2"! Sell your service! That is a major advantage of positioning this as a fee services contract. If I sell an application, someone will ask .. what does it run on? I say: OS/2. They say: Oh, we can't do that. We don't use OS/2. We have no OS/2 skills .. don't you have something that runs on Windows?
But ... if I start talking about a service to manage workstations ... the questions start coming into the realm of "tell me about the features and terms of the contract .. what do you do, what do you provide, how much does it cost?"
Buying a product leads to one set of questions from a customer. But retaining a service does a great deal to shift the focus and provide a more realistic perspective for business computing. The question of 'what does it run on?' may not come up. If it does ... there is a marketing response.
That response is the truth. If the user insists on Windows ... "well, we can do it on Windows today .. here's how much more it will cost, $XXXX". This takes into account the additional hardware and software and the additional time spent supporting the workstation. There is a reason Gartner Group can up with a TCO of $9,500 for a Win95 workstation, even though I've never met a customer who feels they are paying that.
Going further, you can tell the prospect that you have support for Windows workstations and servers which may be part of the contract. OS/2 Warp Server for e.business and WorkSpace on Demand support for Windows clients is expensive. But for the time being, the Managed Clients use an embedded OS .. you can mention OS/2. You can also say .. honestly, that there is option of moving to another OS at some point in the contract. Managed Clients facilitate this very type of migration.
For a service, the OS may be Windows, Java, Linux .. .whatever is the appropriate tool .. because ... they are buying a service to manage the desktops, literally they are buying access to applications .. thats' all ... they are not buying an operating system!
They don't have to buy OS/2. The essence of Managed Clients is the improved ability to deploy software. So, running Windows under the existing contract is a real possibility once the reliability, manageability, and expense issues are resolved.
That's all I can say on the topic. The Managed Client cannot be sold to every user. However, when the model fits, it is a marvelous revenue opportunity for the channel partner and provides an excellent solution to a very real problem experienced in the world of business desktop computer users. There are many other Managed Client opportunities, including excellent vertical and industry specific environments and applications. Here the operating system is even less of an issue because it is likely that the workstation is only running the vertical application. Again, the Managed Client provides the same set of excellent user benefits.
I hope this material can be useful as the basis for some marketing activities. Feel free to offer comments to me via email (BStJohn@Serenity-Systems.com) or using the Channel Partner Marketing forum on the web site.