Computer Finance Research

Are windows thin clients economical?: II

Issue Date: 01-01-99
Issue Number: 9.08
Category: THIN CLIENTS

In part one of our analysis (see Computer Finance, December 1998), we noted the changing economics of Windows thin clients. By announcing that it was requiring a copy of NT 4.0 Workstation on every desktop, Microsoft has added a cost of $130 - $260 to each Windows thin client that many users perceive as a tax.

Yet, as we noted, over the years, Citrix has also gradually upped the prices of WinFrame, its flagship Windows NT 3.51-based product - but it has also added functionality with each new release, recently adding features such as load balancing and session shadowing.

Comparing prices quoted in a 1996 Zona Research study, pegging WinFrame at $3500 for 15 concurrent users, the same product today lists for nearly $6000. Nonetheless, it is Microsoft that has drawn the bad press. How much of a difference will this pricing change really make?

This report focuses on the experiences of eight diverse user sites to check where and why they installed Windows thin clients, and where data was available, what the numbers look like. For WinFrame shops, if we had sufficient data, we also analyzed whether an upgrade to NT 4.0/MetaFrame would make sense.

For reference, we've included the list prices of relevant Microsoft and Citrix products in Table 1, and we listed the eight user sites in Table 2. We drew our references from Citrix Microsoft, and independent sources.

Table 1. Microsoft and Citrix list prices for a 15-user system
(Source: Computer Finance).

Product	List price
NT 4.0 Server/Terminal Server Edition (10 CALs)*	$500
NT 4.0 Server/Terminal Server Edition (5 additional CALs)*	$175
NT 4.0 Workstation (15 clients)	$3,899
Citrix MetaFrame (15 clients)	$4,995
Citrix MetaFrame workgroup (5 clients)	$1,995
Citrix WinFrame 1.7 (15 clients)	$5,995
Citrix WinFrame 1.7 workgroup (5 clients)	$2,495
Citrix Bump Pack (50 additional users: Metaframe or WinFrame)	$9,975
Citrix Subscription Advantage (15 clients)**	$1,000

Notes:
* Client Access Licenses
** Annual maintenance option

Table 2. Research sample
(Source: Computer Finance).

Company type	Size (staff)	Sites	PCs	Windows terminals*	Thin clients (total)**
California realtor	100	27	52	8	60
Utility	580	14	100	350	365
Shipping	600	28	500	40	40
Mid Atlantic realtor***	2000	44	1900	60	365
Cable TV network	2500	15	1900	100	600
Petroleum	29,000	****	20,000	40	4,000
Bank holding company	2800	188	800	900	900
Production*****	150	7	80	30	60

Notes:
* Many organizations in the sample also run thin client environments on PCs.
** Concurrent user licenses for WinFrame or MetaFrame. (None of the sample used Microsoft Windows Terminal Server without MetaFrame.)
*** Staff includes 1800 independent agents whose desktops are managed by the company.
**** Numerous global sites.
***** Organization currently has 15 WinFrame licenses, but will shortly double them.

We surveyed a cross section of players, including IT managers, network administrators, operations managers, and financial controllers of various organizations. The companies ranged in size from 100 to 30,000 employees. And, as the various data here suggests, the financial results were mixed.

MID-ATLANTIC REALTOR

The company, the twelfth largest realty firm in the U.S. and the product of a recent merger, has a core home office staff of about 200. The company offers 'turnkey' real estate solutions, ranging from selling of properties to the offering of title and mortgage insurance through a subsidiary.

They are supplemented by 1800 affiliated agents, working out of a 44 locations (some up to 200 miles away), supplemented by 60 clerical staff. The company manages the IT environment for both staff and affiliates, although it doesn't own or purchase equipment for its affiliates.

The installation is hybrid thin client. The company provides PCs or Windows terminals to about 90% of its headquarter's staff, while the affiliated staff is responsible for buying its own machines (which are mostly PCs).

Nonetheless, the realty company supports hardware purchased by its affiliates, but with strong recommendations that they buy specific machines. 'We tell our independent agents that they could buy any laptop, but we give them a standard guarantee that the Toshiba laptops will get onto the network,' explained Dean Panos, network administrator.

Additionally, the company also manages a core set of applications (e.g., Microsoft Office, Outlook, and several other productivity and business applications), which are server-based and operated within the WinFrame environment.

Individual users are not prohibited from using their own applications stored locally on their hard drives, but those are not supported by the central IT group. Because WinFrame is operated by pressing an icon, end users do not need to reboot if switching from a Winframe-based server application to a local one.

The hardware short list includes:

* Desktops: Gateway Pentiums (there is a mix of machines from 266 - 400 MHz, depending on vintage) which typically cost $1700-1800. There are roughly 250 machines spread across the front office at headquarters and remote offices.
* Laptops: Toshiba Pentiums, typically costing $2500 - 3000. These machines are used by the 1800 independent agents, who are mobile.
* Windows Terminals: Wyse WinTerms, costing around $850. There are roughly 15 - 20 units installed at the home office and 60 units for support staff in remote offices.

The back end includes three Citrix WinFrame servers, including two large Data General (six- and eight-way, clustered) boxes, and a four-way Compaq Proliant machine. The WinFrame environment is used for running common applications, including Microsoft Office, Outlook, accounting, and several industry-specific third-party applications. PC users can click on a WinFrame icon to access common applications, or to icons for local applications that some may maintain on their hard drives.

The obvious driver for centralizing Windows applications was reduced maintenance loads. Prior to the merger, the PC support staff of IT consisted of one full-time and two consultants supporting roughly 1000 users, returning multi-day response times for one of the companies, and four people delivering 24-hour response to 5000 users at the other company. WinFrame has helped cut PC support technician visits by about half.

Another driver was the need to improve access to the external Multiple Listing Service (MLS) databases; previously, each PC relied on slow, problematical dial-up access. With WinFrame, access could be centralized to a persistent T1 connection; the end result is more reliable, faster connections, with latency only within the inter-office frame relay lines.

In all, the organization has improved support without hiring additional IT staff. Currently, they have a five-person IT department. With the fat PC client alternative, and based on Meta Group averages of one level one technician per 70 full-time users, the organization would require a 15-person staff to deliver a service ratio of one level one technician per 150 part-time (mobile) users. Conversely, Meta Group estimates that, if managed PC configurations are adopted, the level one support level could dwindle to as little as one level one support person per 400 users.

While this organization has not fully adopted a Managed PC (e.g., with lockdown or mandatory use of certain models), it has gotten close via use of 'preferred' machines, 'preferred' applications that are centrally supported, and use of WinFrame desktop for most applications.

The WinFrame network has been in operation since January 1998. Because hardware is purchased by users separately out of their own budgets, we did not factor in client hardware costs (and, since most of the machines are fat clients anyway, there is little difference with the PC-only case). Our cost analysis instead focused on server hardware, software, and support.

* Server hardware: WinFrame required significant server capacity. Without it, only a modest server would be required for Outlook. Therefore, our estimate is that the upfront costs of the Citrix, WinFrame system vs. a normal, fat PC configuration was $276,000 for thin client versus about $96,000 for conventional.
* Software license costs: Microsoft licensing costs are the same for both thin and fat client cases. The real difference, therefore, is the addition of Citrix license costs for thin client. They purchased small, five-user base packages of WinFrame for each NT Server at a cost of about $1500 apiece (Citrix's current prices are higher), adding seven 50-user 'bump' packs from Citrix to cover 350 concurrent users at a cost of $4995 each, or about $35,000 total.
* Support: As mentioned earlier, we believe that the company saved the cost of 10 support staff thanks to thin clients. We based our estimates on annual salaries for network administratoirs and PC technicians at $35,000/year (unburdened).
* Other: There were some telecommunications savings due to the ability to centralize external (MLS) access.

THE BOTTOM LINE

We calculated fixed and recurring cost views of the economics of WinFrame versus conventional fat PCs, with recurring costs computed for a five-year period (see Tables 3 and 4). Not surprisingly, the fixed costs, which are largely up front costs, are more expensive for the WinFrame alternative (by about $170,000); but the advantage of WinFrame comes in back-end recurring costs (by our calculations, about $1.8 million). The investment certainly made sense.

Table 3. Fixed cost comparison: WinFrame versus standard PC LAN for mid-Atlantic realtor
(Source: Computer Finance).

Configuration	Category	Item	Units	Unit price	Total cost
WITH WINFRAME	Server Hardware	DG (8-way, clustered)	1	$80,000	$80,000
		DG (6-way, clustered)	1	$60,000	$60,000
		Compaq (4-way)	1	$20,000	$20,000

	System software	NT Server 3.51(incl. 10 CALs)	3	$960	$2,880
		NT Server 3.51 (additional CALs)	2105	$35	$73,675
		Windows 95	2050	Bundled with PCs	No additional cost

		WinFrame workgroup (five concurrent users)	3	$1,495	$4,485
		WinFrame bump pack (50 concurrent users)	7	$4,995	$34,965
		WinFrame load balancing	2	$7,500	$15,000
	TOTAL				$276,005

WITHOUT WINFRAME	Server Hardware	Compaq (4-way)	1	$20,000	$20,000
		NT Server 3.51	3	$960.00	$2,880
		(incl. 10 CULs)**
	System software	NT Server 3.51 (additional CALs)**	2105	$35	$73,675
		Windows 95	2135	Bundled with PCs	No additional cost

	TOTAL				$96,555

Note:
** Client Access Licenses

Table 4. Five-year recurring cost comparison: WinFrame versus standard PC LAN for mid-Atlantic realtor
(Source: Computer Finance).

Configuration	Category	Item	Units	Unit price	Total cost
WITH WINFRAME	Networks	T1 connection	1	$500/mo.	$30,000
		Frame Relay connections	44	$400/mo.	$1,056,000
	Support	Network administrators	5	$35,000/yr.	$875,000
	TOTAL				$1,961,000

WITHOUT WINFRAME	Networks	Analog phone lines*	44	$23/mo.	$60,720
		Frame relay connections	44	$400/mo.	$1,056,000
	Support	Network administrators	15	$35,000/yr.	$2,625,000

	TOTAL				$3,741,720

Note:
* If separate modem lines were installed for all 1800 agents, the annual costs would be $496,800 (or $2,484,000 over five years).
Admittedly, if client costs were thrown in, the results would not be that much different since only a small proportion of the user base is using Windows terminals. Because this is a hybrid thin client installation (most of the clients are full PCs which have local hard drives, and in some cases, local applications), the WinFrame savings are not as great as they could be.

The $64,000 question is what would happen if the company decided to upgrade to an NT 4.0/MetaFrame infrastructure? Based on published mail order prices and an estimate of 2135 desktops, 1000 concurrent MetaFrame users, we think that the bad news would be as follows:

* MetaFrame: At $1995 per five concurrent users, and $9,975 for 50-user 'bump' packs, the Citrix license cost for 1000 concurrent users would be around $75,000.
* Windows NT Server 4.0 /Terminal Server Edition: At $499.95/server (which includes 10 client access licenses), plus $35/additional client access license, the cost would be about $75,000.
* Windows NT Workstation 4.0: At $129.95 per upgrade, the cost would be approximately $275,000.

The overall MetaFrame/NT 4.0 cost damages would be about $425,000; if the organization stuck simply with Microsoft Terminal Server and dispensed with the extra Citrix functionality, the pain would be reduced to about $350,000. These are list prices; actual prices might be lower if the organization could centralize procurement of NT licenses for its affiliates, qualifying it for a Microsoft Select discount program.

In conclusion, the additional NT 4.0 'taxes' would not be a deal-breaker.

NEW ENGLAND UTILITY

The largest utility in a small state uses WinFrame to lower client maintenance for 120 users out of a total base of 350. The WinFrame users include about 50 in the central office and 70 more in 14 district offices scattered across the state. They are one of the earliest users of the Citrix thin client, beginning with WinView, a predecessor, in 1994. The Citrix thin clients replaced IBM 3270 terminals.

The driver to replace the old character terminals was a combination of new client applications covering work management, time entry, and mapping. Additionally, they wanted to provide remote users the productivity of Microsoft Office, but without the maintenance burden. One alternative, putting a dedicated mapping workstation in each district, would have easily cost $100,000 or more.

Instead, WinView was initially installed for an approximate cost of $2,000 for the base license (including 15 users), and $995 for each additional 15 users. The real costs came with upgrades, including one new generation of WinView, and five of WinFrame (they currently operate 1.7, the latest release); based on the 120-user population, and Citrix published costs of $1000 for 'subscription' (maintenance, which covers new upgrades), that would cost $7,000 annually. The customer also pays about $9,000 annually for access to an (800) premium technical support line.

According to the IT manager, the initial decision to adopt a PC thin client for remote sites was 'an act of desperation,' since they didn't have the budget for additional remote site servers, nor the budget for four additional regional IT network administrators, at an estimated cost of $40,000 annual salary (unburdened), each. Instead, the utility operates with 1.5 network administrators, or about $60,000 (unburdened) in annual salary costs.

The only performance problems have not been WinFrame-related. A PowerBuilder application running against a Sybase database, based on Compaq two-way, 133-MHz machines, has proven a performance hog. The machine was replaced last year with a four-way, Compaq Pentium Pro 200 at a cost of $25,000.

The organization is being dragged into MetaFrame on NT 4.0 because it is about to implement Microsoft Exchange. It is obviously not enthusiastic about having to budget an additional $50,000 for the extra NT license costs. 'It's still worth it because we'll still save in support,' said the IT manager. He adds that there is a bonus of life extension of the 120 486 machines being used for thin clients.

Compared to conventional, fat PC client alternatives, continuing on the WinFrame/MetaFrame route saves about $350,000 in PC hardware purchases - although, there will be another $25,000 investment in a new Compaq four-way server as part of the process. 'We'll still amortize those costs pretty easily over our user base,' he said.

SHIPPING COMPANY

A Jacksonville, Florida-based, $1.2 billion organization with 600 users, over 30 offices worldwide, and an owned fleet of eight vessels (many more are leased), the concern is how to maintain satellite-linked clients aboard ship. The answer is: You don't.

The organization has bought WinFrame thin clients for two DOS-based applications: container stow planning (the equivalent of a warehouse management system) and maintenance management. Purchase orders can be generated anywhere on the high seas, and uplinked back to headquarters in time to have the parts ready by the time the ship reaches port.

The shipper has decided against upgrading to MetaFrame because the only advantage would be the standardizing of server OSs on NT 4.0 (the land portion of the organization has already upgraded). That's not sufficient to justify a cost, which the operations manager estimates at $2500 per machine - especially since the existing DOS applications are adequate. The day of reckoning will come only when all vendor DOS support is discontinued.

SOUTHERN CALIFORNIA REALTOR

The company develops, owns, and manages commercial and residential properties around Los Angeles and Sacramento. Like any large realty organization, it is highly distributed, with 100 staff, 60 users, scattered from headquarters to 27 local leasing offices. Given California distances and Los Angeles traffic, requiring PC support staff to visit different sites could easily consume a half day per trip, equivalent to hopping a plane out of state. In Southern California, it clearly pays to keep support staff in one place.

WinFrame was installed April 1998. An itemized cost justification for the system is shown in Table 5.

Table 5. WinFrame cost justification for California realtor
(Source: Computer Finance).

WinFrame system		Existing PC LAN system
ONE-TIME COSTS		ONE TIME COSTS*
Servers (4)	$42,588
Windows terminals	$4,200
WinFrame	$17,800
Installation, training	$15,795
WinFrame annual service contract	$3,750
NT 3.51 license	$799
Exchange license	$999
Exchange license (client access)	$3,770
WAN installation	$60,000
Ancillary (switches, backup, UPS)	$6,343
TOTAL	$156,044

RECURRING COSTS (5 YEARS)		RECURRING COSTS (5 YEARS)
Network administration: terminals	$79,820	Network administration: PCs	$478,920
Network administration: servers	$23,946	Network administration: servers	$79,820
Hardware maintenance: servers	$936	Hardware maintenance: servers	$936
		Hardware maintenance: PCs	$96,000
Hardware upgrades: Server	$3,200	Hardware upgrades: server	$3,200
Software upgrades: Microsoft Office	$76,800	Software upgrades: Microsoft Office	$76,800
Software upgrades: WinFrame	$12,000	Operating system upgrades	$5,400
Installation	$125	Installation	$3,549
Telecommunications	$271,320	Telecommunications	$21,000

TOTAL	$468,147		$765,625

Note: Because existing PC LAN system configuration assumed existing equipment, there were no one-time costs.

The IT environment includes a Novell NetWare 3.12 file and print server, two WinFrame servers, and an NT 4.0-based domain controller that provides access to the network, email, and backup tape server. There are four servers overall, including two Intergraph 200MHz and two Compaq 200MHz machines. The client side includes a handful of Wyse WinTerms, and a mix of Pentiums and life-extended 386 and 486 boxes (half are 486s, with the rest split 50/50 between 386s and Pentiums).

According to Pamela Shelley, controller, replacing all clients with Pentiums would have cost almost $100,000. 'The beauty of WinFrame is that we didn't have to upgrade the clients, only the servers,' said Steve Tamkin, manager of IS.

Performance has been satisfactory. 'We've seen good increase in performance. Actually, WinFrame has sped up the 386s,' noted Tamkin. Although WinFrame only displays the Windows 3.x user interface, most desktops are running in 32-bit mode, including Windows 95 and Office 97. They also run several specialized property management and accounting applications.

Major costs include one-person payrolled to runIS, and a one-time cost of $6,000 to the systems integrator for first year on-site technical support and a three-day WinFrame training session. This cost will be eliminated next year as the organization grows more familiar with the system.

In examining the costs of the system, the standout element is the higher telecommunications costs for the thin client alternative versus the higher costs of network administration for the fat client system. Yet, the difference is over $450,000 in favor of the thin client-this pair of factors alone summarizes the savings of thin clients. In examining the list item by item, we have a couple minor notes:

* The server upgrade costs were rated equal in both cases; our impression is that server upgrade costs should be less demanding for fat client installations.
* It was assumed that there was no client hardware maintenance for the thin client alternative. Although the old PCs are being run in terminal (diskless) mode, the equipment is older and subject to the wear and tear of age. Either, there should be a nominal sum allocated for maintenance, or a modest sum for hardware replacement (with terminals) allocated.

The bottom line is that the initial costs of the WinFrame 60-user system over a standstill approach was $156,044; the recurring costs over five years were $468,147, which was compared to $765,625 for the costs of maintaining a fat PC LANServer network (see Table 5). The difference between those figures - the recurring savings over five years - amounted to $297,478, which netted to a 26% internal rate of return. As mentioned above, we would be a bit more conservative, allowing for nominal maintenance or gradual phase-out of old PCs, involving about $15,000 - $20,000 costs.

Would the economics still look favorable with MetaFrame? Forgetting about client hardware replacement, and assuming that the organization would continue to buy Citrix software upgrade annual maintenance (at $1000 per 15 users), and that the cost would be in new Citrix and NT 4.0 workstation licenses, our guess on the numbers would go as follows:

* MetaFrame software upgrade: $19,980
* NT Server 4.0: $2000
* NT Server 4.0 client access licenses: $1750
* NT Workstation 4.0 upgrade: $7800

That would add a grand total of $37,350 in one-time costs.

If we assume that the roughly half of the 50 remaining 386 and 486 machines were replaced slowly by WinTerms over five years, that would add another $15,000 - $20,000 to the cost.

Our verdict: If the organization is operating fine with the existing WinFrame/NT 3.51 configuration, this would be a wasted expense. If, for other reasons (such as forced migration because of loss of vendor support for old system or application software versions), it will reduce the internal ROI, but not destroy it.

GLOBAL OIL COMPANY

Flexibility, not numbers, has been the driver for installing WinFrame and MetaFrame here. Roughly 80% of the 25,000-person staff have computers of some form. About 3,000 - 4,000 users run terminal server applications, much of that WinFrame - but they are run primarily on regular PCs (there are only about 40 Windows terminals in use).

Today, the company sees WinFrame/MetaFrame as a niche configuration. It didn't originally see it that way.

'When we first put in WinFrame, we had a general manager who saw it as the wave of the future. Since then, we've grown more realistic,' said Ed McDonald, chief architect, noting that there are clear limitations. For one, most PC applications were not designed for multi-user concurrent access and are therefore extremely brittle. 'The concept of a well-behaved application is not endorsed widely in the DOS or windows world,' he noted, adding, 'If a single user application crashes and burns, that's OK. But if it's a multi-user session, that's another story.'

He adds that since the company is very lean staffed (less than 30,000 employees for a $30 billion organization), many staff members double and triple up in job functions or roles, and therefore, use a large variety of software applications. 'If we were an insurance company with 5,000 agents working the same application, that would be different,' McDonald noted.

Nonetheless, there are specialized situations within the company where Windows terminals are quite suitable. For instance, staff on deep sea oil platforms cannot easily have their computers serviced; more dependable terminals, preferably with no moving parts, are ideal.

There is another use for Windows thin clients, even with PCs. It provides superior mobile connections. Windows Terminal Server will still maintain modem sessions even if the phone line temporarily goes down - something which isn't the case with Internet access.

Three years ago, the company ran a cost analysis based on 2-3 year pilots involving about 40 desktops. McDonald recalls that the costs of thin clients from the pilot were barely 10% cheaper than fat clients.

TV NETWORK

An organization with 15 sites, 2000 users, and - because it is part of the entertainment industry - the need to share multimedia content, the organization is deploying Microsoft Windows Terminal Server and Citrix MetaFrame for users of enterprise business applications (currently, Oracle Financials and internally-developed Oracle Forms application). That comprises roughly half of the 2000-user base; it uses 600 concurrent user MetaFrame licenses. Those users either kept their old Compaq 486 machines or were given NeoWare Windows terminals.

WTS users also have access to Microsoft Office and the Netscape browser, which was selected for its more compact footprint and better security over Microsoft Internet Explorer.

Because the users of enterprise applications weren't power users - they perform routine accounting and related transactions - there was no driving need for local hard drives or heavy computing power.

There were also network bandwidth savings, according to the IT desktop network administrator. 'If we had Oracle installed at the desktop, we would have to pump changes out to 1,700 desktops on a nightly basis. That would suck a lot of bandwidth,' he noted. Furthermore, by going to thin clients for half the user base, the system operates with two administrators - the IT project manager and an outside consultant. If fat client PCs were used, the project manager estimates he would have needed two more support people.

The tradeoffs of the thin client architecture included fatter servers. 'We wouldn't have bought so many large servers if we didn't have Terminal Server,' said the IS desktop project coordinator.

The itemized costs of the project are shown in Table 6. The overall price tag was almost $2.1 million. We didn't include savings in the table because we don't have the complete picture on recurring costs. However, the obvious savings came in support (two fewer network administrators at $35,000/year, unburdened, or $70,000 total) and avoided costs of buying news PCs (1000 units at $1750 each, or $1.75 million total).

Table 6. MetaFrame costs for TV network
(Source: Computer Finance).

Category	Item	Units	Unit price	Total cost
Server hardware	DG (4-way)	21	$86,000	$1,806,000
Client hardware	Compaq 486	900	Used existing machines	No additional cost
	NeoWare Neostations	100	$500	$50,000
System software	NT Server 4.0 Terminal	21	$500	$10,500
	Server Edition (incl. 10 CALs)
	NT Server 4.0 (additional CALs)	790	$35	$27,650
	MetaFrame (15 concurrent users)	21	$4,995	$104,895
	MetaFrame (50-concurrent user bump packs)	6	$9,975	$59,850
	NT 4.0 Workstation	1000	$130	$130,000

TOTAL				$2,188,895

Notes:
*The organization is large enough to qualify for Microsoft Select and other discounting contracts. Therefore, the actual costs are somewhat lower.
**Thin clients comprise only half the 2000-user network; the company ordered 600 concurrent user MetaFrame licenses.

Although WTS provides thin client support, the organization chose to pay roughly $250,000 for MetaFrame for a number of reasons, including multimedia support, superior performance, and system management features such as load balancing. 'We're a multimedia company, and we need redundancy,' the desktop systems manager said.

BANK HOLDING COMPANY

The company, with $7 billion in assets and 188 branches, was seeking an economical upgrade from IBM 3270 mainframe terminals. 'We were looking for a way of effectively deploying the windows interface to our branches, but we found that client/server was much too expensive,' said John Byrne, assistant vice president.

Roughly 900 seats would be involved, and replacing them with regular PCs would have cost a couple million dollars extra, while requiring the hiring of five, may be eight additional support staff.

The expiration of terminal leases this year drove the bank to act. Although core banking transaction systems were still mainframe-based, there were two critical applications that would benefit from a Windows front end: the email system and an IBM Computer Output to Laser Disk (COLD) document retrieval application.

An added benefit was the ability to have multiple applications simultaneously open on a Windows system vs. the single-tasking of the green screen world, which yields productivity savings due to elimination of constant log-ins and log-outs.

There was no standstill option. Renewing terminal leases would have also cost money; the 5-year cost for renewing the 3270 terminal leases would have been $2.2 million over five years. The goal with the Windows replacements was not to exceed that amount.

Given that the bank was starting from scratch, WinFrame on NT 3.51 was not an option. However, in going with NT 4.0 and WTS, it also chose to adopt MetaFrame because of the superior performance of the ICA protocol.

In so doing, the project cost roughly $1.8 million, including the following elements:

* Professional services.
* Servers: 12 MetaFrame servers and two smaller domain (access control) servers.
* MetaFrame license, including base packs (15 concurrent users) and bump packs (50 concurrent users).
* NT 4.0 Server, plus client access licenses.
* NT 4.0 Workstation.
* Wyse WinTerms.
* Microsoft 3270 SNA clients.
* Two additional support staff.

Table 7. MetaFrame costs for bank holding company
(Source: Computer Finance).

Category	Item	Units	Unit price	Cost
Misc.	Systems integrators, testing, CAT5 cabling			$225,000
Servers	Compaq 5500, four-way Pentium Pro	12	$21,500	$258,00
	200 MHz (MetaFrame server)
	Compaq 5500, two-way Pentium Pro	2	$15,000	$30,000
	200 MHz (domain server)
Clients	Wyse WinTerms	900	$825	$742,500
System	MetaFrame (15 concurrent users)	12	$4,264	$51,168
Software	MetaFrame 'Bump' packs (50 concurrent users)	13	$7,000	$91,000
	NT 4.0 server (incl. 10 CALs)	14	$1,200	$16,800
	NT 4.0 server (additional CALs)	780	$33	$25,740
	NT 4.0 workstation	900	$265	$238,500
	MetaFrame load balancing	12	$1,100	$13,200
	Microsoft 3270 SNA	900	$40	$36,000
Support	Network administrators*	2	$40,000	$80,000

TOTAL				$1,807,908

*Additional support staff hired as part of the MetaFrame project.

The itemized costs are listed in Table 7. Had the bank chosen a fat client solution instead, we estimate that hardware costs, based on our estimate of $1750/PC, would have increased over $800,000; additionally, if eight additional network administrators had been hired, that would have translated to an extra annual cost of $320,000, unburdened.

PRODUCTION COMPANY

A 150-person Las Vegas company that stages live and video productions, with seven western US offices, primarily operates conventional fat client networks, is gradually trying to centralize IT operations on a selective basis. We estimate that it is spending nearly $290,000 for its MetaFrame upgrade (see Table 8).

Table 8. MetaFrame costs for production company
(Source: Computer Finance).

Category	Item	Units	Unit Price	Cost
Servers	IBM 704, two-way Pentium Pro 200 MHz	2	$15,000	$30,000
	IBM 730, two-way Pentium Pro 200 MHz	1	$20,000	$20,000
Clients	Micron Pentiums (300 MHz and up)	90	$2,000	$180,000
	Wyse WinTerms	30	$650	$19,500
System Software	MetaFrame (15 concurrent users)*	4	$4,995	$19,980
	NT 4.0 Server (incl. 10 CALs)	3	$500	$1,500
	NT 4.0 Server (additional CALs)	120	$35	$4,200
	NT 4.0 Workstation upgrades**	150	$130	$19,500
TOTAL				$294,680

Notes:
* Includes 15 existing licenses for warehouse and freelance producer staff that use WinTerms, 30 licenses for mobile laptop users, and 15 future licenses for accounting, to be added early 1999.
** Number includes additional NT 4.0 Workstation named user licenses for freelance producers not part of the 120-user internal employee installed base.

It has begun phasing in Windows terminals for dedicated-use areas, beginning with the equipment warehouse (which serves warehouse staff and free-lance producers who check equipment availability). The organization plans to expand Windows terminals to accounting shortly.

The organization began with WinFrame, but last August, it upgraded to MetaFrame because its enterprise applications (see below) required the full Windows 9x interfaces that are only supported by the more recent Citrix product. Although Microsoft WTS delivered the same 32-bit client support, it still decided to open its wallet for MetaFrame because of its multimedia capabilities that are critical to freelance producers, who log onto the system as part of their activities.

The current IT environment includes three servers:

* Application/MetaFrame server: An IBM 330, two-way Pentium Pro 200 MHz with 96MB RAM; three 4.5 Fast/Wide hot swappable drives with an Equinox modem cage; and six US Robotics 56.6 modems. Applications include three enterprise programs: EMS, a custom VB quoting and project management system; UBS RentTrace, for tracking rental equipment; and Goldmine contact management.
* Database server: IBM 704, two-way Pentium Pro 200 MHz servers with 256 MB RAM and 14 GB RAID storage
* Groupware server: IBM 704, two-way Pentium Pro 200 MHz servers with 256 MB RAM and 14 GB RAID storage.

Additionally, there are local Micron file and print servers at each site equipped with 256 MB RAM and 8 GB storage, with processors ranging from Pentium Pro 200 MHz to the latest 450-MHz Xeon machines.

Linking everything is 10/100-Mbit Ethernet, which is a relatively minor expense. The real network bucks are in the Cisco 5500 switch at headquarters, and the 10BaseT hubs (each with 16 ports, average) located at remote sites.

On the client side, there are currently 15 Wyse WinTerms; in early 1999, the company will buy 12 - 15 more, primarily for accounting. Additionally, the mobile workforce, which includes 30 users, also will have MetaFrame on their laptops to simplify dial-in sessions.

For full PC users, which is about 75% of the 120-user base, the company has standardized on Micron machines, most of which are at least 300-MHz Pentium IIs. The comparative costs of the machines are about $500 -$800 for the Wyse boxes, vs. $2000 for fully configured Microns.

We have listed the costs and components of the MetaFrame system in Table 8. For the upgrade, the company will spring for about 50 named-user licenses from Microsoft (to account for freelance producers who use the system, but are not part of the internal staff), and 30 concurrent user licenses from Citrix.

Although clearly not happy with the requirement to buy a full NT 4.0 client for each terminal client, the IT director still views thin clients as clear cost savers for single-application users. Significantly, unlike other organizations surveyed in this study which also had remote offices, the delivery of full support to remote PCs was not an option.

Nonetheless, mobile users, who have full-function laptops, have been given MetaFrame to improve dial-in connectivity. In fact, most of the company's remote offices continue to operate full PCs because the users require access to multiple, rich applications.

THE MARCH OF PROGRESS

Perception vs. Reality. When it comes to profitability, there are few companies that beat Microsoft, but when it comes to pricing practices, the company is challenged to put on a benevolent face. That's been the case with Windows thin client pricing, where the requirement for a full NT 4.0 Workstation client is perceived by users to be nothing more than an unnecessary surtax.

But as we mentioned earlier, as Citrix has grown its WinFrame product, it has quietly upped pricing as well. Although the company's MetaFrame product has been priced more cheaply than WinFrame, because a key piece of functionality has been assumed by Microsoft, it is still significantly more expensive than the WinFrame pricing of two years ago. Of course, it could be argued that today, you're getting more functionality.

Nonetheless, the trend in Windows thin clients is that there is no free lunch. But is that any different from the situation with software in general? In most cases, pricing creep is more invisible because, unlike the channels-dominated PC market, pricing or contract terms are usually not published publicly.

Instead, they are generally negotiated under non-disclosure agreements that often mask the true inflation in licensing fees. Neither are software costs visible with enterprise software, because the true costs are not in list prices, but in the degree of systems integration work that accompanies them. It's no secret that more and more software vendors are growing their service practices, because that is where the money is.

In another report (see Computer Finance, December 1998), we examined an obvious piece of fallout from the dissatisfaction in software pricing creep: the emergence of fixed-priced, fixed-time systems integrators.

The Economics of Windows Thin Clients. Most organizations had pretty realistic handles on the up front costs and the roles of Windows thin terminal clients.

However, while most organizations had good ideas of the cost differences in buying fat vs. thin clients, and the ramifications when it came to server sizing and technical support, few factored in hardware replacement costs in their thin client scenarios. Yes, Windows terminal technologies will extend the life of 386 and 486 PCs, but nothing lasts forever.

Significantly, we also found that none of the organizations in our sample were fooled about the idea of Windows thin clients providing a shortcut to multi-tier application environments.

Obviously, the provision of features such as terminal server load balancing/sharing is no substitute for component transaction monitors and partitioned applications. All organizations in our study viewed Windows terminals as suitable for one purpose alone: to ease the maintenance load in situations where high levels of PC support are not cost effective.

But back to the question of whether Windows thin clients are still economical. We found a mixed picture. It's obvious that organizations which maintain distributed offices but lack the critical mass to staff large IT organizations, find thin client architectures are worthwhile, regardless of pricing increases. In most cases, the need to buy NT 4.0 clients is not a show-stopper.

For the smallest organizations, the migration to NT 4.0/WTS/MetaFrame is an especially charged question. For some, we found that on pure economic terms, the migration is not worth it.

The gating question is software support; if they satisfactorily operate on limited function, 16-bit software, it does not make sense to migrate to NT 4.0 (or eventually Windows 2000) unless there are external factors coming into play (e.g., software providers pulling the plug on legacy version support). At that point, they will have to face the music.

It's similar to the issue of whether to upgrade from Office 95 to Office 97; in most cases, Office 97 does not offer sufficient functionality for most organizations to justify an upgrade. But external factors, such as compatibility with business partners, usually forces the issue. It all proves that, while economics are critical to thin client decisions, it's often the less tangible factors that ultimately decide the pay off.