Once in a while we come across a company whose idea and products just make sense. Ncomputing is such a company and it may take some time until you will hear more about its products, but we do believe that the firm has what it takes to popularize cloud computing for the masses and become Intel’s biggest threat yet. We are talking about the ability to split one PC into possibly dozens of sub 5-watt computers with a cost of less than $100 each. To us, it is the first convincing cloud computing idea that has the potential to reach more users than any other computing product before. Nine years ago, my editor-in-chief asked me to research a then new Silicon Valley start-up and interview the company’s president for a brief article. Back then, there were thousands of start-up and to deal with one specific one was just another story and you did not expect to hit anything spectacular. The PR director of the 45-people-strong start-up welcomed me in what he called “half-baked” offices and led me to the president’s office, a Stanford student who seemed to be more excited about his 3D mouse and was not concerned about dirty dishes taking up more than half the space of his desk. It was your average over-the-top Internet start-up environment, but this company had a fresh idea how to make information on the Internet available to users and its idea how to monetize that idea was called crazy at the time. But once I had seen the technology in action and had met the minds behind it, I told my editor-in-chief that this company would replace Yahoo and our Internet publication should change its advertising model.
The company today has more than 16,000 employees, the president was Sergey Brin and the company was Google.
Ncomputing feels just like it. It operates under the radar of the big boys, but makes visible progress in a high-growth area that needs innovation. To me, Ncomputing can be, with determination and luck, the next Google. Here is why.
Ncomputing: How to create an $11 computing device
Last week, Cherrypal launched its $250 cloud computer with an innovative approach to attract average computer users who don’t want to edit videos and play games, but simply browse the Internet, write emails, watch YouTube and create simple documents. Following the story, we were contacted by a representative for Ncomputing – a company I had not heard of at the time – and an offer to provide information about a “$70 PC”. We finally had a chance for a briefing with the company’s chairman and CEO, Stephen Dukker (founder and former CEO of eMachines), to learn more about this cheap PC.
Realistically, calling the Ncomputing devices PCs is not correct, since these boxes do not carry components you would expect to find in a PC – such as a processor, memory or storage devices. Instead, the purpose of the Ncomputing devices is to tap into the horsepower of a single PC to enable the creation of multiple computing stations. The computing devices are access terminals that share the performance provided by a host PC. Up to seven computing devices of Ncomputing’s X-series connect via direct connections, the L-series supports up to 30 users via Ethernet.
Each box carries a minimum of hardware with the main component between an ASIC. The result is an extremely low production cost of about $11 per seat, according to Dukker.
Hardware and software
The base version of Ncomputing’s product line is the X-series. The devices connect via CAT 5 cable to a PCI card with three Ethernet ports that is installed in a host PC. Since there are typically two free PCI ports in a PC, the technology supports up to six connections to Ncomputing boxes. Add the host PC as a computing device and you end up with seven Internet “computers”. Dukker said that a $350 PC with a basic Core 2 Duo processor and 1 GB of memory is enough to power this platform and run, for example, MPEG-2 playback, TV playback via a Sling Player, YouTube video playback, DVD video playback, as well as productivity applications such as Microsoft Word, PowerPoint and Acrobat Reader at the same time.
The power consumption of each computing device is rated at about 1 watt. Since this version uses direct connections, the maximum distance between a host PC and a computing device is 10 m or about 30 ft. The X-series comes in a $200 package, which includes one PCI card and three access terminals – which translates into a cost of $66.67 per seat (not including the host PC.)
The L-series supports up to 30 computing devices, priced at $150 per seat. The connections are established via Ethernet an Ncomputing claims that a $500 quad-core server would be enough to run all 30 devices, which are rated at a power consumption of 5 watts each.
X-series and L-series networks are glued together by a virtualization software that was developed by a European company (that was merged into Ncomputing) called Hydrapark. This software layer creates a self-contained user environment under one operating system provided by the host PC (Linux and Windows are supported.) Ncomputing bundles the software with the hardware free of charge and claims that it could scale the application to potentially hundreds of seats.
What the $70 computing device is and what it is not
Clearly, there is a reason why these computing devices are called access terminals and not PCs. You can’t use these devices for gaming or video editing. But you can use them to create a relatively cheap network of general purpose network computing units that are powered by one capable PC. If Internet, email and basic productivity applications as well as media playback is all you need on multiple computers, then an Ncomputing package is all the hardware you need to build a network of Internet computers in your home.
At this time, Ncomputing targets specific corporate and institutional applications areas such as manufacturing environments, education and government. It is also a product that is aimed at emerging markets to enable Internet access for people who earn $3000 or less per year.
The usability for U.S. consumers isn’t as convincing, but, if you think about it, such a product makes a lot of sense for families who would like to have multiple simple Internet devices available within a home. Simplicity and low power consumption are big selling points, but there is also less maintenance: You simply care for one host PC and the rest of the network takes care of itself. However, on the other side, if your host PC is down, you lose all connected computing stations (the L-series offers an opportunity to install a backup server via Ethernet.)
Dukker told us that he expects to have a consumer cloud computing device for the U.S. ready by H2 2009. It is interesting to note that these devices are flexible in their application areas and Ncomputing apparently has begun to sell its boards to companies that are developing Internet Kiosks, set top boxes, all-in-one monitors and TVs.
Why Intel should watch
Dukker said that Ncomputing has sold about 1 million computing boxes in 80 countries over the past 20 months. Compared to Intel’s 160 million+ sold CPUs per year, that is a drop in the bucket.
However, companies such as Intel need to sell more chips every year. In an increasingly saturated market, that means that Intel not only needs to expand its product portfolio, it also needs to expand its customer base. The most promising customer bases are mobile users on the one side and several billion potential customers in emerging markets on the other. Intel has been feverishly working to conquer emerging markets: While the Atom processor appears to be limited to SFF notebooks and MIDs at the time, it will also be Intel’s product for emerging market computers. Intel can produce the chip for $6 per piece, but somehow we believe that the company has shot itself in the foot with outrageous tray pricing. The low-power version of Atom is priced from $20 to $135, excluding $25 for the necessary SCH chipset. The more power hungry nettop/netbook version of the chip with Diamondville core is priced from $29 to $44, excluding the chipset.
Intel can tell us as often as it wants that prices are determined by market demand, but we doubt that these prices will allow Intel to reach millions of new customers in emerging markets. And as long as Intel ignores this opportunity, companies such as Ncomputing could be able to establish their customer base in potentially huge new markets – with a product that can be built for $11 per seat.
If you think about Intel’s strategy to sell more chips every year and compare it to Ncomputing’s strategy, it appears that Ncomputing works entirely against Intel’s model. Splitting one PC into seven computing devices means that a processor manufacturer will lose a revenue opportunity of six network computers. As a side note, Dukker said that Ncomputing is working with AMD to deploy host PCs. He told us that AMD concluded that there is no possible to market a PC with a profit for low-cost markets and apparently decided to go with a access terminal solution to expand its reach.
Ncomputing’s cloud computing model is a no-brainer in third-world countries and could make a lot of sense for average American and European household as well. Popularizing cloud computing in traditional computer markets will be difficult, since people are used to own their software and store files locally. However, users who are new to computers will not need to be convinced of the benefits of cloud computing – especially if a traditional PC is out of their reach.
Dukker may have found a formula how to create a product that is affordable for people in emerging and third-world countries and still make money on it. With a production cost of $11 per seat, he has enough room to adjust his pricing model in different markets and different environments.
It is not difficult to imagine Ncomputing to quickly gain traction in emerging markets and appeal to users in mature markets as well. If this is the case, Intel may have a big problem and could face its biggest threat yet. Of course, until Ncomputing isn’t ready to play with Intel just yet, but Dukker believes in his opportunity: “There are market dynamics even Intel can’t stop,” he told TG Daily.
Cloud computing is one of the big business opportunities for IT companies these days. Ncomputing’s concept is the best I have seen so far. I will check back in a few years to see if my prediction about the next Google was right.
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