| COVER STORY: Network Computing |
If you've overdosed on coffee terminology and still don't know why you should care about Java or network computing in general, it might focus your mind to know that Wells Fargo has installed 28,000 network computers. Or that Bank of America is rolling out network computers, state by state, at a rate of 500 a month.
That's the word from sources involved in the projects although, officially, the banks are characteristically tight-lipped about their deployments. A spokesperson for Wells Fargo confirmed that it has installed a type of network computer, but would not comment on the scope of the project. Wells reportedly has culminated a three-year roll-out. BofA did not respond to inquiries, but the company reportedly is sweeping away both obsolete personal computers and dumb terminals and, at press time, had installed 3,000 network computers in the field.
According to vendors in the evolving network computer (NC) market, a majority of their bank clients are investigating NCs, but have imposed nondisclosure agreements on the vendors. IBM, for instance, says the IBM Network Station, the NC it announced late last year, is being tested at several of the top five banks. Jim Gant, vice-president of marketing in IBM's computing division, says, "We did a study with one bank that has 20,000 desktops installed today and they reckon 80% are candidates for NCs."
The appeal of a network computer is that it's much easier and cheaper to maintain than a personal computer as well as cheaper to buy initially. Basically, that's because centralized servers are used to load and subsequently revise software on all computers in the network at one go, and end users have no discretion to deviate from the standard. They lack hard drives onto which they might load incompatible versions of operating systems or programs and disk drives through which they might introduce viruses. Scott McNealy, chief executive of Sun Microsystems, recently warned banks, "A floppy is a great way for them [employees] to back up absolutely super critical information and allow it to get into the wrong hands." That is, if employees aren't simply playing games or surfing the Web for fun, McNealy told bankers. Basically, NC users make do with whatever the server gives them.
Wait a minute, don't NCs sound like dumb terminals? Indeed, an IBM executive notes "a pendulum swing back toward the mainframe," from client(read PC)/server, while Microsoft Corp.'s marketing manager for financial services dubs NCs as "retrograde." Speaking in an interview, Microsoft's Mike Dusche says, "We just don't think people want to go back to dumb terminals."
Nonetheless, virtually everyone's agreed that system administration can be made radically better and, bar Microsoft, they think NCs are the way to do it. Dusche, however, says, "The PC, not the NC, will win."
Various independent researchers predict huge savings from network computing. NCs are running at around $700 ($1,000 when configured for business), compared with a likely $3,000 for a business PC installation. More significantly, the cost of ownership--which the Gartner Group estimates is $11,900 annually for a PC--is variously expected to fall by 50% to 75%. And, in a downsizing world, IBM's NC weighs in at a noteworthy two-and-a-half pounds.
The seven-year niche
To most, the NC represents a synthesis of the best of the current client/server technology and the earlier mainframe/dumb terminal technology. At the launch of the "Oracle NC" earlier this year (servers to support Sun's network computers), Oracle Corp. said it was also ushering in the next computing "paradigm." Announcing the end of the industry's latest dalliance, Mike Jarvis, vice-president of server technology, said, "client/server was the seven-year niche."
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Now that a true sense of the cost of client/server networks is emerging, many companies appreciate the efficiency of centralized system administration and the control it gives them. Meanwhile, users have come to appreciate having information at their fingertips, intuitively accessed by selecting on-screen icons. More recently came access to other users--worldwide--through the Internet.
The network computer is expected to make peace between the information systems (IS) side and the user side. The IS manager regains some of the control enjoyed in his heyday by controlling the servers, which set limits to what users can do. "The IS people could keep the servers locked up in a room,' says Tim Kellogg, product marketing manager of Tektronics Inc., a Beaverton, Ore., company, which last year was the biggest shipper of NCs.
Users, meanwhile, lose some freedom, but they will be able to do essentially the same data queries PC users can. Those on NCs won't have to worry about how to access numerous remote databases or about backing up the information, says Meir Gil, whose bank has long used an NC type model. Gil is senior bank technology analyst for New York City-based Republic National Bank. Overall, Gil doesn't believe anything is lost by moving to NCs.
Although administration of information is centralized, access to information is very decentralized in the NC model. Instead of just shifting the emphasis to either the server or the client side, network computing introduces a third tier. This serves as a data access layer, between the server housing the data and the client (NC) displaying the data.
The approach takes its inspiration from the World Wide Web. A Web surfer isn't running sophisticated data mining software on his computer, remote search engines are. The user needs only a browser to give him a window on the information.
Such coordination of diverse system users on the Internet is facilitated by improved data access methods and by a common communications standard known as TCP/IP. The networks inside most banks, however, use another protocol, SNA, an IBM protocol that became a de facto standard decades ago. Effectively, it means formal relationships must be established between two computers before they can communicate.
Republic Bank's Gil says of the Web-surfer way, "You can't do this dynamically on SNA because you have to predefine what terminal is accessing the database. On the Web you anonymously take a data hit and you're gone." In that sense, Gil says, "TCP/IP is somewhat less secure." However, he adds, now "TCP/IP is the protocol of choice." It is not the network computing architecture, but the client software, that is expected to be problematic.
Java, the computer-independent language developed by Sun Microsystems, is a key element of network computing because it will allow any network computer to run applications located on any vendor's server hardware or software. The fear, though, is that vendors will develop the source code sold by Sun along proprietary lines, lessening Java's "independence".
At time of writing, a bank consortium was being formed partly, Gil says, because "banks want to make sure that vendors don't do to Java what they did to Unix." Universities were the first to develop applications on Unix--the operating system for high-end midrange systems that are at the core of the Internet--and Unix was hoped to remain an open standard.
Ironically, it was a Unix-monopolizing gesture by Sun in the late Eighties that spurred the formation of an Open Software Consortium industry group. Now Sun is in the philanthropic role and Microsoft is the bad apple in the cart. At a press conference last December, Sun got 100 vendors, with the notable exception of Microsoft, to pledge allegiance to "100% pure Java" development.
David Floyer, director of research at IDC, a Framingham, Mass., consultancy, is one of a number of commentators who remark that, so far, Microsoft is alone in developing Java in a proprietary way. (Microsoft says it is enhancing Java.) Floyer sees vendors unity against Microsoft as temporary, expecting today's collaborators to revert to competition once NCs take off.
| The Evolution of the Network Computer
Dumb terminal--no processing power, no graphics
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Even with its server software line, Microsoft has the most to lose if NCs succeed, because its Windows operating system is the standard for PCs. Heretofore, specific applications were written for specific operating systems, which ran on specific computers. Java dispenses with such limitations using the so-called Java Virtual Machine, a "software computer." It sits between the operating system and the application, acting as the interpreter for an application regardless of what computer system it was written for. The Virtual Machines of different computing devices (i.e., from mainframes down even to smart cards and cell phones) allow them to communicate. Consequently, applications written in Java are platform independent.
Going forward, Java is expected to be the dominant programming language, but, meanwhile, banks have many applications written in other languages. These can be run on NCs using a trick that has been used since the early Nineties to run applications on a computer other than the one for which it was designed--terminal emulation. Emulation replicates the command set used by the original computer in a section of the user's computer (his screen has different applications running in different sections of the screen.)
"Emulation is not as easy or as elegant as running an application on the Ôbox' for which it was designed," Meir Gil says. Republic currently emulates dumb terminal applications with graphical user interfaces on X terminals, a predecessor to NCs. (Each branch can run without the mainframe, by relying on the branch server.) The bank also uses the X terminals to display Java applications being run from the server. Gil says Republic will likely move to NCs, allowing it to run the Java Virtual Machine on the clients. The bank probably will rewrite many applications in Java.
Republic may also have to upgrade its communications (to T1) lines if existing bandwidth becomes strained from heavier network use. (Republic now has 56 kb lines in every branch, each supporting between 10 and 70 users.)
The cost of getting into network computing is too variable to estimate, commentators say. Baseline bandwidth and server requirements are impossible to quote, but it's safe to assume that many banks will need to build a modern communications infrastructure. TCP/IP (like an efficient client/server architecture) requires a router at every branch, and routers cost anywhere from $1,000 to $150,000. Most banks will also need to buy new clients, and to rewrite at least some applications in Java. (Others, such as the PC-based Windows applications that staff are familiar with, could be emulated on NCs.)
Because NCs are less powerful than PCs, it might seem feasible to disable the disk drives of the PCs and treat them as NCs. Gil says one could, except NCs are better, being specifically designed for network computing, and, besides, the components of old PCs are near breakpoint. Dumb terminals are no use because they lack graphics and, like X terminals, the processing power to run the Java Virtual Machine locally.
Some consider the Unix-based X terminals Republic installed in 1990 as the original "NCs." "With NCs you upgrade the servers, not the terminals," Gil says. "Since 1990, we've upgraded our server memory once, at a cost of $8,000. If we had PCs it would have meant two or three upgrades of 2,200 terminals, at $3,000 each." What's more, his Tektronics terminals are maintained by one full-time and one part-time person. "In a PC environment, I'd need 15 or 20 people," he says. (The prevailing annual salary for a system administrator in New York is around $100,000.)
The NC pioneers
Gil considers Republic lucky that it was not "brainwashed by Microsoft," like other banks that moved from dumb terminals to PCs. Others dabbled with X terminals in the early Nineties, but few committed to them. Even Wells Fargo, reportedly was hot, cold, and ultimately hot on X terminals.
ABA BJ followed up with a number of Republic's peers to see what their experience of the original "network computers" taught them. One, a six-branch Illinois bank had just spent $480,000 on X terminals for its tellers when it was acquired by a $5 billion assets-bank. "The terminals never even came out of the box and our tellers took a step backwards, from dumb terminals to manual work," a bank operations source said. The parent bank has expressed no interest in NCs and currently is connecting PC users in a wide area network.
Others that installed X terminals felt their full potential wasn't used. One, who nonetheless considered his bank "ahead of the curve" in adopting X terminals, says the bank is considering upgrading to NCs. With NCs the user downloads what he needs and runs it locally, unlike now where the bank system administrator says, "If we lose the server we lose everything. Being based in the Caribbean, where brownouts occur daily," he says, "that's a problem."
Another source, whose institution uses X terminals, but whose particular branch uses PCs instead, says, "I would have preferred PC emulation on X terminals because that way we could get to PC servers, mainframe servers, and Unix servers.
"With X terminals we can do problem resolution from here (the centralized server), rather than send someone out" he adds.
Traders take to NCs
First Union National Bank is the best known user of NCs, having been the first to publicize its use of Sun's JavaStation. However the Charlotte-based superregional still has only five NCs installed, one year after it began testing NCs to process trades in its capital markets group. At press time, a bank spokesperson said First Union is not yet sure how far it will go with NCs.
Last November, even as Peter Kelly, a bank senior vice-president, endorsed Sun at a press conference, he said First Union would deploy other "thin clients" too. From the JavaStations he reported "a dramatic reduction in both time and cost for training, administration, and maintenance."
Investment banks have been quicker to embrace NCs than retail banks. Steve Tirado, director of Java desktop systems, could not name bank clients doing pilots, but mentioned that Nomura Securities International is installing 100 JavaStations for its traders.
The cross-platform nature of Java should help commercial banks become diversified financial services providers, notes George Bloom, Oracle's regional manager for server technologies. Oracle is the dominant database for retail banking, he says, while "75% of stocks trade on Sybase technology." The intention is that NC servers, such as Oracle's and Sybase's, will be able to serve data to the end user regardless of whose software it's in or hardware it's on.
Java objects go fetch
NC servers are the middle layer of the new three-tier architecture. Their software, called middleware, helps users (clients) get the data they need from the servers housing the data. In Oracle's case, the new layer is the Universal Application Server.
Data collection is done by so-called objects, overseen by network traffic-control cops, called "object request brokers." Objects are the corporate network equivalent of "intelligent agents," which some day are expected to go shopping over the Internet for consumers, having first been programmed with their preferences. Objects are suited to collecting data that soon won't be housed in gridlike relational databases, but databases that will be multi-dimensional. An object can get a handle on all information pertaining to a given stock trade, for instance.
Technically speaking, objects are packages of program and code that serve as reusable programming blocks. It's so economical, object-oriented programming (which Java uses) has become the dominant programming method. From a bank's perspective, it means a relatively simple transaction, such as a money transfer, does not have to be programmed anew for every distribution channel. Rather, one application is written and deployed on ATMs, at the voice-response unit, the teller line, etc. Java encapsulates this in its "write once, run anywhere" slogan.
Java applications typically are referred to as applets, mini-applications designed to be downloaded across a network. An ideal use, for instance, is downloading mortgage prequalification software/calculators to a Web surfer, who avoids delays and breached connections by running the applet off-line. The same principle applies over a corporate intranet.
Server-side competition
"Ten years ago, dumb servers were the real problem," comments Michael Baker, executive vice-president of NSS Corp., a Bedford, N.H.-based systems integrator that has helped many banks, including Republic, install NC-type terminals.
The slimmed-down client now works because, as NC advocates say, the network is the computer. In fact, once TCP/IP becomes ubiquitous, it's expected that employees can log on to the company's intranet through any NC anywhere, as if they were in the office.
Baker says network strain was--and continues to be--exaggerated, adding "in eight years, Republic has had zero downtime."
Tektronics, the leading NC supplier, sees the splash NCs have created in the past nine months as the culmination of many years' developments it has been a part of from the start. Tim Kellogg sees Sun as one of those "jumping on the bandwagon," for NC hardware, but concedes that the Java programming language, which has been commercially available for only a year or so, is "the linchpin" of the current NC drive.
| Others are jumping on the bandwagon, says Tektronics Inc., the lead supplier of network computers. The first in the NC line, the X terminal, is shown here acting as a display device for applications being run on other machines. |
The JavaStation, Sun's NC terminal, barely ranked in a survey on 1996 NC shipments published in February by IDC. Tektronics shipped the most units (71,859), leading Hewlett-Packard and NCD (which lately has been working with IBM), respectively. Tektronics moved into the lead when its terminals emulated a version of Windows NT and, for $75, these now can be upgraded to run Java locally. In this early stage of Java program developments, Sun's NC, which is specifically for Java, is limited, Kellogg says.
Likewise an IBM server-side executive questions Sun's hardware position, whatever its assurance of software success with Java on the client side. (Jim Gant, IBM's client-side source, when asked if NCs could exist without Java, responded that "they could, but in a very constrained way.")
However, with network computing reassigning the heavy lifting to servers, Tony DeMarco, financial consultant for System 390, IBM's new-generation mainframe, asks, "Where is the role for Sun's intermediate server?"
Not only will the processing load be redistributed to emphasize servers, but the load itself will grow "exponentially," DeMarco says. "A study by IDC predicts network computing will cause a 25% increase in transaction volume every year till the year 2000. For a bank with $500 billion in assets, that means going from four billion transactions a year to 12 billion."
Another reason DeMarco expects IBM's mainframe business to prosper is that banks somewhat bucked the client/server trend and remain heavily invested in mainframes. More than 75% of banks' transaction data remains on mainframes, he says.
Integrion, IBM's home-banking consortium with 16 banks, uses a Webcentric model. Nationsbank and Banc One just started doing live transactions such as money transfers, but they are limited at this time to the banks' employees.
Where NCs fit
Bank tellers and customer service representatives typically are seen as the best candidates for NCs because their work is routine and not demanding of heavy local processing power. Asked where an NC wouldn't cut it, Tektronics' Kellogg deadpans, "3-D molecular modelling." In banking, Republic's Gil suggests those structuring/trading derivatives or doing financial analysis would need PCs, for instance. Another NC advocate admitted he personally had a PC, but said he would willingly give it up. "It's crazy to buy me a $5,000 PC when 95% of the time I use it for e-mail," he said.
IDC's Floyer reckons banks are more likely to replace dumb terminals and/or X terminals than PCs. Consequently, he calculates that 63% of the desktop "computers" in banks could be displaced by NCs. (Microsoft's Dusche notes that "there are 170,000 PCs in banks right now, the majority of them running Windows.")
Others believe PCs are widely replaceable. IBM this year is switching 10,000 of its PC users to its Net Stations, including "very high level executives." Sun, by next month, will have made the NC the computer of choice for 3,000 employees, or about a quarter of its staff.
According to a Yankee Group survey, 65% of IS managers will buy NCs within the next two years.
Banks seem to be treating NCs as more than a fad, considering that they are now forming an international consortium to give banks some control over the development of NCs. Charter members currently are being sought, one per major region. Bank of America is to represent the United States, Royal Bank of Canada, Canada, and National Westminster Bank, the United Kingdom. Wells Fargo, though the largest known domestic bank user of NCs, reportedly has declined charter membership, which comes at an undisclosed, hefty price. Subsequently, any other interested bank can join, sources said. Vendors, too, can participate, but will not have voting rights.
Even Microsoft is going with the flow, with a "zero administration" server initiative and Java-using NetPC.
At Oracle's announcement of the "new era" in computing, Mark Jarvis remarked, "when there's a Klingon attack on the deck of Startrek, Spock isn't using Windows 95, he's using a network computer." Now, the only question is, who'll drive the Starship NC? BJ
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