Interphase Corp., a small Plano telecommunications company, is taking a gamble on breaking into a new market, selling cloud computing hardware to recession-beaten schools, governments and businesses.
Interphase has launched a product portfolio of six desktop virtualization thin clients, small devices that do not store information but can create a desktop environment for users by relying on a remote host server. Companies are increasingly using cloud computing services to deliver their software from remote servers, rather than on-site servers managed by large information technology staffs.
Analysts say challenges abound for the company’s clouDevice portfolio, an untested batch of products in markets dominated by larger, more experienced players, such as Wyse Technology and Hewlett-Packard Co.
“It’s a bit of a David-and-Goliath challenge, but we’re going after it,” Interphase chief executive Greg Kalush said. Kalush said that despite the challenges, his company may have come up with a way to build market share relatively quickly.
How’s that? By keeping the clouDevice’s overhead and manufacturing costs low, and by specializing hardware design to match client needs, Interphase may be able to undercut its competition with lower prices, said HJ Li, Interphase’s senior director of product management.
Analysts say that while small tech companies will fare well when the private cloud computing market takes off, they are skeptical that undercutting the competition will bring Interphase the business it seeks.
“With Interphase being a relative unknown in the thin client space, cost [savings] can only go so far,” said Ian Song, a senior research analyst at the International Data Corp., an information technology research company.
“We really don’t know what some of their performance capabilities are,” Song said. “The portfolio is by no means comprehensive. It’s pretty good.” Mark Margevicius, vice president and research director at Gartner Research, a company that tracks trends in information technology, said that as long as a company differentiates itself, there’s an opportunity for any vendor to succeed. But the technology Interphase must use to manufacture its devices is available to Wyse and HP, so it’s hard to see how Interphase can undercut its competition at all, Margevicius said.
Potential clients have been more than a little rattled by the recession. Kalush said some of the most appropriate customers for the clouDevice products are cash-strapped schools and local governments — particularly in Texas — that could use information technology to save money. For education, Interphase emphasizes cost-efficiency and more computer access for students.
“We could put a wireless client device in the hands of a student for $150 or less,” Kalush said.
For governments and enterprise businesses, desktop virtualization consolidates a company network to one source, making it easier for IT staffs to thwart computer viruses that would otherwise spread undetected, Kalush said.
Expanding the business Interphase, though small, had a strong first half of this year. The company increased its telecommunications revenue 60 percent in the second quarter, generating $6.2 million. Profit rose 82 percent in the second quarter over last year to $3.2 million.
The company was founded in 1974 as an engineering consulting company, and it gradually started selling products in the early micro-controller industry. Micro-controllers are tiny computers built into products, such as microwaves, that usually perform just one function.
In 1999, Interphase entered the telecommunications market, selling hardware and signaling devices to military units and other clients. But three years ago, Interphase leaders decided the company needed to diversify, partially because the telecommunications market is unpredictable.
Li said he started looking into the information technology market, but at first, he had trouble finding a market that a company of Interphase’s size could enter effectively. The cloud computing market was an attractive bet, and analysts predicted plenty of growth, Li said.
Gartner Research expects worldwide cloud services revenue to grow about 100 percent to $148.8 billion by 2014. According to IDC, server sales resulting from cloud computing will grow 50 percent to $12.6 billion by 2014.
Ethernet advantage Bill Rust, a Gartner analyst who covers education information technology, said one of the clouDevice’s features, the ability to run using an Ethernet rather than a USB cable, makes Interphase an interesting vendor.
USB is limited to 16 feet and is a major problem for implementing desktop virtualization in schools, but Ethernet doesn’t have that limitation and is cheaper.
“They may be one of our next Cool Vendors,” Rust said, referring to annual recognitions that Gartner gives to innovating companies.
Wi-Fi on the way The Ethernet clouDevice products are already available, and in the coming months, Interphase will release a version of its devices that can run on WiFi.
Susan Eustis, president of WinterGreen Research, said small companies that can be nimble and innovative will do well in the cloud computing market because large companies can’t cut prices and aren’t focused on building market share.
“Small companies aren’t hampered in this way,” Eustis said.
“After the little companies build the market, the big companies will gobble them up. They see who’s going to succeed.” However, small companies must be careful to develop products that are unique — they should avoid going head-to-head with large companies such as IBM, she said.
“That being said, there’s a lot of space in this cloud business to go places,” Eustis said.
With so much growth expected for private cloud computing services, Kalush said, it was hard to resist jumping in.
The market has “got a lot of positive attributes, and we thought, what the heck, this looks like a pretty cool market, let’s go see what we can do,” he said. “It’s one of those Hail Mary passes, but we feel pretty good that we’ve got something here.” Interphase Corp.
He is also the inventor of the patented meshDETECT, Secure Prison Cell Phone Solutions.
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