First Union Corp. has joined a handful of institutions that are rolling out network computers-simplified, less expensive versions of the personal computer.
The $220 billion-asset banking company recently installed 141 network computers from International Business Machines Corp. in 47 branches.
These are in addition to the ones First Union's capital markets group already has installed and the several hundred that it plans to roll out over the next year.
Network computers have attracted widespread attention because they cost less than PCs and are more cheaply maintained.
Unlike PCs, they do not store data locally, making them easier to manage and eliminating software distribution problems and viruses.
A Meta Group study last December calculated that support costs for network computers were 34% less than for typical, unmanaged PCs.
Despite the attractions, network computers are not expected to be installed by many banks. Mentis Corp., Durham, N.C., predicted that in 2000, 14% of all banks will have network computers installed for use by tellers, up from 11% in 1997. Banks deploying network computers for customer service representatives will remain flat-at 11%-between 1997 and 2000, according to Mentis.
More likely to be deployed are PCs loaded with Pentium chips, the most advanced type of PC chip available, said Mentis.
Banks using Pentium-chip computers at the teller line will increase from 30% in 1997 to 64% in 2000, predicted Mentis. Banks deploying them for customer service reps are expected to increase from 51% to 74% by 2000.
Jeff Scott, First Union's director of advanced technology, said First Union's rollout of network computers is a pilot test. Since the bank needed to buy new machines anyway, "we decided it was an opportune time" to launch a test.
First Union has replaced limited-use "dumb terminals" that were installed in branches it acquired as part of its purchase of Signet Bank 18 months ago.
Though more feature-rich than dumb terminals, the new network computers "are still limited in functionality," said Mr. Scott.
"The goal is to sort out if this does bring more business value," he said.
"We see network computers for low-complexity niche positions," said Mr. Scott. "We certainly don't see that today we'll be replacing desktop workstations with NCs. There's still too much functionality that NCs do not afford."
So far, the machines are providing "tremendous savings" in managing the infrastructure, he added.
Dan Shea, IBM's client executive on the First Union account, said, "Most banks are looking at ways to lower their costs of ownership. NCs cost half as much as PCs to run each year."
In the second phase of the pilot, First Union will connect the browser interfaces of its network computers to the bank's corporate intranet for human resources and branch information. In the final stage, it will add Windows-based applications. All the testing should be completed within five months.
"The bank wanted Internet or intranet access and PC applications that were as inexpensive as possible," said Mr. Shea.
First Union chose IBM for its branches, although its Capital Markets Group installed network computers from Sun Microsystems.
A disadvantage of Sun's network computers, Mr. Scott explained, is that they require a Unix-based server, which would have been difficult to provide to nearly 3,000 branches. IBM's models, he said, can be configured with a more standard PC desktop server.
Other financial services companies that are testing network computers include PNC Bank Corp., Bombardier Capital Mortgage of Montreal, Norwest Mortgage Inc., and Reilly Mortgage Group Inc., the eighth-largest commercial mortgage company in the United States.
Bombardier has 350 IBM network computers installed, mainly at its processing centers in Jacksonville, Fla., and Colorado Springs.
"We wanted the opportunity to provide limited access to Microsoft's suite of products and make them available via" the network computer, said Al Sorheim, vice president of planning and support services at Bombardier. The company could also better control use of the computers, he said.
He added that his company will spend less in both initial purchase price and in five-year operational expenses with the network computer.
"It's a little more expensive than the green-screen dumb terminal, but that doesn't have the future potential" that the network computer does, said Mr. Sorheim.