Interview : Viglen chief predicts uphill struggle for Vista

Bordan Tkachuk is perhaps best known for his appearance as one of Alan Sugar’s three lieutenants in the BBC hit show The Apprentice. In the final episode of the series he is one of three business associates tasked with grilling the finalists to uncover any hidden weaknesses, before Sugar stamps the winner with his seal of approval.

As chief executive of Sugar-owned PC and laptop maker Viglen, Tkachuk is well placed to know what it takes to succeed in a highly competitive business. Tkachuk said the company has undergone a major transformation following the scramble for market share during the 1990s that saw many vendors go to the wall. It was, Tkachuk said, a case of get big, get niche or get out. “At Viglen, we decided that it was far better to get niche. If you go back six or seven years, some of our competitors were jack of all trades, but master of none. Our position was to focus on public-sector IT, particularly education, and make that our specialist sector,” he said.

Tkachuk pointed to the commoditisation and cut-throat competition that has affected the mainstream PC industry. While the average cost of a system price has continued to fall, so too have the profit margins for vendors, he explained. “We used to sell a powerful PC for over £1,000 with gross margins of around 30 per cent - so you made £300. Today we’re selling a more powerful PC for maybe £400 with a gross margin of around £40, or 10 per cent if we’re lucky,” he said.

In market conditions like these, it soon became apparent that if Viglen was to survive it had to sell to large customers such as the government, Tkachuk said. “We’ve walked completely away from the retail sector and we don’t really focus on the small and mid-sized sector either,” he added.

One of the biggest issues relating to client computing today in all sectors of the market is Microsoft’s new operating system, Windows Vista, and the c hallenges that migrating to this complex new platform presents. Tkachuk believes that Microsoft has a difficult task ahead of it convincing customers to upgrade. “I think one of the issues with Vista, and this applies both to the large business sector and the sector we’re in, is that lots of user organisations are running very large fleets of equipment, anything between 5,000 to 10,000 units,” he said. “Typically, these organisations look to replace a third of their fleet each year. It becomes very difficult to support different platforms when one requires much greater hardware to run.”

Tkachuk said that customers have been jittery about deploying new operating systems, particularly prior to the first service pack release, and that upgrading to Vista will be hard work in both the corporate and public sectors. “It’s going be a long haul for Microsoft, it’s not going happen overnight. It’ll require some compelling arguments for organisations to be confident that the product will meet their expectations and be stable,” he said. “We’re seeing with our customers that they’re not yet voting with their chequebooks.”

Tkachuk believes Vista’s pain could be Linux’s gain, particularly on entry-level systems in the public sector. “Currently, we’re seeing a spate of these e-book type machines: cut-down laptops with smaller screens, which have less performance as a result, and so need a light-footprint operating system. Certain Linux derivations will be right for that type of product, because the cost parameters are also quite important there,” he said.

Low-cost mobile devices
The small but growing market for mini notebooks that cost about £200 should be fertile ground for open-source vendors, Tkachuk said. “People looking to buy these low-cost devices are not going to want to spend another £60 or £70 on top for an operating system. I think that application sets using the office suites that run under Linux give adequate functionality for the majority of users,” he explained.

Another sector in which Viglen is active is the high-performance computing (HPC) arena, where it specialises in clustering together off-the-shelf equipment to deliver powerful number-crunching systems at relatively low cost. These HPC systems are very often Linux-based, and a major reason for this is because the people building and operating them tend to come from a Linux background, Tkachuk said.

Asked if Microsoft’s clustering solution has a chance of breaking into this market, Tkachuk said, “Microsoft’s HPC solution will have a hard time following [Linux]. Having said that, if you’d asked me that question 18 months ago I’d have said it had no chance, while today there is some interest, and we have sold Microsoft-based [HPC] systems to some sites.”

With businesses becoming more interested in energy efficiency and the environmental impact of their IT operations, Viglen’s Green IT strategy has become increasingly important to the company. “Public-sector organisations are very aware that they have to look at conservation and recycling as a package,” he said, adding that it is an interesting area because there are business benefits to be had. “On an ethical level, in terms of power consumption and disposal, there are obvious reasons why organisations have to do this, but on the business side, if we can produce products that use less power and run cooler, then the side benefits become the prime benefits,” he said.

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