Articles / Netpliance: An Inside Look

Netpliance: An Inside Look

Last month, Kalin R. Harvey wrote about the i-opener and the lessons it could teach companies about how they can interact with the Open Source community to everyone's mutual advantage. He's since discussed the issues with Netpliance directly, and today tells us how it went. A month ago, I published an article which examined Netpliance, its product, the i-opener, and how they related to the Open Source community as potential collaborators. Since that article was published, I was invited to their headquarters to discuss various ideas and how the company could develop a stronger relationship with the community and enhance its business model. During this period, there has also been a lot of public dialogue within the community about the company and the issues in the original article.

This article is a report on the meeting, a re-examination of the issues involved, and an appraisal of Open Source as an operating business philosophy, both practical and ideological. It also has positive news about the company's attitude towards Open Source development.

A Perspective on Netpliance

One of the unfortunate aspects of the discussion surrounding the i-opener and Netpliance is that most of it is based on an unclear picture of who or what Netpliance is as a company. I felt this myself as I was making my way to Austin; although the people I was meeting with had the opportunity to read my original article and understand my thoughts on the issue, I really knew very little about the company. There was plenty of public information available on their Web site and SEC filings, yet the image in my mind still closely resembled a large black cube with no windows that popped out really neat little computers and acted as router for Internet service.

It's common to hear people say that familiarity breeds contempt. However catchy that statement is, it has rarely been true in my experience. In this case, there was a large amount of contempt in the hacker community towards Netpliance, largely because there was a lack of dialogue between the company and the community. This was partly due to the SEC quiet period surrounding their IPO, and also partly due to the fact that the company didn't anticipate a need to develop relations with the Open Source community so early, and was taken quite by surprise with the attention they were receiving.

There has been an information void when it came to what the company is, and of course nature abhors voids, and it was our nature to fill this one. A lot of the posts I read had a common set of assumptions: That Netpliance was a hardware manufacturer, that they were capitalizing on commodity ISP services, and that they didn't know anything about the Open Source community and wanted to keep everything locked down. Before I say anything else, allow me to give my impression of the company, its corporate philosophy, and the people behind the scenes.

I'd like to provide as much new information to the discussion as possible in this article.

Netpliance Realities

My first face-to-face meeting with members of the executive team left me with one impression: This company has a very strong vision and is extremely passionate about their mission in starting the company. Being involved with the Open Source community, I've come to recognize the signs of unbridled passion, that incomparable excitement that you feel when you talk about your latest project, or the newest in-roads Linux is making in some new market.

When you see something you believe in succeeding, it's natural to get worked up about it.

Sometimes this kind of passion can lead to actions that seem wild or irrational to people outside the group. When Netpliance changed their Terms of Service or poured epoxy on the board, they were reacting to a threat to their vision. Regardless of what we may have thought about these actions, we have to put them in the context of a group of people working very hard to achieve some goal and then having that dream threatened.

Whenever I asked about what the company was trying to achieve, it always came back to stories about grandmothers calling the company because they were sending e-mail to their grandkids, or of Netpliance employees' spouses or friends really starting to understand this Internet thing that they keep talking about. The company is essentially focused on breaking down the digital divide by re-creating the computer interface that we technical people have evolved with.

They have done really good job of removing the crufty metaphors that we have had piled up on top of each other and really made the Internet a simple, natural experience. They are trying to eliminate the anxiety non-technical crowds associate with configuring modern PCs. I have been slowly working with my mother on basic Internet and PC skills over the last 5 years, but I know that she could have been up and running all by herself with the i-opener within a couple of minutes; it really is pretty impressive for what it is supposed to do. And it isn't offensive; there are no banners or obtrusive pop-up branded advertising as with some other appliances that have appeared lately. I'm not trying to be a cheerleader for the company, I'm just pointing out, as others have already, that they have a very solid product which meets the needs of a large portion of the population very nicely, and does so with grace.

Netpliance never intended to focus on hardware. Hardware development is a relatively small part of the overall business. They have several times more employees working in software development, content delivery, and interface design, and countless more working in customer service. Although they have a branded box that carries their services, the company is actually focused on providing the content and interface regardless of the device. They have already signed deals to have the i-opener software and content delivery deployed on set-top boxes developed by a major cable company, as well as RCA branded Internet devices; they are also looking to offer the i-opener service on other devices such as PDAs and screenphones.

They are basically positioning themselves to provide software, content delivery, and customer support for any hardware or access provider who wants to target the first-time-user market. They appear to do it very well.

Basically, 'i-opener' more aptly describes the interface and content. The hardware and even the operating system are at an infrastructure level to the core focus of the company.

Market Forces

Another thing a lot of us assumed about the i-opener is that sales were not going too well and that the company really didn't have much going for it anyway. The reality is that they are having trouble keeping up with the demand for the devices from their core market. They have been experiencing a predictable network effect as granny gets online and then wants all of her friends to join her so she has more people to e-mail. If their massive customer service department and the stories I heard from random employees I grabbed (who had no idea who I was) are any indication, the i-opener is actually doing very, very well with its core market (due to SEC regulations, exact numbers were unavailable).

It should be clear that one of the major suggestions the community was putting forward is untenable. A lot of us, myself included, were suggesting that Netpliance at least partially re-focus its business model and tap into this massive market for X terminals and low cost thin clients that they stumbled upon. Let me assure everyone, these guys have not been living in caves while this whole thing has been going on; they have been paying attention.

But it would be destructive to the company to move from primarily focusing on software and service to focusing on hardware. Not only would it require their laying off more than half of their work-force, and re-examining the aptitudes of their executive team and board of directors, but it would probably be impossible, given the private investments made in the company based on its business plan and long-term vision.

There are also a finite number of boxes available to Netpliance. They are receiving products based on market projections and component availability defined by a single market trajectory. There just aren't enough LCD screens or production capacity available to them to fully support one market without hurting the other. Every device sold to someone not using the i-opener services, even at a fair market price, would be a sale that leaves the demand in their core market unanswered. They also risk violating FCC regulations if they sold certified devices that they knew would be modified. That is the sober reality of the situation.

The people I talked to at Netpliance agreed completely that there is a massive untapped market for simple, configurable X terminals out there just waiting for someone to step up and fill. They have been getting calls almost daily with offers to purchase thousands of devices for schools, corporations, etc. They also realized that they are well poised to take advantage of it and dominate the market for a short time if they want to.

But, as much as we would all like to have immediate access to cheap X terminals, the reality is that these types of devices will be commodity items in a year's time. It's obvious that a market exists and it's inevitable that many companies will try to satisfy it. Large-scale hardware producers squeezing by on razor-thin high-volume margins would wipe out a young company like Netpliance. Any plan to market Netpliance-branded hardware on a large scale would necessarily be a short-term one.

In fact, they would like nothing more than for someone else to step in and start selling to the hardware-only market; they would even help them out as much as they could. The Netpliance executives understood that they could only benefit from having diskless networked devices broadly distributed and being developed upon. But Netpliance is still a start-up and maintaining focus is important. We should understand that.

The Benefits of Open Source

So we don't get an unlimited supply of cheap terminals for our homes, yet. The news isn't all bad, though.

One of the things that I was looking forward to was talking to some of the developers. It shouldn't be surprising that they were positive towards Open Source, and naturally had worked on Open Source projects independently in the past. In fact, everyone who I pressed for an opinion about Open Source was positive on it; from the CEO to the technical writer, everyone echoed the original statement that the company made when the hack first emerged -- that any help they could get in making their product better was great.

Linux was their first choice as an operating system for the device; its obvious strengths, price, and open development model made it very attractive. But they couldn't make it and a browser fit on the necessarily small memory footprint of an Internet appliance. There is a lot of desire to go this route if it is possible; the company is officially operating system agnostic, but given the inherent advantages of Open Source systems, there are plenty of reasons for them to support an open infrastructure (it should be noted that QNX has announced that they will be Open Sourcing key components of their OS; more details should emerge on this in the coming weeks).

Since Netpliance's product strength essentially boils down to a well-designed interface, structured content delivery, and customer service, the OS and the hardware that it runs on are only secondary concerns. I was pleased with the company's understanding of how opening up the market and development of these infrastructural components was good business sense and would result in better technology for everyone, and a stronger position for their company.

So here are the take-aways I got after meeting with Netpliance: The pilot 100 program that they posted on the "developer's corner" section of their Web site is being expanded. The people within the company who understand the benefits of Open Source have been working hard to increase the number of i-openers earmarked for distribution to the Open Source community, but they are only able to do this within the constraints of their available resources. The next batch of devices will either be distributed to hackers by a third party or sold freely at a fair market price.

There are also discussions underway to publish the hardware specification and encourage third party development of i-opener-style devices. It's been stated plainly elsewhere that the i-opener hardware is really nothing too technologically stunning. If there is a market for X terminals as strong as we all think it is, there is no reason not to expect similar devices everywhere very shortly. Netpliance has no desire to stand in the way of that happening, but they can't support the whole market themselves. Open Source has been most successful at developing open infrastructures, and an open Internet appliance infrastructure is something that we can all look forward to.

Key executives are also supporting releasing core software components of the i-opener under an open license to help make them work better. This, coupled with support for development of more open Internet appliance standards, has a massive potential to help grow the overall market, and eventually make it easier for more people to get online.

There will also be much better communication between the company and the community.

Given the position that the company is in and their market focus, they are actually moving towards a pretty bold commitment to supporting Open Source development.

The corporate context of Open Source

There are probably going to be responses to this article that say that I am selling out to Netpliance, or that the company doesn't really care about Linux hackers because they are not meeting all of the demands made by the community. It will be the same people who protest Apple for not Open Sourcing their GUI and complain that they are just trying to take advantage of the community. I don't expect most of the people reading this to have that reaction, but I know there will be an inevitable minority who will be very vocal and very unreasonable; I've seen it happen too many times before.

When I wrote the first draft of this essay, a friend noted that he thought it sounded defensive. It probably does. I'm pretty openly defensive when it comes to seeing Open Source software become more prevalent and gain respect while seeing open development models work well, not being abused or disregarded.

Personally, I see the changes that have taken place in the open software movement since the heady days of the FSF as being immensely positive. The shift of the default rhetoric from quasi-socialism to quasi-libertarianism has been very productive overall. We are still all focused on the goal of having software that doesn't suck. We understand that companies can help to achieve this. But there is also a realization that we can't and shouldn't expect companies to do open source development if it is going to hurt their bottom line and kill the organization. If it did, that would hurt the credibility of Open Source to the public-at-large and other companies; it would damage the movement's long-term prospects.

Luckily, the bazaar development model is so strong, and the community so talented, that, done right, Open Source can have a major positive economic impact.

The question essentially comes down to why you support Open Source software as a movement. What underlies that passion beyond a personal desire to work with the best tools? The answer that resonates most strongly with me is "seeing things done better". Seeing inefficiency reduced and flaky software removed, and more amazing things being done with technology -- seeing technology enriching more lives in more ways.

These goals are worth achieving, and the best way to get support for them from the corporate community is by helping to create examples of open software development creating wealth and distinct market advantage to consumers. A company composed of people who want to run Linux on an Internet appliance but had to settle for at least some form of Unix is worth supporting. In the not-too-distant future, there will be dozens of Internet appliances on the market, most of them running Windows CE or some other proprietary OS.

I'd like to see the eventual shakeout be a story of a company doing very well against competitors because of involvement with the Linux community rather than bankrupt for the same reason.

Kalin R. Harvey ( currently works as a technical analyst for a major Canadian Public School Board and holds a degree in Linguistics. He actively promotes Linux and Open Source software as a more efficient way of organizing society and getting the most out of technology.

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Recent comments

08 May 2000 09:00 Avatar leonbrooks

Netpliance Developer's Corner
PS. It's my understanding that Netpliance has started a mailing list on their developer's corner and will also be posting updates to the page on Monday.

They did. Not by sending the people who'd registered a message saying "go here to join" but by dumping the whole database into majordomo. )-: I feel inclined to complain about their poor choice of list server and that they set it up a little bit wrong as well, but I also feel that the job had already been more than overdone by the time I read my email this morning. Also, I'd like to personally thank them at this point for not using a wizard to set up a Windows-based list. (-:

Ah, well, I hope they learn something from that other than "open source advocates are a bunch of whingers". People in general are a bunch of whingers. (-:

The page is at ( for those who are interested.

07 May 2000 01:35 Avatar mikkel

07 May 2000 00:51 Avatar hairylarry

quasi socialism to quasi libertarianism
I don't know if I'm quasi what but I do know this.

I have trouble with a company sneaking systems into unsuspecting and naive households, systems where thay can update the software right down to the system level any time you log on, systems where you are forced to use their ISP service providing them with the opportunity to collect all kinds of data and statistics on these naive and unsuspecting users and then market this data either in aggregate or individually, multimedia systems with speakers and microphones (paranoia strikes deep), do you get my drift (said the Firesign Theater).

You say they are not sneaking them in, then why the low ball price and the massive advertising. I have the exact same reservations about the free internet services but at least there you are not tied to their service in order to continue using your hardware.

I think it's great that Granny gets email. But Granny does not know enough about security and privacy issues to even begin to think about it. They are clearly targeting naive users and locking them into their service and I see no guarantee or even indication that this relationship will not be abused. In fact I suspect that it is part of their business plan to market data on these newbies.

Thanks for your research. It helps fill a void. But there are many serious issues to be addressed about this type of business.


Hairy Larry

06 May 2000 23:24 Avatar tlott

Soul Searching
Kalin, I appreciate the insight into NPLI's operation. Your article raises several interesting points including what exactly NPLI's core business is. Though they are intent to forge relationships with the community, it is unclear how a company that distances itself from its hardware and focuses on its interface will use us. While I can appreciate NPLI's decision not to leverage the community to take on the hardware giants, GUIs don't tend to last long in the bazaar. As more appliance manufacturers get into the game it is going to be more difficult for NPLI to sustain its revenue model. Regardless, I'm with you. I'm all for the development a simpler and easier to use appliance, whether someone can turn a profit from an open box with an ISP contract is another question. Perhaps your next visit?

06 May 2000 21:10 Avatar jeffcovey

We forward-date editorials so they get viewed by the widest possible audience, instead of scrolling off the bottom of the page. You'll probably feel differently about this when it's your editorial we post. :)


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