[CNET] Startup Eyes Microsoft's Crown

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From: Philippe Lourier (pl@technetcast.com)
Date: Tue Jan 23 2001 - 10:58:43 PST

Start-up eyes Microsoft's crown
By Paul Festa
Staff Writer, CNET News.com
January 23, 2001, 10:35 a.m. PT
URL: http://news.cnet.com/news/0-1005-200-4573692.html

A start-up led by members of Microsoft's former high command hopes to solve
key problems that have held up delivery of software applications over the Web.

To achieve that goal, OpenDesign is stepping gingerly over the bodies of
failed start-ups while eyeing a prize coveted by Microsoft, Sun
Microsystems and Oracle.

The Bellevue, Wash.-based start-up is the brainchild of Intellectual
Ventures, a Redmond, Wash.-based incubator headed by Microsoft's former
chief software architect Edward Jung and former chief technology officer
Nathan Myrhvold.

Web-based applications are seen as the next stage of evolution in
computing, in which key functions of PCs will be transferred to more
powerful machines, or servers, linked in a network. But Web-based delivery
of core applications, such as word processing and spreadsheet programs,
raises a host of problems that have limited widespread development and
adoption of applications. As a result, most PC software today far outstrips
Web-based rivals.

Like some of its predecessors, OpenDesign promises to do for Web-based
applications what Microsoft and other operating system providers did for
desktop-based applications: provide a platform to handle the low-level
plumbing of application development and deployment.

OpenDesign proposes to let developers "publish" their applications through
its system as a way to ease distribution problems, thereby taking advantage
of scalability and load-balancing features, the lack of which company
founders say hamstring today's Web applications.

"In a way, the Web was a huge step backward because we went from powerful
PCs with huge applications and right back to a thin-client-server model,
right back to the OS of the 1970s," said Alex Cohen, chief evangelist for
OpenDesign. "OpenDesign and a lot of other companies are all trying to get
to the next level."

Cohen and others say Web applications will be able to take off once they
have resolved underlying infrastructure issues, such as easing heavy
traffic demands on one server by distributing traffic and tasks evenly
among multiple Web servers--a technique known as load-balancing.

"If we can solve those problems for the developer transparently, the
potential for innovation increases exponentially," he said.

Rivals step in That potential has drawn a hungry competitor in Microsoft,
which has long regarded the Web as a potential replacement for the PC as a
venue for application development, and therefore a threat to its dominant
Windows operating system. In the Web-application sector, Chairman Bill
Gates has wagered the future of the company on a high-stakes gamble known
as Microsoft.Net.

Laboring in the shadow of Microsoft's Redmond empire, Cohen and the
Microsoft veterans funding the start-up are entering an increasingly
crowded field of companies providing infrastructure for Web applications.

Some of the pioneering members of the Web application infrastructure
vanguard have already fallen by the wayside, felled by lack of developer
and consumer interest in their offerings and by the recent doldrums in the
venture capital markets for technology start-ups.

These include Desktop.com, a start-up launched in 1999 that provided an API
(application programming interface) for Web-based applications. Desktop.com
closed its doors late last year.

Another failed effort was My Internet Desktop, which abandoned its
business-to-consumer model and was sold to Internet Appliance Network
(IAN). Its technology is now being used in IAN's internal network.

"What we were trying to do was create an infrastructure simple enough for
Mom or Dad to create something, but sophisticated enough so big
corporations could use it too," said Marcelo Lewin, founder and chief
executive of Level 2 Labs and former CEO of My Internet Desktop. "The way
Web development works is comparable to building a house by first making the
nails, then cutting the boards. We were trying to bring you all the pieces
so you wouldn't have to do everything from scratch."

One of the troubles for the failed start-ups--and potentially for
OpenDesign and the new crop of start-ups--is that the idea of simplifying
Web application development and deployment is a principle focus for
Microsoft, Oracle, and potentially Sun Microsystems as well.

Microsoft has placed great emphasis on its Microsoft.Net initiative; Oracle
has countered with its own software release; and some expect Sun to throw
its hat into the ring with a project code-named Brazil.

Another high-profile start-up tackling some of these issues is Loudcloud,
the Web-based software infrastructure provider founded by Netscape
co-founder Marc Andreessen.

"This kind of effort takes a lot of (research and development), a lot of
money, and a lot of time to get it done," Lewin said. "Which is why
companies like Microsoft and Sun are in a great position to do that. My
suggestion to anyone trying to tackle that is to look at what Microsoft and
Sun are doing and try to become part of it, rather than fighting it."

Start-ups face the giants At least one company perceived by Microsoft to be
stepping on its Web application toes has not fared well this year.
Crossgain, a Redmond-based start-up briefly led by former Microsoft
executives and staffed by former Microsoft engineers, was forced to fire
its 20 former Microsoft employees under pressure from the software giant,
which said they were violating the terms of their yearlong non-compete
agreements, sources close to Crossgain have confirmed.

Although both Crossgain and OpenDesign have remained mum on the details,
their plans appear to be in the same vein. Both companies compare their
work on the Web with the function of the operating system on the PC. Both
also promise to free time and resources for Web application developers by
taking care of crucial underlying tasks such as load-balancing; fault
tolerance, which lets one server take over when another goes down; and
scalability, or the ability to increase output with demand.

OpenDesign executives have discussed their plans with Microsoft's Gates,
and the start-up is not unduly concerned about the company's reaction to
their plans, according to Cohen.

OpenDesign Chief Executive Jung maintains that the start-up has plenty of
room to maneuver around Microsoft's .Net initiative.

"From 30,000 feet, everyone seems to be working on the same thing," Jung
wrote in a statement. "But if you get in there and really understand what
each company is doing, you'll see people placing bets on different
approaches and problems."

Analysts predict that the market for Web-application infrastructure
services will follow a typical pattern of initial growth and ultimate
consolidation, and that for companies to succeed, they must position
themselves carefully to eke out a viable niche.

"Microsoft will not own Web services," said Daryl Plummer, an analyst with
Gartner. "In the category of Web services framework or composition,
companies are looking to address the underlying infrastructure of Web
applications. There will be money to be made there."

Other analysts agree that the need for these services is great, demand is
high, and competition is going to be stiff.

"The inadequacy of the present infrastructure is hobbling the ability for
the whole software-as-services trend to take off," said Dwight Davis, vice
president of Summit Strategies. "There's a lot of action, a lot of
competition in that space."

Davis cited Citrix Systems as one example of a company with an early
toehold in the market. Microsoft licensed Citrix's technology for hosting
applications on a server while providing load-balancing, availability,
monitoring and other services.

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