January 22, 2001 12:45 PM PST

Start-up to sell open-source Web software

An Israeli start-up will start selling software Tuesday, the latest company to try to convert the success of an open-source software project into commercial success.

Zend hopes the PHP software for generating Web pages on the fly will be as good a foundation for its business plan as Linux has been for Red Hat.

PHP is used so servers can automatically create customized Web pages, enabling Web site features such as online shopping carts. Tuesday, the company will begin selling a packaged version of PHP and programming tools to use it, a caching product to speed up PHP performance and an encryption product that will let programmers develop proprietary uses of PHP, said Jim Jagielski, U.S. chief technology officer of the Ramat Gan, Israel-based company.

The popularity of open-source software, which may be freely downloaded, scrutinized and changed, has been good to Red Hat, VA Linux Systems, and a few other companies. Successful initial public offerings have spawned followers such as Zelerate, which has open-source e-commerce software; Great Bridge, NuSphere and IBPhoenix, with open-source database software; and Covalent Technologies, with Web server software.

These companies, though, must take on some industry giants with their own established technology. In the case of Zend, PHP competes with Microsoft's Active Server Pages, Sun Microsystems' Java Server Pages and products such as Allaire's ColdFusion.

A more likely damper, however, will be lukewarm investor enthusiasm. While Red Hat and VA went public while Linux and open-source fervor was at its hottest, the movement has lost some of its business luster with the general high-tech decline. Some Linux companies are being forced to consolidate to survive and others have scrapped their IPO plans.

Zend isn't starting from scratch, though, a major advantage over some open-source companies. Zend can take advantage of the popularity of Apache, the No. 1 software package used to send Web pages out to Internet surfers, according to Netcraft.

While PHP is commonly paired with Apache, Sun's Java technology also fits through projects such as Tomcat.

Also in Zend's favor is the fact that it employs several PHP gurus, including cofounders Zeev Suraski and Andi Gutmans, the lead programmers who recently overhauled PHP during its upgrade from version 3 to 4. And Jagielski himself is a core Apache developer and the leader of the Apache Software Foundation's PHP group.

The company, with 28 employees in Israel and five in the United States, plans to add another 28 positions in Israel and 15 in the United States, Jagielski said. Expansion will come in programmers and sales staff, he said.

The company is putting as much of its research activities as possible in the United States--"where the vast majority of our customers are," Jagielski said--but the bulk of the effort will stay in Israel because of Israeli tax laws.

The company plans to sell most of its products directly over the Web, but the company is in distribution discussions with VA, Covalent and Cobalt Networks (now part of Sun), Jagielski said.

The products that will go on sale Tuesday are:

A caching addition to PHP that keeps PHP programs in memory instead of requiring a computer to reconstruct a version each time it's used. The addition, which costs $2,000 per CPU and less in quantity, speeds PHP performance fivefold on average, Jagielski said.

A $6,000 encryption engine that lets PHP programs be encoded so their inner workings aren't publicly available. This can be beneficial to programmers selling PHP software who don't want to reveal how their programs work, Jagielski said.

A version of PHP Launchpad, a packaged version of PHP that includes a programming environment to make it easier to create the programs PHP runs, along with service and support. A subscription cost of $50 a year for a lower-end product and $70 a month for higher levels of support.

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sale of open source and UCC?
By selling open source, would the Uniform Commercial Code then be envoked, thereby invoking 2-312 (warranty of infringment)?
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