COMPANY TO WATCH
The Quest for a One-Stop On-Demand Web App Shop

In some respects, the market for Web-based applications resembles a crowded, noisy and confused bazaar. It's difficult to get a good wide-angle view of all available options. Those there to sell wares often have a hard time finding and securing the best place to set up shop, and those shopping for the right Web app to implement for any given task are often left wondering whether a better solution might be found if they take more time and look around more corners.

Etelos hopes to change the way Web-based applications are developed and distributed. The company's technology aims to make it easier for open source developers to get their applications into the mainstream.

It's trying to attract vendors and ultimately more customers to its technology for Web-based applications. Its goal is to create an Etelos Marketplace for on-demand applications that will transform the world of software distribution.

Etelos' CTO and founder, Danny Kolke, sees this new type of marketplace as a mecca for developers to license, distribute and support their applications. The Etelos Marketplace, he reasons, will also give businesses a wide selection of fully customizable, on-demand business applications to license and deploy to the hosting environment of their choice.

The company, in business since May 1999, is making some headway in changing the ecosystem for the development and distribution of business productivity for small and medium businesses (SMBs) and enterprises.

But Etelos' path is not without its risks. An important factor for whether or not the firm succeeds is whether enough customers and potential customers are moving from free donwloads to Software as a Service fast enough.

"The company's main problem is its financial situation," Laurent Lachal, senior analyst at Ovum, told CRM Buyer. "It became a public company recently through a reverse merger with a company that was going bankrupt. Its financial figures don't look good. Its revenue is shrinking."

The Plan

Kolke started his business using an open approach. That didn't always mean using open source. His "open" theme focused on developing a platform that would get Web applications working together.

"Our idea was to have an open marketplace and service from our platform. The goal still is to unite different applications on competing platforms," Kolke told CRM Buyer.

His early customers suggested the concept, he said. The result was a unique method for deploying applications on demand. The Etelos platform works with other applications without dependencies.

The core of the platform started out as open source. But some of the integral parts are made up of code Etelos developed.

"The end-user or Web user app may or may not be all open source. We did an open source version in the past. The actual code distributed is part of our own proprietary platform now. We also use Apache and other open source components," Kolke explained.

Opportunity Knocking

The biggest technical issues Etelos faced involved the quality of what it distributes. The company's platform provides each customer with an individual server and deployment system.

Kolke started the business convinced that the innovative software distribution system would present real opportunities to partner with other developers. Today he sees a growing convergence for unified applications.

"Customers want more applications centrally available. I see us adding many more partners," he said about his company's future prospects.

Troubled Tale

However, the Etelos Marketplace may become an unfinished dream if the company's customer and developer lists do not grow soon. Still, it has a lot going for it.

"Etelos is a company with a really smart management team. They have new ideas about integrating third-party products into a single platform. They also have a plan to obtain supportive advertising," Lachal said.

Etelos announced on April 23 the closing of its reverse merger into Tripath Technology. Subsequently, Etelos raised about US$5 million through public stock sales .

"But it used much of that cash to pay back its initial investors. So they have to get their revenue going," Lachal explained.

Potential Exists

Etelos has smart guys with interesting ideas, he noted. But the company is financially insecure.

"Most of their customers are free download users. The big question is about its success potential. They have to get their market plan going," said Lachal.

Investor issues aside, Kolke is confident his company will see better days. He is very happy with what he started and is looking forward to keeping that momentum going by making the marketplace better.

In the Works

Etelos has three things working in its favor. One is a dynamic billing engine that adapts to each developer's pricing preferences. For instance, some developers want to charge on a per-use basis. Others charge on a subscription cycle.

The second item in the company's favor is its value-added strategy . Etelos takes customer requests for additional programming and gives it to them.

"For instance, we added SugarCRM. We'll see more choices of the types of apps a customer can use for a given task," Kolke said.

Third, Etelos is growing more applications that share data among related databases in a user's account. For example, a contact in one application will talk to the content in other apps, he explained.