Jamcracker reworks its software strategy

Jamcracker, which provides software over the Web as a service, will announce next week a $28.4 million infusion from investors, updated software and a new push intended to set it apart from competitors.

The privately held company on Tuesday will announce new venture capital funding from existing investors and new entrants Telus Ventures and former Microsoft executive Paul Maritz, who currently serves on Jamcracker's board. The funding is expected to take the company to breakeven by late 2002, executives said, a key point in a technology market rife with financial woes and failing start-ups.

Jamcracker is a Web-based aggregator of software applications used by businesses. It is headed by Exodus Communications founder K.B. Chandrasekhar.

The Cupertino, Calif., company will also revamp its ASP (application service provider) business plan. Company executives said Jamcracker plans to begin selling its Jamcracker Platform software directly to businesses later this year, a radical shift from the company's software-as-a-service-only strategy. Businesses will be able to use Jamcracker's software in-house to launch business applications, in effect serving as their own ASPs. Pricing for the software has not been announced.

Jamcracker came into existence in the late 1990s as part of a groundswell of hype surrounding ASPs. Though the concept sparked interest among technology buyers, few big companies proved willing to trust an outside company to host and manage their most important, and sensitive, business data. Most surviving ASPs are focusing on hosting individual pieces of an application, such as data backup, as opposed to an entire business application.

The $28.4 million round of funding is in addition to the $142 million the company has already raised from venture capitalists in previous rounds. Analysts note that Jamcracker has evolved from its ASP roots to become the equivalent of a software exchange of sorts. While early ASPs specialized in single applications, or a category of software, such as enterprise resource planning systems, Jamcracker offered a range of applications, such as help desk, accounting, and sales force automation systems, on an a la carte basis.

Gartner analyst Ben Pring says that because the ASP market has developed more slowly than many vendors and industry analysts expected, Jamcracker's original vision hasn't really panned out. see commentary

Jamcracker hoped to simplify things for a customer by aggregating software delivery from several ASPs through its own systems and software so that a customer could order from a menu of applications and receive one bill, rather than dealing with several different companies for each application. Its "secret sauce" is a layer of software that serves-up applications to a computer user via a Web browser, leaving all of the back-end computer processing to Jamcracker or its affiliates.

"Their positioning has always been unique," said Evan Quinn, an analyst with industry consultants the Hurwitz Group. "Of course, the question remains whether the market will find it a phenomenally powerful concept."

Jamcracker competes with the likes of Corio and USinternetworking, which recently filed for Chapter 11 bankruptcy protection.

Jamcracker executives said the company's evolution stems from an increased focus on its Jamcracker Platform software in July 2001. It has since struck deals with third parties such as Canadian network operator Telus and systems giant Unisys to use the software, and hopes to attract business from larger companies by later this year offering the software to them for use inside their networks.

With the company appearing to be morphing into something new, or at least adding a new strategy to a nascent business, questions remain about just where Jamcracker fits in. But executives insist the company has a focus and is sticking with it, even amid the tech downturn.

"Jamcracker is a Web applications platform company," said Todd Johnson, senior vice president at Jamcracker. "Today our model allows us to deliver licensed software in a hosted environment; In the future we will also be delivering software-only (packages) for (a company) to deploy in their own data centers. Jamcracker is therefore, a software and service provider business."

San Francisco-based Putnam Lovell Securities chose to outsource several of its software needs last spring to Jamcracker. The company said it would save 57 percent on software and related IT and servicing costs during the next three years. "For my technology budget, I have to decide where to focus my expertise," Putnam Lowell Chief Technology Officer Rodric O'Connor said. "I'd rather focus my people on a couple of things" rather than use them to put out desktop software fires, said O'Connor, who oversees a 150-employee network of computer users in four locations: San Francisco, New York, Los Angeles and London.

"What I don't want," he said, "is a big data center with a lot of hardware and a lot of software and a lot of people looking after it."