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Open-source firm reverses strategy

ArsDigita, in the midst of layoffs and a major product overhaul, is bucking the trend of comrades selling open-source software.

ArsDigita, an e-commerce company in the midst of layoffs and a major product overhaul, is bucking the trend of comrades selling open-source software.

While other open-source companies such as Red Hat, Caldera Systems and VA Linux Systems work to shift revenue from products to services, ArsDigita is going the opposite direction.

Instead of just offering services around the open-source ArsDigita Community System (ACS) software for setting up e-commerce Web sites, the company will begin selling proprietary software modules, said Dave Menninger, senior vice president of marketing. In addition, the company's latest version of ACS has been rewritten using Sun Microsystems' Java language instead of the previous TCL language.

"We are a company that's in the midst of a transition from a purely service-based model to a mix of service and product license revenue," Menninger said.

The change will allow the company to reach profitability by the first quarter of 2002, he added. ArsDigita said last week it had $25 million in revenue in 2000, up from $7.4 million in 1999.

But the change in direction has taken its toll. The company laid off 29 employees in the last week, and the company's founder and former chairman, Philip Greenspun, has left to pursue other interests, Menninger said.

The switch to proprietary software sales and Java caused some disagreement with Greenspun, Menninger said. "I think there was a little push-back there, but I don't think there was a fundamental rift," he said. The main reason for Greenspun's departure was the gradual evolution of ArsDigita into a larger corporation rather than the start-up environment Greenspun preferred, he said.

The open-source realm, once brimming with entrepreneurial enthusiasm that grew with the popularity of software such as Linux, now is under pressure along with the rest of the technology market. Open-source e-commerce seller Zelerate threw in the towel recently, while competitor Red Hat acquired competitor Akopia.

Details of the proprietary modules haven't been announced yet, but Menninger said an example package could connect the ACS software to accounting and inventory software such as that from SAP.

ArsDigita customers include Oracle, Deutsche Bank and Nokia, Menninger said. The company raised $38 million in 2000, most of which "still is in the bank," he said.

Meanwhile, for those who prefer the purely open-source approach, the ACS software is at the heart of the OpenACS effort, which also uses the PostgreSQL database software and the OpenNSD version of AOL Time Warner's AOLserver Web server software.