The Baltimore Sun
( Sunday December 5 1999 )

Bright idea: Selling software on the Web
By Mark Guidera: Sun Staff

It hasn't been that long ago that Shervin Pishevar ditched his $50,000-a-year job as an analyst with health care provider Kaiser Permanante to work nights as a security guard.

His father, who fled the upheaval of the Iranian revolution in the 1970s, was stunned that his son had given up "an American dream job," recalled Pishevar.

But Pishevar said the move wasn't frivolous. It was a well-thought-out leap of faith to pursue his own American dream: building his own company.

By day the 25-year-old and his pal Drew Morris, 24, toiled on laptop computers at their parents' homes creating a novel operating system that would allow desktop office software programs to be accessed through the Web -- initially for free.

"Our vision has always been that in five years, the software market would look a lot like the utility market," said Pishevar, who grew up in Silver Spring. "You pay as you go for what you use. Why should you pay $400 for a software program when you are using only a couple of the applications?"

Last week, Pishevar's and Morris' dream of creating a Web site that allows users access to software programs for small and midsize businesses became a reality.

The young duo unveiled their Web site, myWeb OS.com on Wednesday. More than 12,000 customers have signed up.

The Baltimore company also is in the last stages of negotiations with venture capital investors who may invest up to $10 million.

The potential investors include Grotech Capital Group of Timonium; Impact Venture Partners, a new venture capital company formed by e-commerce expert Adam Dell, brother of Michael Dell, the computer magnate; Orion Capital, a big Internet start-up investor, and America Online of Dulles, Va.

Frank Adams, managing partner at Grotech, said myWebOS.com has generated more investor interest than any other start-up his company has been involved with -- and for good reason.

"This company has the potential to completely change the paradigm of the office software market," Adams said.

"Every expert we talk to comes up with one word for the potential: huge," he added. The reason: The company is on the front end of a new wave of ventures aiming to make money by distributing business software through the Web rather than through retail outlets.

Some Silicon Valley competitors have the same idea, including V-jungle, Desktop.com and x: drive, the latter two companies having secured more than $20 million each in venture financing.

"This will be a fairly crowded market over the next one to two years," said Ryan Brock, senior analyst with AMI-USA, a business research and consulting group in New York. He sees large software developers launching their own Web-based software-for-lease sites, as well as upstarts.

Such outfits, known as application service providers, or ASPs, are rewriting the rules of the software industry, say experts.

The advantage for the customer, said Brock, is that application service providers endure the headache of upgrading, managing and debugging applications, as well as figuring out which applications are useful.

A turning point for Pishevar and Morris came when they registered the domain name for their Web site and stumbled across myWeb.org. It was registered by an 18-year-old Swedish programmer named Fredrik Malmer.

They discovered he was a few leaps ahead of them in developing a virtual office operating system. In short order, Pishevar had Malmer on a plane to Baltimore, and by the time he left, they had a deal to merge.

The heart of the company is the operating system, which allows users to swiftly access business software applications from any gizmo that can tap the Net.

Already a number of Internet sites and wireless telecommunications outfits have teamed up to offer select features, most notably stock quotes, weather reports and e-mail that can be accessed from handheld phones and other portable gizmos.

Downstream, say visionaries, there's no reason why a business owner shouldn't be able to use a PalmPilot to review employee expense reports, access customer orders, or write and post employee bulletins.

For now, myWebOS.com allows users to access several business applications, including travel expense management, employee benefit programs, and a unified, fax, voice and e-mail, all through the Web. MyWebOS has developed some of the applications. Others were developed by companies that have agreed to post their service through myWebOS.

The company intends to roll out during the next several months other free programs, such as spreadsheet and word document programs, as well as games and other entertainment features.

The company expects to generate revenue from renting or leasing premium applications posted by software developers, in much the same way cable companies charge for premium channels. How will they make money? By taking a percentage of the rental or lease fee.

Pishevar and Morris are well aware that they can't be counted among the ranks of the next likely Internet millionaires.

The next nine months will be crucial, they acknowledge. Adams at Grotech agrees.

"It used to be you had the luxury of getting a $3 million first round investment, spending it frugally to build the business and beta-test the product or service over 24 to 36 months," Adams said. "Now, the time frame is maybe nine months. You are on Internet time. If you don't execute fast, someone overtakes you and you die."

To ensure that the company can flourish, Pishevar said, he's looking for "seasoned" Internet talent with management experience.

Last week, the company announced that it had made its first major hire, tapping former Netscape Communications Corp. sales and development executive, Deepak Puri, to head the company's new San Francisco office.

Pishevar expects the company will hire up to 40 more employees during the next three to six months.

The company has all the appearances of the classic Internet garage operation. It resembles more a college dormitory than a high-technology venture. Indeed, the average age of the company's 12-employees is collegiate: 21.

The company's offices, on the third floor of the Brown's Arcade building on North Charles Street in Baltimore, are littered with empty Pizza boxes, Diet Coke cans and boxes of junk food. Drawing boards with "stream of thought" ideas sketched in bold letters decorate the walls. Workers have been known to bunk on sleeping bags and cots after workdays that ended at 4 a.m.

There are two elements Morris and Pishevar believe will make their business model a standout.

First, there won't be any banner advertising to distract or annoy users. And second, they are sharing their source code, the key to how their operating system works, with free-lance software developers interested in incorporating their applications.

Historically, software developers, such as Microsoft Corp., have kept such source code secret.

The company's other priority is building name recognition. Pishevar, a University of California at Berkeley graduate, anticipates a national marketing splash next year. He estimates that the company will probably need at least 100,000 customers to begin begin making money.

"Really our main goal is to democratize the desktop applications market," says Pishevar. "We believe we have a very disruptive but enabling technology."