New Web-Based OS Company Draws Big Names

A venture capital firm has given a $10 million boost to a Swedish company that could soon be in the competitive crosshairs of Google and Microsoft Corp.

Swedish venture company Northzone Ventures will help Xcerion AB emerge from stealth mode to launch its Web-based OS and related marketplace for hosted software later this year, said Xcerion CEO Daniel Arthursson, in an interview with the IDG News Service Monday.

The company already has some big-name investors backing it, including one of the original architects of Windows NT and a former Microsoft general manager, Lou Perazzoli, and former Microsoft CFO John Connors. Arthursson said Xcerion, which was formed in 2001, set up an office in Seattle two years ago, and company founders began networking in the area to gain the support of the former Microsoft executives.

Xcerion has developed an OS that works from within a browser, which developers can use to build Web-based versions of existing software or new applications quickly and without having to build separate versions for different computer OSes, he said. The company also will host the applications and make them available in an online marketplace.

Users can choose to either run ad-supported versions of the applications for free, or pay a small yearly fee -- about $5 or $10 per year -- to run them is ad-free, Arthursson said. The company will manage subscriptions for third-party vendors and give them about 80 percent or 90 percent of the subscription revenue, while keeping a small percentage for its hosting and management services, he said.

"If you [look at] the current marketplace, there are probably only about 50 to 300 applications that are the main ones people use today on their desktop computers," he said. "If you can recreate these and use it within our own OS, people won't have to use those applications on the desktop and can stop buying licensed software."

Users also can run applications built on Xcerion's XML Internet OS when they are offline, Arthursson said. Any information saved when they are running the application offline will be immediately updated to the online version when they reconnect to the Internet.

Xcerion is hoping to do for Web-based business application development what Microsoft did for applications development on the desktop, Arthursson said. "In some sense, we're working in the same direction [as Microsoft]," he said.

Google also has promoted itself as a platform on which developers can build Web applications, but so far the company's services have not really caught on with consumers, not business customers.

Arthursson said he hopes Xcerion will partner with many of Microsoft's ISV partners so they can offer versions of their software online. He said he expects ads sold for applications offered through Xcerion's marketplace will likely be the No. 1 source of revenue for the company, while subscription services managed for third-party applications will be its second biggest revenue stream.

Microsoft, too, has been ramping up its strategy to offer Web-based applications.

When Xcerion launches its Internet OS -- which is expected by the end of the third calendar quarter -- it also will launch its own Web-based office productivity suite that will run on the OS. The suite will include a word-processing application, a spreadsheet-application, a presentation application similar to Microsoft PowerPoint and an e-mail and calendar application, Arthursson said.

The differentiator between Xcerion's productivity application and Google Apps from the search vendor is the ability for it to run when a user is offline, he said. Microsoft, too, is said to be developing a Web-based version of its Office suite, but has not officially made an announcement about the product.

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