April 6, 2006

ActiveState reactivates

Author: Bruce Byfield

David Ascher, CTO and vice president of engineering for programming tool vendor ActiveState, has seen his company through several incarnations. The latest change is ActiveState's re-emergence as an independent company after more than two years as a subsidiary of security software vendor Sophos. I talked with Ascher about what ActiveState's new status means, where the company has been and where it's going. His answers illustrate the challenges of building a company around free and open source software, and reflect how the market for FOSS has changed over the last six years.

ActiveState was founded by Dick Hardt in 1997 to build tools for FOSS programming languages. When Ascher joined the company in 2000, the company was building well-known tools such as Komodo, ActivePerl, and ActivePython. During the early years of the millennium, the company branched out into anti-spam technology with Pure Message. In September 2003, this change of direction led Sophos, the well-known threat management company, to acquire ActiveState. During Sophos' ownership, the ActiveState name and tool-building efforts were reduced to a department within the larger company, with Ascher as its acting manager.

In February, Pender Financial Group Corp., a venture capitalist firm, purchased the tool-building department for $2.25 million -- about 10% of what Sophos had paid for the entire company. Bart Copeland, former president and CEO of Recombo and PhotoChannel Networks, was brought in as CEO as part of the deal, and Ascher returned to a role that he describes as "more hands-on and a lot more technical." Today, ActiveState finds itself a separate company once again, while still sharing a floor of an office building in Vancouver with a branch office of Sophos.

Looking back at the Sophos era, Ascher says that while ActiveState remained a separate brand, it shared infrastructure and finances with the larger company. "It worked out OK," he says. "It was nice, after some of the rough times during the early part of ActiveState, to be part of a company that had significant assets. It could do things like upgrade our infrastructure. We didn't have the same level of stress."

At the same time, Ascher notes that developing programming tools "didn't really fit in" with Sophos' business model. Having bought ActiveState for its anti-spam technology, Sophos was content to sell the tool department as a peripheral piece of the business.

For his part, Ascher welcomes the chance for ActiveState to develop its own long-term goals. Speaking of the sale to Pender Financial, he suggests that "it all worked out very well" for everyone involved.

The ActiveState business model

Ascher doesn't think that the ActiveState business model has changed much over the years. "We are in the business of making it easy for people to use open source programming languages like Perl, Python, and PHP inside their organization," he says. "We do that for programmers by developing the tools, and we do that for enterprises by building quality control assurance and support." In other words, the company's goal is to convince programmers that it offers advanced tools that are both useful and an acceptable business expense, while persuading managers that both the tools and the FOSS languages they work with are more than "toys" and can help them reach their corporate goals.

"ActiveState helps the technologists make the case within their organization," he says. Despite all the changes in IT over the last six years, he explains, "There's still a fair number of managers who are uncomfortable letting their staff use open source tools."

These different messages require some balancing. Although some of its tools are available in standard editions as a free download, strictly speaking, ActiveState is not a FOSS company, since it sells proprietary tools. At the same time, because its tools work with FOSS programming languages, Ascher stresses that "our business depends on a healthy relation with the open source community." Part of that relation is built unofficially, as the company's programmers interact with their peers on mailing lists and IRC channels. However, the relationship is also officially maintained by giving back code and staging events of interest to the community, as well as keeping in touch with the problems of the "programmers in the trenches."

To managers, ActiveState emphasizes other elements. "Businesses in general don't care about technology choices," Ascher says, "they care about return on investment." So, when talking to managers, ActiveState emphasizes its ability to solve what Ascher describes as "company problems," emphasizing such things as cost, productivity, and time to market.

Summarizing the different messages, Ascher refers to his experience at trade shows. "Some people really like our T-shirts. And some people will probably never wear our T-shirts. And that's OK. They can take the business card," says Ascher.

Then and now

Although its business model hasn't changed since the last time ActiveState was independent, Ascher believes that the company has evolved. "The company's more mature," he says. "In the early days, ActiveState had promising products. Now, we actually have valuable products. And that means we end up profitable, that we can actually do longer-term investments than what we could do before." In short, the company is now in a stronger position and has more to offer.

At the same time, Ascher thinks that the market for FOSS-based tools is larger than it was when he joined the company six years ago. Despite some holdouts in management, he believes that "open source is not as radical a notion as it once was. There's a lot more high-level discussion around the value of open source technology within IT in general. And customers are much more educated, and that provides more opportunity. People are a lot more willing to spend money [on FOSS] than they were before."

The main cause of these changes, Ascher suggests, is GNU/Linux. "I think Linux has done so well in establishing the credibility of open source that we don't need to fight the old stereotypes of open source as just toy software. Everyone now understands that it's serious."

Ascher and the ActiveState team are still working out exactly how the company will operate in these new market conditions. "Maybe we will be a bit more like what we were before the Sophos acquisition. We can project the image that we want to project. ActiveState has always had a bit of an edgy image to it, and I think that there's no reason to expect that part of it to go away."

Internally, Ascher says the greatest departure from the pre-acquisition days will probably be in hiring opportunities. In its early years, ActiveState could increase its status in the community by attracting well-known developers with a unique opportunity to work with FOSS technologies. But now, he notes, "A lot of companies can say that." The company has lost its uniqueness and can no longer count on being able to pick and choose among the best, the way that it used to.

However, ActiveState is "not in a massively expansive phase of the business. We're not interested in burning cash. We're interested in using our resources judiciously. And right now we have just the right staff for what we're doing." Although Ascher agrees that the current phase is somewhat like being a startup all over again, he sees current conditions as quieter and more complex than they were in the first wave of FOSS-based businesses.

Future plans

Only a few weeks into a new stage in the company's history, Ascher is understandably cautious about discussing possible future directions for ActiveState. However, he admits to considering increased support for Ruby and JavaScript, noting that people "are looking more and more at JavaScript as a real language again, as opposed to just a scripting language."

Ascher also mentions AJAX and the development challenges presented by the next generation of Web technologies, the so-called Web 2.0. "Until now," he says, "Most of those technologies have been relatively hard to put in practice. We're still just looking at the leading edge of developers who are building interesting things with them. But for those to become mainstream technologies will probably take some time ... and maybe some tools. So we are definitely looking at some development and what we can offer there."

Ascher is similarly reticent when the talk turns to finances. Although he wouldn't confirm or deny the rumor that ActiveState became profitable only when it expanded into anti-spam technology, he does point out that the tool department of Sophos has been profitable for as long as a separate record of its finances has been kept. He acknowledges that the rest of the company was more profitable, but quickly adds that Pender Financial's willingness to fund the company is further evidence of its current profitability and future potential.

Looking back, looking ahead

Ascher is reluctant to derive any lessons from ActiveState's history. "Looking back," he says, "you can see things that were good ideas or bad ideas, but that's hindsight, and it's very hard to know if you got lucky or unlucky. So I don't have a particular set of pearls of wisdom that I can share."

Yet he attributes at least some of ActiveState's survival to its employees. "The biggest thing that ActiveState has going for it," he says, "is staff that cared about the company and developed a strong degree of ownership of the company. And the more we've encouraged the staff to take responsibility and see what they could do for the company and vice versa, the better we've done."

Overall, Ascher seems proud of ActiveState's history. Referring specifically to some layoffs in the first years of the millennium, he says, "Certainly, it wasn't a lot of fun, but from a business-corporate point of view, the thing is that the company did survive and did manage to pull off an acquisition that was good for the investors."

The challenge now, Ascher says, is to prove that the new ActiveState can continue to build on the foundation established by earlier incarnations. Now, he says, "The onus is on ActiveState to show to our customers and our community that the spinout is going to be good for them." He encourages them "to keep an eye on us and see how it comes out."

Bruce Byfield is a course designer and instructor, and a computer journalist who writes regularly for NewsForge, Linux.com, and IT Manager's Journal.

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