Why Zaplet Zigged to Corporate America

Seeing its Net clients crumble, the young software company is quickly shifting its focus to more established entities

By Jim Kerstetter

There's nothing like a dot-com meltdown to get a young company to revamp its business model. Just one year ago, Zaplet was selling software that created private discussion groups on Web portals like ZDNet. All a reader had to do was send an e-mail to friends with a "Zaplet" from the ZDNet site attached. As soon as the e-mail was opened, they were in their own, instantly created chat room.

Back then, company founders David Roberts and Brian Axe say, they were more concerned about working with Net publishers in order to prove their technology than selling to Corporate America. But when the Net bubble burst, Roberts and Axe realized they had better find another kind of customer -- pronto. "Thankfully, we were never entirely committed to one market," says Roberts.

As quick as dot-coms went kaput, Zaplet, in Redwood Shores, Calif., shifted direction. Today, business-software customers are squarely in the sights of Zaplet CEO Alan Baratz. Best known as a former vice-president at Sun Microsystems, Baratz joined the company in June, 2000, with one goal: To turn this neat little technology company into an enterprise-software outfit. "I could see what we could do for enterprise customers," he says.


  Zaplet now provides technology that's something like souped-up instant messaging tethered to an old-fashioned database. Open an e-mail with an attached Zaplet and, poof, a brand-new computer program instantly appears on your screen. That little program ties into other business software, but you never have to deal with the complex stuff behind the scenes. "You are actually sending an application-like thing in an e-mail," says Steve Rizzi, a vice-president at systems-integrator SAIC. Rizzi runs SAIC's Advanced Information Technology Center and is using Zaplet for workflow systems on government integration projects.

Zaplet's main business software is called AppMail. It started shipping in May and was built from scratch over the last year. The company has filed for 12 patents on its technology. Here's how AppMail works: One employee creates an AppMail-based file for something like job recruiting. Cisco Systems, for example, is working on a Zaplet-based human-resources and recruiting application. That file gets sent to other employees through e-mail. The program allows people to share recruiting information, list tasks such as interview schedules, or share important data, like a list of job candidates.

A second release of AppMail is due in October. It will improve programming hooks into back-office systems and databases, so hardcore business data will more easily zip around the corporate network in little Zaplet programs. "We see it moving from being a little jazz concert to a symphony," says Roberts, now "Chief Zaplet" at the company.


  Where will it be used? Zaplet execs see AppMail tapping into information culled from two types of software: customer-management programs, which help keep track of what customers want; and supply-chain-management programs, which help a company make sure it's getting what it needs to keep those customers happy. The markets for both are expected to grow better than 20% this year, to a combined $22 billion, according to AMR Research in Boston.

So far, Zaplet has raised $90 million in venture financing and is clawing its way into the cutthroat corporate world. It has eight enterprise customers, including four banks and Cisco. It has also received funding from Oracle. In addition, though no concrete plans have been announced, Zaplet is trading technology with customer-management software leader Siebel Systems (SEBL ).

"They're attracting significant attention, and they've got a ton of money," says Dana Gardner, an analyst at the Aberdeen Group in Boston. "That tells me they're in it for the long haul."

Zaplet also has plenty of pedigree behind that cash hoard. The lead investor is Kleiner, Perkins, Caufield & Byers partner Vinod Khosla. It has also pulled in private investors like Sun tech guru Bill Joy. Baratz says the company should be profitable by the second quarter of next year. "I don't want to be in a situation where we have to go out and get more money," he says.

Zaplet isn't the only company diving into this new kind of software, of course. IBM's Lotus (IBM ) has a collaborative tool it calls Sametime that ties into the popular Lotus Notes messaging system. Other startups, like Consilient, are taking similar approaches to the collaboration issue. And peer-to-peer-companies, such as Groove Networks, founded by Notes creator Ray Ozzie, could butt heads with Zaplet. Unlike Zaplet, they don't require a user to be connected to the network all the time. But they still solve some of the same collaborative issues.


  To get on this enterprise bandwagon, Baratz has completely revamped the 150-employee company. He's turning it from a dot-com-like culture into a business-software company. Baratz is the first to say it has been a tough transition. Out are people with dot-com expertise, in their place are people who know how to sell to Corporate America.

Baratz is, bit by bit, bringing in other seasoned execs, like George Paolini, who was vice-president for technology evangelism and marketing for Sun's Java programming language. He will join Zaplet at the end of June. "Keeping morale up during all of this has been incredibly difficult," admits Baratz.

Sounds like miles away from Zaplet's early days. Roberts and Axe first brainstormed the idea nearly three years ago during a houseboat vacation near Mount Shasta in Northern California. They then pitched the idea to Khosla, who gave them the green light and provided the bulk of the company's funding.

It was also Khosla who convinced Baratz that he was the guy to take Zaplet into the world of business computing. Baratz has a rep for bringing new technologies into the mainstream. In the late '90s, he ran the Sun division responsible for Java.

Still, Zaplet's success will hinge on its ability to make music with others, like enterprise-software companies and big integrators. Now, consulting-heavyweight Accenture is working with Zaplet. That's a good first step, but Baratz needs to do plenty more. In the post-tech-meltdown era, when customers will do business only with the tried-and-trues, he'll have to dig deep into that old Sun Rolodex and find some heavy hitters to vouch that Zaplet is more than a blip on the tech radar screen.

Kerstetter covers software for BusinessWeek

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