Zend Technologies: Open-source orphan no more

PHP Hypertext Preprocessor is a server-side scripting language. Like Linux, PHP uses open source code, allowing its practitioners to mold it to their own needs. PHP can be used to program dynamic websites, similarly to Microsoft’s (Nasdaq:MSFT) ASP and Macromedia’s (Nasdaq:MACR) (ColdFusion).

One of the architects of PHP 3 was another Israeli golden boy, Zeev Suraski. In 1998, while a student at the Technion - Israel Institute of Technology, he decided an earlier PHP version needed an overhaul.

“I wasn’t thinking about money at the time,” he says. “There is much more openness in academe to Linux and other open-sources, and students often do programming for free.”

After PHP 3 succeeded beyond all expectations, requests began coming in from PHP users for missing applications. In 1999, PHP was recognized for commercial use, which requires higher standards.

So Suraski decided to found Zend Technologies, which would develop an infrastructure for PHP users, and actually try to make money from open-source. Suraski founded Zend with Andi Gutmans, who had helped design the later PHP versions.

The reason Suraski did not found the company earlier was that he wasn’t especially enchanted with the idea of providing software for free or providing customer support services. But the moment it became apparent that the market needed additional PHP development tools, it was a whole other ballgame.

Suraski says PHP’s advantage over ASP is that it is not affiliated with a particular operating system. This also helps handle many servers smoothly. PHP’s main disadvantage, besides lacking a strong parent like ASP, is related to its infrastructure. “Microsoft has very strong tools and support,” says Suraski. “A programmer can more easily use ASP without seeing even one line of source code, because he has development tools. PHP is a combination of lines of source code and Zend’s development tools.”

Using the Adobe package

Zend Technologies president and CEO Doron Gerstel says 3 million websites now use PHP, and there are 75,000 downloads a month for the software. The PHP user community is estimated at 400,000.

Gerstel says Israeli programmers are largely unaware of PHP, for a couple of reasons. First, organization IT managers tend to be conservative. Second, the attitude toward open-source is much more accepting in countries like Germany and Japan. “The concept of a programmers community is undeveloped in Israel. In this sort of vacuum, Microsoft has a major advantage,” says Gerstel.

Surasky adds, “Microsoft took on the Hebrew language and provides very strong support. PHP is largely identified with Linux, and the Linux community in Israel is quite small. It is therefore harder to generate awareness of PHP in Israel.”

Zend directs its strategic efforts toward PHP support and tightening the PHP-Zend relationship by selling open-source software and penetrating the software enterprise market through partnerships.

Zend began sales a year ago through its website only, without establishing a marketing and sales staff. 1,400 installation packages have been sold to date for $1.3 million. Zend has also appointed distributors in Japan and South Korea.

Zend’s most important strategic partnership was signed with Adobe, which will include Zend’s development tools on its new GoLive 6 software, under the Zend brand name, as well as paying for it in cash.

Gerstel says, “Here we have a major software company strongly adopting the technology. Adobe not only signed an OEM with Zend, but is using the Zend brand name. We preferred to be paid in cash for the deal, without reference to future sales. Future sales will generate cash through resellers. For us, the deal is the first sign of similar deals to come, with higher integration levels.

“It is much easier to reach the market through resellers. You benefit from all their marketing strengths for their products, and since they don’t hide the fact that you are a part of the package, you benefit twice over.”

Gerstel attributes great importance to the fact that Adobe will promote the Zend brand. “Reaching a lead position is more important than the size of the deal,” he says. “Our brand will not be diluted by the Adobe deal. I now know that companies the size of Adobe treat you differently when they pay for something. Start-up entrepreneurs claim they would do anything to be included in a package of a company like Adobe, even do it for free. We don’t do things gratis.”

Zend currently has 25 employees. Former Elron Software CEO Dr. Kobi Ben-Zvi is VP business development. Shareholders include Walden Israel and Shrem Fudim Kelner Technologies, which was an early investor in the company. Zend is in the process of raising $7.5 million.

Published by Israel's Business Arena on 27 February 2002