Embattled Tarantella claims a direct hit on Citrix

Executives at Tarantella, the server-based software specialist, are thrilled. In August 2002, the company not only managed to poach a customer from its arch-rival, Citrix Systems, but also found a very vocal advocate of its technology in the president and founder of that company, New York-based application service provider (ASP) Veracicom.

The man in question, Mike Hjorleifsson, is more than willing to express not only his dissatisfaction with Citrix’s product development plans and strategic direction, but also his faith in Tarantella’s vision. “Citrix is abusing


Company name: Tarantella

HQ: Santa Cruz, California

Main activity: Connectivity and server-based application deployment software

Last full year revenues: $66.7 million

Last full year net income: -$5.7 million

Key issue: Tarantella executives claim that customer defection away from arch-rival Citrix Systems to its own products demonstrates its technology leadership. But the company continues to struggle with brand recognition, shrinking revenues and losses.




its customer base,” he claims, “but Tarantella has leading-edge technology and is dedicated to working with service providers like Veracicom.”

Despite Hjorleifsson’s outburst, however, there is little evidence to suggest that Tarantella has scored a major victory over Citrix. Both companies make software that allows users to access applications running on central servers via a common web browser interface, regardless of what type of client device they are using or their location. But Citrix dominates that market with an 80% market share, according to IT market research company Giga Information Group.

Furthermore, says David Friedlander, an analyst at Giga, “Tarantella continues in its uphill battle for brand recognition and market share.” The company was formed in 2001, when Unix-on-Intel software vendor Santa Cruz Operation (SCO) sold the bulk of its assets to open source software company Caldera, retaining only its Tarantella division, and changing its name to reflect this restructuring. Supporting the change in direction, Doug Michels, SCO founder and Tarantella CEO, and several of the SCO management team stayed put. (In a confusing move, Caldera changed its name back to SCO in August 2002 to underline its commitment to the Linux operating system.)

This separation has enabled the company to form partnerships with major hardware vendors Sun Microsystems and IBM (with whom SCO formerly competed at the low-end of the Unix market), but its financial situation looks “increasingly frail,” according to Friedlander. “Although Tarantella has a solid alternative product to Citrix MetaFrame, its current financial situation makes it a risky bet for enterprise customers,” he says. In the nine months to 30 June 2002, Tarantella revenues crashed to just $10.8 million from $62.6 million in the year-earlier period.

So why does Hjorleifsson at Veracicom express such faith in Tarantella? First, he claims that Citrix lacks commitment to ASP customers. But there is good reason for this. ASP customers are not a major source of revenues for Citrix or indeed for Tarantella, since most IT decision-makers have resolutely rejected the ASP model. In 2001, for example, Citrix derived less than 5% of its $592 million revenues from ASPs, prompting the company to subsume its iLicense programme for ASPs back into its enterprise sales organisation.

Furthermore, says Hjorleifsson, Tarantella has made more innovations in the server-based computing space, and in particular, supports the Linux open source operating system. Veracicom, he claims, has lost significant sales to the education market because of Citrix’s failure to embrace Linux.

Larry Ritter, senior director of product management at Citrix, argues that there is little reason — or demand — for Citrix to port its MetaFrame product to Linux. “MetaFrame customers deploy the technology to enable employees to access personal productivity applications. That style of application is not widely deployed on Linux servers, where you’ll more commonly find Linux web server software or file server software. If user productivity applications become widely available on the Linux platform, then we may reconsider, but to date, we haven’t seen a business case for doing so,” says Ritter.

For his part, Hjorleifsson seems unconcerned about Tarantella’s financial uncertancies. Nevertheless, he admits, he made his decision to swap to Tarantella after “lengthy discussions” with Tarantella’s management.

“If the technology works, and the provider can promote, develop and deploy its technology efficiently, then I couldn’t care less where it comes from,” he concludes.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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