Forbes magazine founder Bertie Charles Forbes once famously said, "If you don't drive your business, you'll be driven out of business." Indeed, many small and medium-sized businesses have floundered not because they offer a poor product or service, but because they're eventually unable to manage their business processes well enough to flourish in often highly competitive industries.

Forbes magazine founder Bertie Charles Forbes once famously said, “If you don’t drive your business, you’ll be driven out of business.” Indeed, many small and medium-sized businesses have floundered not because they offer a poor product or service, but because they’re eventually unable to manage their business processes well enough to flourish in often highly competitive industries.

Over the past forty years, the rise of computing and information technology has yielded helpful solutions, making key operations such as transactions, relationship management, and enterprise resource planning easier. More recently, the Internet’s evolved into a worldwide communications platform, offering new sales channels, marketing opportunities, and business management opportunities never before available. Computing makes for competing, but that’s both a blessing and a curse. Today’s businesses must simultaneously deploy IT to stay abreast of their competition and manage the broad new array of opportunities made available to them due to the emergence of the World Wide Web.

Not surprisingly, enterprise software is a lucrative market saturated by thousands of smaller companies, and long dominated by firmly entrenched colossals, such as Intuit, IBM, NCR, and Microsoft, just to name a few. Any company entering this space must differentiate itself to stand out from the pack.

Figure One: The CORESense point-of-sale (POS) system interface

One of the most effective strategies to break into a market is to both lower the cost of entry and offer new and appealing services based on rapidly evolving marketplace environments. One company that’s taken such a cue and ran with it is CORESense, Inc., located on the Web at http://www.coresense.com.

Founded in 2000 and headquartered in Saratoga Springs, New York, CORESense offers a Web-based product line based entirely on the so-called “LAMP” (Linux, Apache, MySQL, and PHP) platform, providing businesses with a low-cost yet complete solution for the administration of key business processes, including e-commerce and Web storefront management, product and inventory management, back office operations, multi-channel sales support, and customer relationship management. Already boasting several well-known clients — John Deere, PGA.com, and 3balls.com, the latter one of eBay’s largest sporting goods and golfing supplies retailers — and having just closed a Series A round of venture capital funding, CORESense is carving its own segment out of what’s long been heralded as an exceedingly cutthroat business sector.

For this installment of “Out in the Open,” Linux Magazine spoke with CORESense CEO Jason Jacobs and co-founder and Director of Technology Development Richard Gabriel to discuss both the business and technical reasons underlying their decision to depend on Open Source software. In light of the company’s recent infusion of venture capital, Linux Magazine also spoke with Robert Dennen Jr., Managing Director for CORESense investor Enhanced Capital Partners, LLC, who offered some valuable insight into evaluating an investment candidate and how the emergence of Open Source technologies coupled with evolving business strategies has changed the evaluation process.

Making Cents with CORESense

When asked about the decision to base their product line on Open Source technologies, CEO Jacobs said, “We’re targeting markets that need Fortune 500 features, but can’t afford a Fortune 500 price tag. Because we built our applications with open source tools, we can only charge our clients for the application layer that we provide. It’s just fewer people in the supply chain with their hands in the till. In addition, we find that open source tools are evolving much more quickly than proprietary tools, so it allows us to create new features at a more rapid pace.”

CORESense’s web-based product line targets both small and medium-sized businesses, and is available to customers on both a licensed and hosted basis. CORESense’s Coresense Small Business retail store management software, referred to as CoresenseSB, offers a turn-key solution for small business operations, including multi-channel sales (specifically point-of-sale, web, eBay, and telephone sales) through a unified interface. CORESense’s second flagship product, Coresense Integrated Enterprise (CoresenseIE), offers everything included in CoresenseSB, but is better suited to the larger enterprise, as it can integrate with legacy systems and can plug into third-party applications via EDI, XML, email, and FTP.

In addition, the company offers a variation of their small business product, dubbed CoresenseSB for eBay. According to Jacobs, eBay’s enormous influence as an online marketplace has opened new routes for organizations interested in streamlining their inventory management process. He says that the idea to build a product based on the eBay platform began percolating soon after they were contacted by 3balls.com.

“[3balls.com] was looking for a solution that would run a robust e-commerce site and manage their high volume of retail inventory. One technique to keep inventory low is to closely manage product lifecycles. Most small retailers do that by putting things in a backroom and waiting for their sidewalk sale or by marking [merchandise] down and putting it on a discount rack. However, by liquidating through eBay, you’re actually creating a very sophisticated retail strategy. One [result] is reduced inventory. The other is that you’re out there in the marketplace: after a bidder wins an auction, he or she actually goes to your web site to check out. So, they not only win the auction, they buy a few extra things before they check out. Average [3balls.com] eBay retail sales were ticking up by 20%. So that was very validating in the end.

“But the best reason to provide Coresense SB for eBay is that we’re introducing [small retailers] to eBay as a liquidation solution that they should actively manage, because in the end, it’s going to have a very significant bottom-line impact for them. We see this as a real advantage as we try to go out and capture market share of two million-strong retail businesses.”

CORESense’s Technology Infrastructure

To learn more about CORESense’s IT initiatives, we sat down with CORESense co-founder and Directory of Information Technology Richard Gabriel.

LINUX MAGAZINE: We understand that you’re a co-founder of CORESense. Given your unique insight into the company’s inception, was the decision to use open source software a key factor from the very beginning, or was the decision made after a survey of the technology landscape?

RICHARD GABRIEL: The software evolved out of business needs, not academic ideals. Because our product was intended for small- to mid-sized organizations, cost, scalability, and reliability were key factors in our technology decision. Visual Basic, Perl, PHP, and Cold Fusion were considered, along with PostgreSQL, Oracle, and MySQL. I had worked with all of them, but only the combination of PHP, MySQL, and Linux offered the low-cost, powerful tools that we needed. Open source has been paramount during our growth and development, and it allows us to compete with the big players in the retail market.

LM: How many employees work in the CORESense IT staff?

GABRIEL: About fifteen engineers, integrators, administrators, and IT business consultants make up the IT staff.

LM: Did the IT staff show any reluctance to using open source software as the core platform for the company’s products?

GABRIEL: Open source has been at the heart of our product, development, and methodology from the beginning. It’s part of our mission, and we believe it to be the wave of the future. Since we’ve proven its power and since it’s gaining momentum as a mainstream platform, we’ve only had enthusiasm from our staff.

LM: Do any members of the CORESense IT staff participate in open source projects?

GABRIEL: Many members of our staff follow open source projects religiously and contribute to message boards. However, with all the excitement around CORESense, they usually spend a lot of their personal time furthering the improvement of our products.

LM: Specifically, which open source technologies are used by CORESense?

GABRIEL: Our core product offerings are built around PHP 4.3.4, MySQL 4.0.18, Apache 1.3.28, and RedHat 9.0, and are enhanced with Mod_SSL 2.8.15, Mcrypt 2.5.7, Openssl 0.9.7c, and cURL 7.9.8.

For code development and management, we depend upon CVS 1.11.2, CVSWeb, Webmin 1.3, Nedit 5.3, phpMyAdmin 2.5.5, and phpBugTracker. (For more information on php-BugTracker, see the sidebar “Keeping Track with phpBug-Tracker.”)

Some of our network-related applications include PURE FTPd 1.0.15, Cronolog 1.6.2, and LVS/keepalived.

LM: Has [CORESense] purchased support or consulting services from Zend, MySQL AB, or another firm? Has the CORESense IT team standardized on any specific development tools?

GABRIEL: CORESense is registered with MySQL AB and has purchased commercial licenses for our systems. We also utilize Zend’s Optimizer, Encoder, and Studio products.

Regarding tools, our IT staff is currently reviewing several development environments including phpEd (http://www.nusphere.com), nedit (http://www.nedit.org), Zend Studio (http://www.zend.com), Eclipse (http://www.eclipse.org), and others.

LM:Which operating systems are used by CORESense’s IT staff? Are Open Source products used for internal purposes at CORESense? For example, what does CORESense use for email/calendaring? For word processing? Helpdesk support?

GABRIEL: We run RedHat Linux 9.0 and Windows XP Professional. Internally, most IT staff uses products such as Evolution and OpenOffice. However, other departments may employ Microsoft OfficeWord, Excel, PowerPoint, Outlook — when needed. We use an ASP-based time tracking and helpdesk application.

LM: What specific challenges has the CORESense team encountered when building such complex products using open source technologies?

GABRIEL: Our biggest challenge used to be overcoming customer skepticism, as is always the case with new technologies. However, since IBM and others have embraced open source as a viable and powerful platform, customers are much more comfortable with it. The technology itself hasn’t been difficult to use — no compatibility or integration challenges there. By its very nature, open source lends itself to smooth deployment and management.

LM: How have you deployed open source software to perform at the enterprise level? For example, have you implemented redundancy, replication, backups, and the like?

GABRIEL: For backup, we’ve written a geographically redundant backup system based on PHP. We use LVS and MySQL for database replication and distributed queries. Intelligent load balancing and failover comes via LVS, Keepalived, and Apache. For hardware, we depend on RAID-10, redundant power, hard drives, and circuits, and Ultra-320 SCSI. We have network redundancy provided with BGP and direct connections to major ISPs like AOL, CompuServ, and PSINET.

LM: You mention that database replication is used. Is this done specifically using MySQL’s replication feature?

GABRIEL: We’ve been using MySQL’s own replication feature ever since it solidified in MySQL 4.0.12. We find that it really works great. It allows for load balancing for data reads and it provides a level of database redundancy that you don’t find much in the small- to mid-sized retail market.

LM: PHP 5 is scheduled for release within the next few months. Given the considerable enhancements that you’ve written, particularly in PHP’s OOP capabilities, has CORESense started exploring the possibility of an upgrade to version 5 in the coming months?

GABRIEL: We’ve been monitoring and researching PHP 5. We’ll begin using it in our development and testing environment when it’s released, but I expect that it will be some time before we upgrade it on production machines. As with any major release, we have to thoroughly test our software and integrations to make sure everything is compatible.

Due Diligence

In early February 2004, CORESense closed a Series A financing round for an undisclosed sum with venture capital firm Enhanced Capital Partners (ECP) (http://www.enhancedcapital.net). Interested in learning more about how an investment firm goes about evaluating the viability of a company that’s based its offerings around open source software, we sat down with Robert Dennen, Jr., managing director of Enhanced Capital Partners’ New York office.

Asked what factors come into play when considering the viability of a technology company, he outlined six distinct factors:

1. SYSTEM ARCHITECTURE AND PLATFORM. In the early stages, you need to know if the company has a foundation upon which to build and grow. Can it scale? Can it be extended? Is it modular? Is it configurable?

2. OPPORTUNITY. Is the company addressing a large market opportunity?

3. SUITABILITY. Is the company meeting real customer needs and pain points?

4. VALUE. Can the company’s product deliver a demonstrable ROI to the customer in the short term (within 18 months and preferably less than 12 months)?

5. COST OF SALES. Is there in place or can you implement a sales strategy that is appropriate for the per customer revenue generated?

6. GROWTH. Does the company have a basis for accelerating growth?

Based on ECP’s evaluation, CORESense met all of these criteria. Dennen continued, noting, “E-commerce has been growing year over year at a very robust pace and is predicted to continue to grow at a 19 percent compound annual growth rate. This is being fueled by retailers of all sizes that want to sell their product through as many channels as they can. The retailers who aren’t selling through multiple channels are looking for a solution, while those that are selling through multiple channels need a system that enables them to drive more volume with a more efficient process. CORESense provides a cost effective solution to both kinds of buyers looking for a solution.”

Figure Two: Managing numerous sales channels with CORESense products

It’s hardly a secret that IT staffs the world over have recognized the technical merits of open source software, but how does the venture capital community perceive this shift, and how does it affect the due diligence process?

Bob Dennen offers his thoughts: “There is a persistent drive in all aspects of business to do more with less. If you’re able to provide a competitive software solution at little or no cost, it will be given serious consideration. Related to this is the evolution of the IT function and the CIO. For a long time, IT spending was an imperative to gain competitive advantage, then to reduce cost in other departments and make other departments more efficient. Now CEOs are still expecting CIOs to do that, but also to better manage their own budgets. The due diligence process is no different for [open source] software products than for others, whereas before, there was a market acceptance risk.”

Retail Redefined

These days, every company seems to have a catchy tagline. CORESense’s is particularly easy to remember: “Retail Redefined.” Only time will tell whether it’s prescient, but the company seems to have done quite well plotting its own future thus far.

Jacobs had this to say about the company’s once-ridiculed choice of basing their products on open source solutions, “When we endeavored to build this as a commercial project, a lot of the old school people came to me and said, ‘You’re not thinking strategically… You can’t hang your hat on Linux and open source.’ We could have been wrong, but we weren’t. As a result, we have a lot of credibility and we’re gaining a strategic advantage over those who chose a proprietary tool set, because in a lot of those instances with the proprietary tool sets, that proprietary tool maker is also competing with you in those markets.

“We’re not running into that. We don’t have somebody who’s part of our supply chain also competing with us.”

Keeping Track with phpBugTracker

According to co-founder Richard Gabriel, CORESense tracks software bugs and features via a combination of a custom developed system and the popular open source project called phpBugTracker (http://phpbt.sourceforge.net).

Since its first release by creator Benjamin Curtis in December 2000, phpBugTracker has been downloaded almost 25,000 times. Built using the PHP scripting language, the PEAR::DB database abstraction layer, and the popular Smarty templating engine, phpBugTracker supports MySQL, PostgreSQL, and Oracle as backends to its data store.

phpBugTracker can host both multiple users and multiple projects, allowing for simultaneous tracking and versioning of bugs across a number of different applications.

Jason Gilmore is the author of the forthcoming book, Beginning PHP 5 and MySQL: From Novice to Professional. Jon Shoberg is an avid developer of Perl, PHP, and Java applications for the Fisher College of Business at Ohio State University. If you’d like to be considered for an upcoming “Out in the Open,” please send email to outintheopen@linux-mag.com.

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