A company known by few outside the Linux community is planning to spin off a division that will try to take on Microsoft and Sun Microsystems.

Applix, which chiefly sells server software, is spinning off a division that makes productivity software that competes with Microsoft Office to form a company called VistaSource, according to Bernie Thompson, president of the new division.

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VistaSource's software, which runs on Linux and several other operating systems, is aimed squarely at Microsoft, the office software leader, and Sun Microsystems, which has its own office software for Linux and other operating systems.

All three companies have the same goal: to win over application service providers (ASPs), companies that rent, rather than sell, software to customers. Although barely a blip on the radar now, the software rental model, proponents say, will become one of the dominant methods for small and medium-sized businesses to acquire software.

And because no company has obtained a hammerlock on the business, it may just be possible for a start-up to establish a pioneering market share.

Applix gave VistaSource a $6 million investment, but the subsidiary will seek its own venture funding and plans an initial public offering at the end of 2000 or in early 2001, Thompson said.

"It's not so much for the cash as for gaining momentum and trying to bring on strategic partners," he said.

VistaSource will become the latest company to try to figure out how to take advantage of the growing number of ASPs--companies that house software on central servers, allowing people to tap in from anywhere across the Internet for a fee instead of buying the software for their desktop computers or company networks.

Early stages of the ASP model have been proven with basic applications such as Yahoo's calendar and email functions, but Applix, Sun, Microsoft and many other software companies also are trying to prepare for the possibility that more complex programs will move from desktop computers to data centers as well.

VistaSource faces stiff competition from Sun, which already offers its StarOffice suite for Linux and for several other operating systems as a free download. Sun also is planning to offer a version of the software, StarPortal, for ASPs.

Even worse for Applix, though, is that Sun can afford to lose money on the product because it sees StarPortal chiefly as a means through which it can sell ASPs more of its own hardware.

Microsoft is another problem for VistaSource. The company plans to make Microsoft Office, the dominant application suite, available over the Web.

And Corel, although financially struggling, has a major effort afoot to sell office software for Linux.

VistaSource also sells "boxed" versions of its software. The company has released version 5 of its boxed software, ApplixWare, which costs $99. With the new version, Applix has taken a step toward the "open-source" programming model that underlies Linux.

With Linux and any other software covered by the General Public License, anyone can see, modify and redistribute the software's original programming instructions. With ApplixWare, VistaSource offers a "source access" license that lets people see and modify the software but not redistribute it. For a fee, customers can get different license terms that allow them more liberty, Thompson said.

The ASP version of the company's software, called Applix Anyware, will be licensed to service providers with a flexible pricing model, Thompson said.

The ASP version is a two-part product that has a component that runs on a server and a much smaller, 850K version that runs in a Java-enabled Web browser, Thompson said. Though Java proved too sluggish for a full-fledged office suite, hardware is powerful enough to run part of the client software.

Thompson came to Applix by way of Cosource, an open-source programming site Applix acquired shortly after Cosource launched. The site offers a way for companies to find open-source programmers, charging a percentage of the fee paid for programming jobs.

Fourteen jobs have been completed through Cosource, Thompson said. The most lucrative so far was from Lineo, which offered $1,000 for a task it needed completed.

Cosource will show that VistaSource is "open-source savvy," Thompson said. He added, however, that "as a total proportion of our business revenue, it's going to remain small."

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