Could a startup beat Microsoft and Google to market with a 'cloud OS'?

A Swedish, venture-backed startup believes it can beat both Microsoft and Google in bringing a "cloud OS" product to market.

A "Cloud OS" is what Microsoft officials have described as the back-end infrastructure that will power its growing family of Live services. And -- in spite of repeated public denials that it also is working on a "Google OS" -- Google is believed to be in the throes of building its own version of a cloud OS that is being developed by former Plan 9 engineers who are now on staff at Google, I hear).

So what chance does an unknown, 15-employee startup, with a self-described mission of "empowering the world with free software," have against these kinds of software and services powerhouses?

I was more than a little skeptical when I first sat down this week with Xcerion CEO Daniel Arthursson and advisory board member Lou Perazzoli.

(A big part of the reason I agreed to meet with the company was because of Perazzoli. Microsoft historians will remember that he was a former distinguished engineer with Microsoft and one of the key architects of Windows NT. When I heard former Microsoft Chief Financial Officer John Connors also was an investor in Xcerion, that sealed the deal.)

Xcerion has developed a layer that can sit on top of a variety of browsers running on a host of different operating systems -- everything from Internet Explorer, Mozilla and (soon) Safari running on Windows, Linux and Mac OS X. (Right now, the company refers to this layer as Xcerion, but officials are looking for a shorter, easier name.)

This layer -- which Perazzoli described as being more like Windows for Workgroups, which used to reside on top of MS-DOS, than a full-fledged OS in its own right -- is a 2 MB XML-based downloadable. Once customers have downloaded this layer, plus one or more even smaller applets (word processing, spreadsheet, presentation system, etc.) developed by Xcerion and/or various third parties, they are ready to roll.

The customers' data, all of which will be stored as XML files, will reside in Xcerion's "virtual safe," which can be anything from a USB key, a hosted storage back-end, or even a storage system hosted by a corporation for its own employees' usage. Xcerion already has set up a fleet of datacenter servers (running Ubuntu Linux) that will be able to host the data, Arthursson said. Because these servers will host only the compressed XML files containing customers' information -- as opposed to entire hosted versions of Word, Excel and other programs -- they don't need as many servers as Microsoft or Google are racing to provide.

Xcerion is targeting with its offering the 90 percent of users who don’t want or need all the whiz-bang features that are in products like Microsoft Office and StarOffice, said Arthurrson. The sweet spot is the group of consumers, small businesses and enterprise users who don't want to be power users. Users will have a choice of a free, ad-supported version of its product, or one that is available for a nominal (and as-yet-undetermined) monthly subscription fee.

To me, the weakest link in Xcerion's model is the development piece. The company is providing for free as part of its offering rapid-development tools that are geared toward nonprofessional programmers. Xcerion staffers are using these tools to build an initial set of ten applets (word processor, spreadsheet, calendar, etc.). But the company is relying on third parties to provide the rest of the applets that will run in the cloud. To spur development, Xcerion is promising to provide developers with a secure, online marketplace where they will be able to sell their apps. (Xcerion has developed its own micropayments, subscription and transaction engines to support all these functions.)

The goal: Make available for download 200 to 300 free and paid applets within two years. Xcerion is planning to start private beta tests of its applets in another month.

The company is planning to launch by the end of the third quarter its entire platform.

Companies like Microsoft and Google have hundreds, if not thousands, of developers trying to build a solution like Xcerion's. They're spending millions to do so. Could an unknown startup beat them to the punch?