Ooyala's growth

Meanwhile, the explosive growth of online video and smart-phones also is boosting some startups. Ooyala, an online video platform company in Mountain View less than 2 years old, is on pace to become profitable in 2009, said CEO Bismarck Lepe. He attributed strong recent growth to two converging factors: A broad recognition that Web sites now need strong video presentation, and the need to control cost by outsourcing the task to companies like Ooyala.

Admob, meanwhile, is said to be strengthening its position as a pioneer for delivering ads to mobile devices. While most startups have slimmed down to cope with the downturn, Admob has been raising more capital and ramped up hiring in recent months.

"Admob hit the market at the right time," said investor Richard Wong of Accel Partners.

In an increasingly Darwinian economy, Barracuda Networks, Campbell-based maker of spam and spyware filters, has used its profits recently to make acquisitions "to add technology muscle." The recession, Barracuda CEO Dean Drako said, has created a buyers' market for companies that are positioned for such growth.

Drako declined to divulge the cost of the deals — a perk of being a private company — but estimated that acquisitions would have cost twice as much in a healthy economy. Over the past six months, Drako said, there has been a marked increased in approaches by companies seeking buyers.

Barracuda and BigFix may both be described as SaaS hybrids. SaaS, which stands for software-as-a-service, includes a wide range of companies that have been gaining market share against enterprise stalwarts Oracle and SAP by delivering services on an on-demand, subscription-based basis.

As more companies are turning to SaaS alternatives as a means to hold down costs, the competition within SaaS has grown fierce.

Also getting a boost by the recession are open-source business technology companies such as Ingres, RedHat and MySQL, acquired by Sun Microsystems in 2008. Ingres, spun out of Computer Associates in 2006, has more than 300 employees. While open source was conventionally viewed as a geeky, grass-roots rebellion against the dominance of Microsoft, it increasingly is being implemented as a competitive alternative to proprietary systems from Oracle, IBM and Microsoft.

"This is such an extraordinary downturn that there's been a tremendous increase of interest in ways to cut costs and change the contracting model for software," Burkhardt said. Previously, "there was a lot of inertia in IT. The impact of the economic downturn has really blown a hole in that inertia."