IT Factory Dissolves In Face Of Tough Market, Overexpansion

IT Factory, a company that made its name spanning the e-mail realms of Lotus Domino and Microsoft Exchange, is breaking apart, former company executives confirmed.

Citing a particularly tough third quarter, the company is selling assets and consolidated what remains of its technology business in Copenhagen, former CEO Lars Johansen confirmed.

Boston-based IT Factory was privately held, with investments from such Danish companies as Bank Invest and Uni-Vest. On Dec. 11, 2M Invest, a venture capital firm specializing in IT, invested about $1.6 million in the company.

Johansen said he is helping the IT Factory holding company sell off different pieces of the business and that companies that had been acquired in the past two years are negotiating to get their businesses back. The former IT Factory board, which included former Lotus Development president Jeff Papows, has been disbanded.

IT Factory's London operations were sold to a local group, and the Dutch operation is under negotiation, Johansen said. "All of these service organizations are being sold off and will become IT Factory partners," he said.

Last week, the company said it appointed Stein Bagger as new CEO, operating out of Denmark.

IT Factory scored a lot of ink while acquiring eight companies in the past two years, including Solutions By Design in April 2000, ECMS in April 2001, and Synergistics the following month. At its height, the company employed 425 people. The company laid off 100 employees last July in an effort to remove redundancies.

The Synergistics deal was particularly "challenging" company sources told CRN. Cincinnati-based Synergistic specialized in knowledge management tools, but "this was an acquisition that stopped performing once it was acquired," said one IT Factory source.

Johansen said ECMS, a Columbia, S.C.-based ISV specializing in Microsoft Exchange tools, is negotiating with IT Factory to get its business back. ITF Development Center, an Exchange tool, was bundled with a Microsoft SDK for Exchange last year. ECMS executives could not be reached for comment.

IT Factory also fell victim to drastically curtailed IT spending in its third quarter, Johansen said. The year started off fine for the company. "We had as much revenue in first half of this year as all of last year. . . . Business was going well until the third quarter," Johansen said.

The Sept. 11 terrorist attacks exacerbated an already bad situation for that quarter. After the attacks, two large insurance company clients of IT Factory deferred their planned projects until next year, Johansen said.

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