IT Factory Restructures

Prominent developer of tools for the messaging and collaboration platforms of both Lotus and Microsoft is restructuring and sent its CEO packing.

IT Factory Inc., one of the most prominent business partners and developers for both Lotus Software and Microsoft Corp. has undergone a financial restructuring that has forced it to sell off its North American assets.

The financially troubled software and services company, best known for its Lotus Domino and Microsoft Exchange application development toolkits , will revert to a 40-person strong application development company based in Denmark, officials said in interviews today. Its North American offices will be spun off to local management, forming services companies that will resell and service IT Factory software.

A formal announcement is expected next week.

As a result of the restructuring, IT Factory founder and CEO Lars Munch Johansen has stepped down and will assume no further role with the company.

"We began work on this two months ago," said Johansen. "Were keeping the concept of the company intact—there will still be a strong technology company—but were eliminating a lot of the overhead. Each one of the pieces that will remain is a profitable business."

Trouble was evident at the Boston-based company last month when it was twice late in meeting its payroll a while awaiting new funding, according to internal company memos posted to a Web site that tracks IT company failures.

Its assets have now been transferred to a single holding company in Denmark, 2M Invest A/S. All other investors have pulled out. Johansen said he didnt know who would head the company now, but said his parting with IT Factory was amicable.

"I have a huge interest that they succeed," he said. "I spent the best five years of my life building the largest [Lotus] Notes [partner] company in the world."

Johansen said that only about 10-12 employees worldwide were laid off as the result of the restructuring. He said the company has also closed its London headquarters and several other satellite offices worldwide.

A just-laid off employee was less sanguine about the companys fortunes.

"IT Factorys done, its totally imploded," said the ex-ITF employee, who spoke on condition of anonymity. "They werent making their numbers and it was becoming more and more clear that the company wasnt moving forward. So the investors pulled out. They had had enough. They didnt see a viable business there."

Johansen said the companys revenues in the first half of this year were higher than in all of last year. But the business began to slow considerably in the August-September timeframe and the company had a rough third quarter, forcing the restructuring.

Many of the companies IT Factory originally acquired over the last few years to build its U.S. business—like Solutions by Design, Synergistics and ECMS—may revert to their original names, though Johansen said the management at those companies isnt the same as it was when they were first acquired.

Employees who answered the phone at IT Factorys North American offices refused to comment, citing a confidentiality agreement.

As recently as October, IT Factory had been awarded the Best Developer Tool at MEC award at the Microsoft Exchange Conference 2001 in Orlando, Fla. The company received the award for its ITF Development Center for Microsoft, an application development toolset for Microsoft Exchange 2000 and SharePoint Portal Server.

"They put themselves in a difficult position by pissing off Lotus before they were fully in the bosom of Microsoft," said an industry observer who did not wish to be identified. "They really rubbed Lotus nose in it, but they werent big enough for Microsoft to pay too close attention to them."

Johansen disputed this assertion. "I feel we had a very strong, very good relationship with Lotus," he said. "We had good relations with Lotus and Microsoft.

The industry observer noted that IT Factory Chief Technology Officer Robert Ginsburg even appeared on stage with Microsoft exec Paul Flessner at MEC 2001 to demonstrate how to build applications for Exchange using the latest IT Factory technology.

"Microsoft was kept in the dark," said the industry observer. "They held up IT Factory as a strong business partner, when they in fact were imploding. What kind of a way is that to treat a business partner?

"I dont see any relationship between Microsoft and whatevers left of IT Factory in the future."

Both the Microsoft and Lotus businesses at IT Factory had been performing poorly, according to the former employee.

"Both sides of the house werent making their numbers. There was a decline in revenues. It just wasnt sustainable."

Microsoft and Lotus officials could not be reached for comment on IT Factorys restructuring, though spokesmen for the companies both seemed surprised when informed of the news.