IT Factory Restructures

Lotus, Microsoft partner forced to sell off North American assets.

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

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

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," Johansen said. "Were keeping the concept of the company intact—there will still be a strong technology company—but were eliminating a lot of the overhead."

A former IT Factory employee who was just laid off was less sanguine about the companys fortunes. "IT Factorys done; its totally imploded," said the ex-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."

Officials at Microsoft, of Redmond, Wash., and Lotus, of Cambridge, Mass., seemed surprised by the news. Lotus officials were not prepared to comment on IT Factorys restructuring.

Chris Baker, lead product manager for Exchange, said Microsoft would see what it could salvage from its relationship with IT Factory. "We will be talking with IT Factory to explore and understand the impact to Exchange customers and iron out an appropriate transition to best serve the needs of our mutual customers," Baker said.

Trouble was evident at the company last month when it was twice late in meeting its payroll while awaiting new funding, according to internal company memos posted to a Web site that tracks IT company failures and an employee who asked to remain anonymous.

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.

Johansen said that only about 10 to 12 employees worldwide were laid off, although others at IT Factory said the number was much larger. The company also closed its European headquarters in London and several other satellite offices.

Officials remaining with the company blamed the restructuring on the Sept. 11 terror attacks and "an unfortunate acquisition in the USA." They did not specify whether they were referring to IT Factorys purchase of knowledge management developer Synergistics Inc. or Exchange application developer Enterprise Communications and Messaging Solutions.

Many of the companies IT Factory acquired over the last few years to build its U.S. business—such as Synergistics and ECMS—may revert to their original names, although some of the management at those companies has changed since they were first acquired.