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B2B firm's woes hit home with clients

Financial troubles at business-to-business software maker Metiom are illustrating the ripple effect a company can have on customers that depend on its service to conduct business.

    Financial troubles at business-to-business software maker Metiom have many of its clients searching for a new technology provider or developing plans to do so should the company go out of business.

    Since the company announced last month that it cut more than 80 percent of its staff and filed for Chapter 11 bankruptcy, many of Metiom's customers have been struggling to maintain their Web presence. One client, the state of Massachusetts, expects that its online marketplace will not be operational for a time this summer as it searches for a new provider.

    New York-based Metiom makes software used to build public marketplaces that connect manufacturers and suppliers within a certain industry so they can buy and sell goods online. The company also hosts and manages marketplaces for businesses and public institutions.

    The Metiom case illustrates the vast ripple effect that one company can have on customers that depend on its service to conduct business. When companies that provide hosting services and manage software for others falter, customers are left with little time to find another company to provide them with the same type of services, making for a rough transition.

    Metiom executives said the company filed for bankruptcy to realign its business and to look for a buyer for its technology and assets. Companies seek Chapter 11 protection to prevent their creditors from seizing assets while they make arrangements to settle debts and continue operations.

    Metiom Chief Operating Officer Martin Colburn said the company is managing and supporting its customers during its realignment and search for a buyer.

    "We are fixing bugs that may occur, but we are not enhancing the product, which understandably can cause dissatisfaction with some customers," Colburn said.

    Colburn said its customers that want to go out and look for an alternative technology provider can do so if they want to, but not because Metiom is unable to provide its services.

    "We are seeing this a lot, as more and more start-ups aren't able to make it through these difficult times," Gartner analyst Karen Peterson said.

    No customers, no business
    Forrester Research analyst Laurie Orlov said privately held Metiom's inability to find more customers for its software has severely hurt the company. She also said the company has had difficulty getting additional funding, although many privately financed companies like Metiom are going through the same thing with venture capital firms.

    In Massachusetts, state officials have begun the bidding process for a new technology provider to keep its online marketplace, Multi-State Emall, afloat. Metiom and the state launched the Web site, one of the largest state online government sites in the United States at the time, in July of last year. The marketplace boasts a membership of 200 buyers and 15 suppliers.

    State government departments, as well as cities, towns and other public purchasing organizations, use Emall to buy equipment, office supplies and goods from 1,000 of the state's contracted suppliers.

    In a statement posted on the Emall site, officials warned customers that the site could not guarantee system accessibility and stability since Metiom does the hosting.

    Emall plans to use Metiom through the end of this month and will then pick new software and hosting providers during the summer, which is expected to delay the reopening for at least a month.

    The delay could have been worse had Emall officials not foreseen troubles at Metiom early on. "We felt there were problems with Metiom in November, so we started looking then," Emall director Jim Kneeland said. "As their troubles continued, I gave them a breach of contract notice."

    Some of Metiom's customers did not have the luxury of an early warning.

    Turned out the lights
    The managers of Commonfind, an online exchange for the education industry that is hosted by Metiom, said they found themselves without a service provider last month, when the software company filed for bankruptcy.

    "They turned off the system after they filed for bankruptcy," said Howard Coonley, chief operating officer of Commonfund Treasury, which managed the Commonfind site.

    Commonfind was launched in March 1999 and was working with 25 institutions, including Babson College, Smith College, Villanova University, Wellesley College and Wheaton College.

    Schools used Commonfind to connect with supplier catalogs and to purchase goods like books and classroom supplies, the company said.

    On its site, Commonfind posted a statement saying it may reopen if it can find an alternative software provider that can support the needs of its customers sufficiently.

    Indiana's government marketplace, San Diego State University, Maryland's eMaryland Marketplace and the State Government of South Australia are also customers of Metiom. None of those organizations returned phone calls and e-mails seeking comment.

    One of the company's biggest nongovernment clients is toy retailer Hasbro, which has stuck by its Metiom-built online purchasing network, though the company is putting together a contingency plan.

    "We are still rolling it out to new users and suppliers," said Scott Dever, vice president of worldwide purchasing at Hasbro. "We will continue to operate with the product while Metiom tries to fix its situation, and as long as they provide support. If they go out of business, we will have some risk."