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CRM software firm closes its doors

Publicly traded Xchange lays off all but one employee and shutters its doors, indicating further consolidation in the stagnating market for CRM applications.

Xchange, a publicly traded software company specializing in customer relationship management, laid off all but one employee and shuttered its doors last week, indicating further consolidation in the stagnating market for CRM applications.

The Boston-based company has shed about 75 employees over the last two months as it wound down its operations, according to Wayne Townsend, a former senior vice president of Xchange. In its prime two years ago, the company employed 450 people, he said.

Xchange sold software applications for streamlining marketing campaigns to more than 300 companies. It had been losing money for several years amid a shakeout in the business software market. The company's stock was delisted from the Nasdaq stock exchange last year.

Saddled with millions of dollars of debt and declining revenue, Xchange executives had hoped to take the company private and raise new capital after a major restructuring last year. But the financing plan recently fell through, and the company underwent a bank foreclosure, Townsend said.

About 100 companies are still using Xchange's applications, which cost an average of $500,000 to license, Townsend said. Xchange's failure could potentially leave in the lurch those customers, which include major names like Allstate, Staples and Fidelity, according to Forrester analyst Eric Schmitt.

Townsend said that more than 20 major companies are interested in buying Xchange's assets, maintaining its products and supporting its customers.

"I want to stress that we are concerned about our customers and we're trying to make this process as painless as possible for them," said Townsend.

The auction for Xchange's assets is scheduled for March 11, Townsend said. Likely buyers include rival firms Chordiant Software, DoubleClick and Unica, Schmitt said.

The market has been under consolidation amid a protracted downturn in the business software industry. Many software companies that focused on a particular segment of the market, such as marketing campaign applications, are being absorbed by bigger companies. PeopleSoft, SAS, NCR Teradata and DoubleClick have all acquired ailing CRM software firms, some of them Xchange rivals, or their assets.

Townsend expects more consolidation, whittling down the 40 or so remaining rivals to two or three major competitors. Likely survivors include SAS, Unica, Epiphany and NCR Teradata, Townsend said.

Forrester's Schmitt sees the consolidation as coup for software companies like Siebel Systems, PeopleSoft, Oracle and Chordiant, which sell marketing campaign software as part of broader collections of CRM products. These companies "will now point to Xchange's failure as another reason to single-source all CRM apps," he said.