ProvisionSoft at Half-Staff

ProvisionSoft Inc. executives say the company is undergoing a major layoff today -- cutting its headcount by about half -- as its parent company, CMGI Inc., attempts to find a buyer for the struggling storage resource management (SRM) software firm.

Mark Reid, president and CTO of ProvisionSoft, says about half of the company's 40 remaining employees will be let go today. The layoffs "keep expenses in line with current business conditions," he says.

The Andover, Mass., company has already cut its headcount substantially in recent months. In July 2002, ProvisionSoft had 76 employees (see Startup Puts SANs on Cruise Control).

The cutbacks come as CMGI, a technology and e-commerce incubator and the majority owner of ProvisionSoft, is actively seeking to sell the unit. In its 10-Q filing with the Securities and Exchange Commission (SEC) on March 17, CMGI said it plans to divest all of its interests in ProvisionSoft "in the near future" and noted that $1.4 million in R&D expenses on its balance sheet for the quarter ended Jan. 31, 2003, were attributable to ProvisionSoft. CMGI representatives did not return phone calls requesting additional information.

ProvisionSoft was founded in April 2000 as CMGion, which was a joint venture of CMGI, Novell Inc. (Nasdaq: NOVL), Sun Microsystems Inc. (Nasdaq: SUNW), and Compaq. CMGI held a majority stake; Novell, Sun, and Compaq each invested $20 million. The company was supposed to develop Internet caching software and services for service providers.Then, in February 2001, CMGion's investors scrapped its original business model and ousted the management team. It was renamed ProvisionSoft, and Joe Maloney, a former Microsoft Corp. (Nasdaq: MSFT) marketing manager, was hired as president and CEO.

In October 2002, Maloney and VP of marketing Michael Gross departed the company, and Reid was tapped to run the show (see ProvisionSoft Founders Cut Loose).

The SRM sector -- once believed to be one of the major growth opportunities in the storage market -- has been hit hard of late, with several players exiting this arena as they've labored to sell their products.

BMC Software Inc. (NYSE: BMC) unexpectedly decided to cease development of its Patrol Storage Manager (PSM) product last month. In January StorageNetworks Inc. (Nasdaq: STOR), the former storage service provider turned software supplier, cut half of its employees and terminated its SRM development.

Meanwhile, two-year-old SRM startup Arkivio Inc. has had difficulty landing customers and appears to be running low on funds (see BMC Folds Storage Unit, StorageNetworks Hacks Self in Half, StorageNetworks Seeks Buyer, and Arkivio Runs Out of Silver).Consolidation in this sector is also well underway. EMC Corp. (NYSE: EMC) acquired Prisa for $20 million last September, and IBM Corp. (NYSE: IBM) snapped up TrelliSoft in August 2002; the financial details of that deal were not disclosed (see EMC to Acquire Prisa, Finally and IBM Snaps Up TrelliSoft).

Todd Spangler, US Editor, Byte and Switch