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Another one bites the dust. LaGarde has filed for Chapter 11 bankrupcy protection — months after launching Phoenix, its new software-as-a-service platform. This is another example of the market consolidation that is underway among ecommerce technology vendors. Others examples include:

  • Mercado, which sold to Omniture last month for a mere $6 million, after running out of cash.
  • Fry, Inc., which sold to MICROS Retail in August for $31 million plus assumption of debt.
  • n2N Commerce, which closed its doors last holiday after a spectacular failure to launch.
  • Accretive Commerce, which sold to GSI last August, before its second anniversary.

Make no mistake: consolidation will only accelerate under current market conditions. Software-as-a-service ecommerce vendors could be especially vulnerable. SaaS models are supposed to have lower operating costs that can be passed onto clients. However, retailers everywhere demand constant innovation that tailors a unique shopping experience. Maintaining this innovation raises the vendor’s internal costs.

Most SaaS ecommerce vendors have found profits elusive. Many need more capital to sustain operations. Banks aren’t lending; and VCs aren’t investing. So some SaaS providers like LaGarde are seeking a buyer. According to Internet Retailer, LaGarde says it’s in talks with Dydacomp (maker of “Mail Order Manager”).

Dydacomp isn’t saying. They could wait for LaGarde to reduce operations to a skeleton crew before they buy the assets in a fire sale (like Omniture did with Mercado last month). Dydacomp may just pass on the purchase altogether. In that case, LaGarde could go the way of n2N Commerce; and suspend operations.

When a SaaS provider suspends platform operations, the floor beneath its clients disappears. The investment in the company and its technology is a loss. This forces an immediate decision upon clients that moves them onto other technology with haste, at any cost.

Given these market conditions, it is even more important that retailers find objective third party guidance during the vendor selection process. Tools and templates are efficient, but reveal only what vendors are willing to disclose. Bringing unbiased subject matter expertise to the table will save you time, money and heartache down the road.

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