Customer opportunity lost as Xuma collapses
The greater responsibility that managed service providers take on - and charge top dollar for - backfires tenfold on those customers that have to live through an MSP default.
The highest-profile collapse has been Xuma, named by its flamboyant CEO Joe Cha for an ancient Chinese war cry that means "charging horse." The company launched four years ago from Cha's apartment in San Francisco's trendy South of Market district and quickly gathered $48 million from high-profile investors such as Broadview Capital Partners, Dell Computer, ING Capital and Menlo Ventures.
But in June, Xuma sacked 125 employees and closed its doors, leaving customers such as Arcade Planet, Cannon Computer Systems, CornerHardware.com, FringeGolf, Maxim, More.com and NextMonet in the lurch.
For some, an alliance with Xuma translated into untold lost opportunities.
Xuma built a gaming site for Arcade Planet that did not scale and had to be redone, which delayed its launch. "We were four to five months late because of Xuma. And who knows, maybe we could have gotten in on the IPO window before it and venture money shut down," says Bryan Kelly, Arcade Planet's vice president of engineering. "They grabbed too many projects, tried to make too many things happen all at once, and they hurt other companies because of that."
But before Xuma wreaked havoc with its own customers instead of its competitors, the company seemed to develop just like any other MSP.
Cha started Xuma in 1997 after stints at Anderson Consulting and PricewaterhouseCoopers. His chief technology officer and co-founder was fellow Anderson consultant Jamie Lerner. At the core of the business was monitoring and provisioning software, akin to the packages that most MSPs have, by now, either purchased or developed themselves.
Neither Cha nor Lerner, nor any Xuma board member contacted for this story would agree to an interview.
Xuma's first big alliance was a provisioning deal with PricewaterhouseCoopers. Marquee customers Pacific Gas and Electric and Cannon Computer Systems soon followed. But like Arcade Planet, few seemed to stay for long.
Technology not to blame
It was not the technology that killed Xuma - it was its management.
"Delivery dates slipped because they were always shifting staff around," Arcade Planet's Kelly says. The very shortage of qualified IT people that companies such as Xuma was supposed to relieve for its customers was eating the startup alive.
The gee-whiz software at the core didn't help much in curbing the body count, since standardising on any kind of automation software would have limited the company to customers willing to abandon their existing systems in favour of something developed by Xuma.
By the time management realised the full ramifications of the situation, a competitor with tight control over costs and enough management star power to draw customers had popped up - Marc Andreessen's Loudcloud.
Xuma's Cha went on a media crusade, trying to poke holes in Loudcloud's story of innovation and noting that the competitor's name is "a white porous mass making loud noises."
But customers weren't buying the rap.
Xuma's programmers were top-notch and its tools excellent, but Kelly says it was tough to work with the MSP to dynamically update Arcade Planet's site. Add to that the trouble of getting into the cage whenever Arcade Planet wanted to make a gear change and Xuma's never-ending programmer turnover; within six months, the gaming site was bringing monitoring and maintenance in house.
The customers spinning through the revolving door finally caught the attention of investors. Cha left the company early this year. But by then, Xuma's attempt to grab a significant share of the managed services market was pretty much botched. As Loudcloud was adding customers such as Ford Motor, Xuma was shuttered, leaving behind more than 50 customers with no transition plan and no further guidance.
