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Viaken Sells IT Hosting Biz to Apex, Readies for Rebirth as Software Shop

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THE “way to knowledge” was what Viaken Systems promised its customers. But Viaken’s investors have instead been forced to find a way out. After tweaking its business model in fits and starts over the past year, Viaken Systems has dissolved in response to pressure from its investors. The company’s IT infrastructure and hosting business was sold to Silver Spring, Md.-based Apex Digital Systems, while Viaken’s newer collaborative research business will be housed in Viaken’s former Gaithersburg, Md.-headquarters, but will no longer bear the Viaken name.

The eviscerated entity, temporarily known as Viaken Systems Acquisition Company (VSAC), plans to launch a new ontology-based data retrieval software tool called Paragon in the fall that will serve as the cornerstone of the company going forward. Paul Zoukis, a former GE Information Services executive, has been appointed CEO of VSAC, replacing Viaken founder and CEO Keith Elliston, who did not accept a position with the new company.

Nearly all of Viaken’s 45 employees have been retained. The nine-member infrastructure team has joined Michael Provance, formerly Viaken’s VP of discovery solutions, at Apex, where he now serves as COO. The remainder of Viaken’s staff, including those at its European headquarters in Cambridge, UK, will comprise the new entity. Only four or five employees were let go as part of the restructuring, according to Apex and VSAC officials.

All of Viaken’s IT hosting and infrastructure customers are now Apex accounts. VSAC will retain Viaken’s collaborative research clients. According to Provance, Viaken’s two business segments did not share any customers at the time of the split, so divvying them up was relatively straightforward.

Elliston noted that the reorganization, which happened very quickly over the past two weeks, was not as painful a process as it could have been, given the scope of the change. He said he personally contacted each of Viaken’s customers to discuss the company’s split into two entities and to ensure a smooth transition.“We found a home for everything that Viaken was doing,” he said. “It’s not the same home, but everything we were doing is continuing forward. I’m very pleased with that.”

 

Breaking Up Isn’t That Hard To Do

The driving factor behind the change, Elliston said, was the company’s search for a third round of funding from its investors. Although Viaken’s mixed business model had “good momentum,” it was not profitable. The hosted services side of the business was “just about breaking even,” but the current state of the economy and the recent poor performance of other bioinformatics companies “did not create what I would call an active investment environment,” said Elliston.

Eying a software project that has been in development at Viaken for the past two years, the investors opted to raise cash by selling the infrastructure business and to focus the company’s remaining resources on the upcoming software launch. “They felt they could run at a lower burn rate by thinking of the company as an early-stage software company and to put the services business where it really belonged, which was in a services company,” Elliston said.

Company officials on both sides of the deal were in favor of the split. Provance said that while Viaken was able to offer both scientific and IT expertise to its customers through its mixed model, “it was rare for people to benefit from both equally.” Apex, which provides IT hosting for pharmaceutical and biotech companies in clinical trials, sample management systems, and other downstream activities, should be an ideal new home for his group, he said. Not only does the IT-focused company “look at problems the same way” as the Viaken infrastructure team did, but Apex’ broader scope “extends our capabilities into areas customers have been asking for anyway.”

“I think it’s positive for both businesses,” said Steve Gardner, senior vice president and CTO of VSAC. Noting that the cost structures of the two sides of its business were “radically different,” Gardner said it was not only difficult to maintain the overhead costs associated with the IT infrastructure business, but the margins, staffing requirements, and product sets were entirely different.

One observer, Tony Crescenzo, CEO of Viaken’s partner Illumitek, described the infrastructure business as “a big bag of rocks” on the company’s back. While it was making money for the company, “it just wasn’t scalable,” he said. Of course, the change in Viaken’s direction is good news for Illumitek, whose nVIZn analytical and visualization technology will be the foundation for VSAC’s upcoming Paragon software. “We were sitting on our hands” before the recent change, said Crescenzo, who added that VSAC’s new CEO has already jumpstarted development of the product.

Zoukis is eager to get Paragon, which he described as “the heart and soul of the company,” off the ground. Three to four 100-day pilots are slated to begin by the end of July and the product is due to roll out in the fall.

While Elliston said “the jury’s still out” on successful commercial models for bioinformatics software, he sees the investors’ confidence in that side of the business as “proof that we’ve been on the right track.” Meanwhile, he’s looking forward to taking his first vacation since launching Viaken three and a half years ago. Among other plans, he said he’d take at least two weeks to fly his plane to Alaska. But don’t expect to see him out of the bioinformatics picture for long. “I’ve got a few irons in the fire,” he said. Look for his involvement in the custom solutions area some time in the fall.

— BT

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