Outsourcery is set to appoint administrators EY today after reaching an agreement to sell to GCI Network Solutions.
In a statement to the London Stock Exchange this morning, Outsourcery said:
"[An] agreement has been reached to sell substantially the entire business and assets of the company's trading subsidiary Outsourcery Hosting Limited to GCI Network Solutions Limited.
"In order to complete the sale, it will be necessary to appoint administrators, and the board of Outsourcery has resolved to appoint partners from EY as administrators for this purpose. The appointment is expected to be made today, and the sale is expected to complete shortly thereafter."
Outsourcery suspended trading of its shares on Friday 3 June, when it said the then-current proposals to sell assets could "leave no or limited value" to equity shareholders.
The news came a month after Vodafone threw the firm a lifeline and agreed a "conditional drawdown working capital facility".
In April, the company announced it made a £4m loss in the 12 months to 31 December, compared with a £4.6m loss the year before. Group sales over the same period rose nine per cent to £8.1m.
Softcat's chief executive Martin Hellawell (pictured, right) said the difficulties Outsourcery faced demonstrates the tricky nature of running a cloud business.
"It's no surprise. It has been in difficulties for as long as I can remember, really," he said. "Obviously it has got worse over recent times but it is no big surprise. But it's always a shame to see a business like that go.
"It does show how difficult some of these new business are [to run]. I think everyone with the whole cloud thing a few years ago thought it was a gold mine and everyone rushed to it. Actually, maybe it's a gold mine with experience and if they know what they're doing and can run a good business around it. It's certainly not easy. I think that's what happened to Outsourcery and there will be others as well.
"It's always a shame when people potentially lose their jobs and customers get hit, so it's a shame to see them go. It was a relatively small business, I think, so hopefully there won't be too much damage and pain caused."
Mitchell Feldman, CEO of RedPixie, agreed and explained what he believes makes a successful cloud firm.
"The most important piece of advice about running a successful cloud business is you need to build out IP," he said. "Without IP, you are in good shape to become the next Outsourcery because the market is becoming wholly and utterly commoditised. And then it's a race to the bottom on pricing. Unless you've got IP, you're no different to any other company provider in the country."
Outsourcery's co-CEO Piers Linney did a stint on the BBC's Dragons' Den between 2013 and 2015.
Stuart Fenton, CEO of Microsoft partner QuantiQ, said Linney's public profile must have helped the firm.
"All the Dragons and every business person has successes and failures, and you shouldn't measure someone by their failures," he said. "Piers has been enormously successful in the past and I am certain he will be successful in the future.
"It's a shame that the business on its own two feet hasn't been successful.
"The brand was good. The marketing was good. Piers had an excellent profile which must have helped the business. But something must have gone wrong in the execution, probably in sales."
RedPixie's Feldman added that news of Microsoft's new Office 365 E5 SKU - which he described as "full telephony in the cloud" would not have been good news for Outsourcery.
"Once E5, once that was announced, that was the last nail in the coffin for them," he said. "E5 and the announcement of UK datacentres means there is no USP for Outsourcery anymore.
"It's full telephony in the cloud, and that's effectively what Outsourcery does and their USP was ‘we did it before Microsoft did it and we have UK datacentres'. Microsoft now have UK datacentres and offer the same thing."
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