Inacom Leaves Users in a Lurch

FRAMINGHAM (06/23/2000) - When Inacom Corp. filed for bankruptcy protection this month, its competitors wasted no time before swooping in to clean up the spoils.

But for one company that had relied on the Atlanta-based outsourcer and reseller, as of last week there was a gaping hole where a help desk used to be.

More than 800 users at Blue Cross/Blue Shield of Michigan were left in the lurch when Inacom pulled the plug on operations. Just two days earlier, Inacom managers had assured Blue Cross/Blue Shield that they had adequate financial backing to meet their payroll and continue providing help desk and in-person support services for at least another two months, said Annette Findlay, division information officer at the Detroit-based health insurer.

"Inacom's top management said, ‘Don't worry,' " Findlay recalled.

But 48 hours later, Inacom workers were being escorted off the premises, leaving Blue Cross stranded without PC help desk and support services. "It was quite a shock to everyone," said Findlay.

Inacom had been providing services to the health insurer for the past two years, primarily from a help desk center in Tempe, Arizona.

No Contingency

Last week, in-house mainframe and voice communications support teams at Blue Cross picked up some of the work Inacom had been handling, covering all urgent user calls. Less urgent requests, such as jammed printer problems, were put on hold. Findlay said former Inacom employees had been offered temporary employment at Blue Cross.

Findlay said there's a lesson to be learned. "Always, always have a contingency plan. We should have put something in place at the first sign of trouble," she said. "We should have asked ourselves, ‘What if they went out of business tomorrow?' " instead of counting on the company lasting even 60 days, she said.

Analyst Bill Martorelli at Hurwitz Group Inc. in Framingham, Massachusetts, said another lesson learned is that companies should avoid outsourcing to just one vendor.

"Sometimes customers might engage with two different suppliers, as a way to potentially keep the other supplier honest," Martorelli said.

MicroAge Inc. in Tempe has assumed full responsibility for the operations it had managed along with Inacom at Wells Fargo & Co. in San Francisco and Arthur Andersen LLP in Chicago, said Michelle Gorel, public relations director at MicroAge.

She noted that MicroAge also took over the Inacom-serviced information technology shop at a pharmaceutical company, where it hired 70 former Inacom technicians. MicroAge also assumed Inacom's functions at an airline and an electric company. Gorel declined to identify the companies, citing nondisclosure agreements.

Meanwhile, Blue Cross/Blue Shield, hasn't given up on outsourcing. Even with Inacom's abrupt departure, "there's no consideration" to bringing in-house support for PCs, servers, software and other services, Findlay said.

"We outsourced in the first place to get service levels up fast and to get skills we didn't have. [PC and software support] is not a core competency," she said. "There's no tendency at this point to bring this back in-house."

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Inacom Said To Owe $94M

Compaq Computer Corp. last week claimed that Inacom withheld $94 million in payments made by customers before the reseller and IT support oursourcer filed for bankruptcy protection.

Compaq said Inacom sold the computers but never passed the money back to the manufacturer.

In January, Compaq purchased Inacom's custom configuration unit for $370 million to form a subsidiary, Custom Edge Inc. At the time, analysts said Compaq's acquisition was a move to compete directly with Dell Computer Corp. in Round Rock, Texas.

Custom Edge has withheld approximately $43 million in fees payable to Inacom to partially offset the $94 million loss.

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