Pano Logic Vanishing Act
The Redwood City, Calif.-based technology vendor Pano Logic, a provider of virtual end user systems to a client list that includes at least three credit unions, had just announced a success story about its partnership with the $3.4 billion Redstone Federal Credit Union of Huntsville, Ala. when the company essentially vanished into thin air.
While Pano Logic has not released a public statement on its sudden closure, its former public relations firm confirmed the vendor has gone out of business, and as word spread, the company’s Facebook page filled with questions from frantic clients. The phone number linked to Pano Logic’s main offices has been disconnected, and attempts to reach Aly Orady, the company’s co-founder and chief technology officer, via email and Facebook have been unsuccessful.
Credit Union Times learned the company filed an Assignment for the Benefit of Creditors when a spokesman for the Mountain View, Calif.-based business advisory firm Sherwood Partners said his firm is serving as Pano Logic’s assignee. The spokesman declined further comment. Under an ABC, an alternative to bankruptcy, a company hires a third-party assignee–in this case, Sherwood–to monetize its assets to best satisfy the company’s creditors.
Still, Pano Logic has offered no explanation to its clients, such as the $701 million Vantage Credit Union in Bridgeton, Mo., which is now stuck with the devices they purchased from the vendor and has been unable obtain technical support. According to Matt Fagala, systems architect specialist for Vantage Credit Union, the credit union began using the company’s Pano System for VDI, an end-to-end, virtual hardware and software desktop solution, around two years ago, and uses Pano Logic’s devices at nearly all of its branches.
Vantage had been in regular contact with Pano Logic’s support staff until recently, when Fagala said the credit union spent weeks trying to reach the vendor for some necessary code updates. He said the financial repercussions of the company’s surprise shutdown could be dire for its clients, given they’ll have to repurchase and relicense new devices to replace those they received from Pano Logic.
“Now, we will have to find something else, as will everyone else who uses them,” Fagala said. “So it’s going to have a pretty big impact. The weird thing is that no information has come out. It just seems odd to me.”
Redstone FCU, which had been in the process of replacing 75% of its PCs with Pano Logic’s virtual desktop computing solutions and planned to continue the project into 2013, said its legal and IT teams were researching the situation but had no further comment.
The company’s shutdown reiterates just how critical it is for credit unions to fully investigate their vendors and consider the worst possible outcomes of a vendor relationship before going into business, said Stessa Cohen, a Philadelphia-based banking industry analyst for IT research and advisory company Gartner, as well as a former vice president of technology for a payment processing services provider and former assistant vice president for CoreStates Bank.
“It’s about asking a vendor for a road map and asking what’s going to happen and what you can anticipate,” Cohen said. “What happens to your system if there’s a disaster? What if the contract ends early? What if the vendor goes out of business? It’s like entering a marriage. You don’t want to think that you’ll get a divorce, but you have to consider that.”
Cohen said it’s also important for credit unions to consult with an attorney about who owns intellectual property during a vendor partnership and investigate the vendor’s reputation.
The worst case scenario for Pano Logic’s credit union clients, she said, is that they’ll need to somehow replace all of their devices, which may disrupt operational areas such as automation, back-office functions, processing, accounts and customer service. Whether or not the negative repercussions will reach members depends largely on how the credit unions choose to communicate with them, Cohen said.
She suggests using social media to reach out to members and create a level of transparency around the situation, and notes that while members are not likely to question the safety of their money, they may worry about whether they can access it.
“The trick is to create a plan to manage communication internally and with members,” she said. “And banks and credit unions are good at that kind of thing.”
The news of Pano Logic’s closure coincides with the release of new regulatory guidance on technology service provider supervision–the Federal Financial Institutions Examination Council issued a revised version of its “Supervision of Technology Service Providers” booklet, while the Federal Reserve, the FDIC and the Comptroller of the Currency issued new administrative guidelines.
The NCUA said the TSP booklet’s guidelines are not applicable to credit unions and other financial institutions and instead apply to the supervision of technology service providers, but the NCUA plans to follow the guidelines when participating in a FFIEC-initiated technology vendor review.