The out-of-the-blueOctober closure of Pano Logic, a Redwood City, Calif.-basedprovider of virtual end user systems, shocked its clients, whichincluded at least three credit unions–the $3.4 billion Redstone Federal Credit Union of Huntsville, Ala.; the $701million Vantage Credit Union of Bridgeton, Mo.; and the $1.35billion Central Florida Educators Federal Credit Union of Lake Mary,Fla.

Three months after the vendor's sudden shuttering, CreditUnion Times asked Vantage CU how the incident has affected its operations. Thecredit union's response? Not much. Toby Ragaini, vice president oftechnovation for Vantage CU, and Dean Parkinson, director ofoperations, said they've continued to use the Pano System for VDI(a set of devices used to deploy virtual desktops throughout anorganization) since the company's demise and praised the value ofthe system to this day. 

They explained that prior to a tornado that hit St. Louisseveral years ago and left Vantage CU without power for severaldays, Pano Logic's devices played an important role in the creditunion's efforts to virtualize its servers, data center anddesktops. 

“During the storm, the devices saved us,” Ragaini said. “Theyrequire minimal power and leave a very small footprint.”

So far, Vantage CU has managed well without access to technicalsupport from Pano Logic. The Pano System for VDI includes softwareand hardware components, and while the credit union can continue torun the solution's software independently, the physical hardwarewas owned by Pano Logic and will eventually need to be replaced,Ragaini and Parkinson said. They described the Pano System as aself-service system that they purchased, set up an account with andinstalled on their own. 

“At some point in time, maybe a few years down the road, we willneed to see what other brokers are out there to replace thehardware piece, which is a small part of it,” Parkinson said. “Ifwe were really hard pressed, we'd be able to replace the hardwareovernight.”

Before its closure, Pano Logic had raised $45 million and had aninvestor list that included Foundation Capital, Goldman Sachs andMayfield Fund, said former spokeswoman Renee Deger. Businessofficially ended on Oct. 23, 2012, when approximately 50 employeeswere laid off, she confirmed. 

The company, launched in 2006 by Aly Orady, who served as chieftechnology officer, and Nils Bunger, who is now CEO and co-founderfor Mountain View, Calif.-based mobile document management companyMobile Span Inc., have not offered statements explaining PanoLogic's failure.

What the public does know is that in lieu of filing forbankruptcy, Pano Logic filed an assignment for the benefit ofcreditors, with Mountain View, Calif.-based business advisory firmSherwood Partners serving as the company's assignee. An ABC, apopular choice for failed companies in California, is a common lawcontract between a company's board of directors and an assigneehired to manage paying off the company's creditors, explained JamesR. Meizanis, an associate bankruptcy lawyer for the Arlington,Va.-based Tully Rinckey, PLLC.

Meizanis said companies typically choose an ABC over abankruptcy to save time and money as well as gain control duringthe liquidation process.

“In a bankruptcy, a judge has to approve the sale of thecompany, and there are extra hurdles that need to be crossed,”Meizanis said. “Under an ABC, the company can pick theassignee.”

Business customers of a company under an ABC are left to fendfor themselves, Meizanis said. “A beneficial scenario for thecompany's customers is for a new company to come in to buy andsimilarly operate its assets,” he said. 

Due to the self-service nature of its products, Pano Logic'sclosure may not have led its clients into crisis mode, but theincident surely reminded credit unions to do their homework beforegoing into business with a new technology vendor, especially astart-up. Scott Hodgins, research director for Cornerstone Advisors in Scottsdale, Ariz., who said a vendordisappearance as unexpected as Pano Logic's is very rare,recommended that credit unions take a hard look at a technologyvendor's financials before entering a partnership. 

“Sometimes a credit union will want a product so badly thatit'll accept financials that don't have enough details in them,”Hodgins said. “It's OK to go back and say, 'We need more details.'If they're not willing to give them to you, that's a huge red flag.With a start-up vendor, don't expect to see a profit, but you dowant to see revenue going up. You can even ask one of yourcommercial lenders to look at the vendor and tell you if they'dmake a loan for them.”

Depending on how mission-critical its product is, the suddendeath of a vendor can cause anything from a catastrophe to a mildinconvenience for credit union clients, Hodgins said. In the caseof a vanishing technology vendor, Hodgins suggests credit unionstalk to their regulators about alternative products and reach outto the vendor's other former credit union clients. He also saidit's a good idea for credit unions to obtain a vendor's softwarecodes so they have the option of hiring someone to run it forthem.

“Usually, you're talking about getting temporary support untilsomeone else buys and runs it,” he said. “Depending on the product,it can kill you in a week, or it can be a nonissue.”

Vantage CU stressed it had no doubts about Pano Logic when thecredit union originally researched the company.

“Pano Logic is worldwide, in hospitals and in many creditunions,” Ragaini said. “They weren't a fly-by-night company. Theirtechnology is so good that I believe someone else will pick itup.”

Ragaini and Parkinson said they have been in contact with otherformer Pano Logic credit union clients and would like to see thecompany's client base come together to develop their own solutionthat perpetuates what Pano Logic offered. If that isn't feasible,they'd like to see the group find a new vendor to step into thefailed company's shoes, they said.  

“I'm surprised that someone in the industry hasn't stepped up tothe plate to get all these Pano people together,” Ragaini said.“What we want to do is raise awareness about the situation, andfind out why other vendors are not seizing the opportunity to stepin and provide low-cost transition alternatives.”