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16 July 2002 Lavishly-funded web content management software vendor Reef has gone bust, after burning its way through $76 million (€75.5m) since 1999. Remarkably, the Brussels-based company only closed a $27 million (€26.8m) third round of funding less than five months ago in March 2002.

Founded in 1999, Reef aimed to provide a set of Internet software modules to help organisations share content across commerce and community portals, intranets and extranets.

"This strategy improved the product's overall appeal, especially to enterprises frustrated by integration problems. However, it also put Reef in direct competition with a much larger range of products and vendors [such as Vignette and Interwoven]," said analyst Lou Latham at Gartner.

Reef was also the victim of its over-ambitious global expansion strategy. It opened US offices in San Francisco, Chicago, Boston; as well as Montreal in Canada. European operations were established in Belgium, England and Germany. This office network proved to be a huge burden when sales failed to grow as planned.

In contrast, up to 15 smaller content management vendors in Europe – such as Amsterdam-based Tridion and Oldenburg, Germany-based RedDot Solutions – focus far more heavily on niche markets in their home countries.

Reef's customers face an uncertain future. Latham at Gardner says about half of Reef's 200 customers relied on the company for maintenance. "They should seek third-party support from service providers with Reef Experience such as CGI and TechSpan in North America and Napalm in Europe. All Reef users should prepare to migrate to alternative software by 2004," he said.

Gartner expects further consolidation in the European content management market. Latham predicts that only a few vendors will survive the shake-out.