COVID-19 Vendor Failures: Which Software Companies Couldn’t Survive, and How Similar Disruptions Can Impact Your Business...

In late June 2020, small business customers of ScaleFactor, an Austin-based bookkeeping and finance platform, learned that the company was suspending most of its operations. They had roughly two months to move their books, payroll workflows, and financial history somewhere else before the company closed its doors at the end of August.

Two months sounds manageable until you consider what those customers were dealing with at the same time: lockdowns, collapsing revenue, loan applications, and staff they were struggling to keep. A vendor failure rarely arrives at a convenient moment. During the pandemic, it often arrived at the worst one.

The COVID-19 era produced a wave of software and technology vendor failures, restructurings, and near misses. Some companies shut down entirely. Others entered bankruptcy or administration and kept operating under new owners and new terms. This article looks at what happened, what the affected organizations experienced, and why these stories still matter for any organization that depends on critical software today.

Why the Pandemic Exposed Vendor Dependency So Quickly

Most organizations plan for vendor failure as an isolated event: one supplier struggles while everything else stays stable. The pandemic broke that assumption. Software vendors and their customers were frequently exposed to the same shock at the same time.

A travel technology provider lost revenue because its airline and hotel customers stopped operating. A small business software platform lost revenue because its small business customers were fighting to survive. When a vendor’s revenue depends on the health of its customers’ industry, a sector-wide crisis can push both into trouble simultaneously. That leaves customers trying to replace critical software while their own operations are under the greatest strain.

Three patterns stand out from the period: the planned wind-down, the hidden supplier collapse, and the bankruptcy that kept the lights on.

ScaleFactor: A Wind-Down With a Deadline

ScaleFactor had raised more than $100 million from investors, including roughly $90 million in 2019, to build software that automated bookkeeping for small and mid-sized businesses. According to reporting at the time, the company had reached about $7 million in annual recurring revenue by the end of 2019. Its founder said the pandemic wiped out almost half of the company’s sales.

In June 2020, ScaleFactor announced it was suspending a majority of its operations. A small team stayed on to support existing customers and help them transition to other providers, with operations closing on August 28, 2020.

Later reporting complicated the story. Former customers and employees told Forbes that the company’s problems predated the pandemic, and that much of the promised automation depended on human bookkeepers behind the scenes. The company had also laid off around 40 employees in February 2020, before lockdowns began.

For customers, the cause mattered less than the consequence. They needed to extract their financial data, rebuild their workflows with a new provider, and confirm their records were accurate, all within a fixed window and during a crisis.

The continuity lesson: a wind-down period is a gift, but it is a short one. Organizations that understood exactly what data, configurations, and processes lived inside the platform were in a far better position to use that window well

Travelex: When the Provider Behind the Brand Collapses

Many consumers who ordered travel money through their supermarket or bank in early 2020 had no idea that Travelex was running the service. Travelex provided white-labelled online travel money services for UK supermarket chains, including Tesco, Sainsbury’s, and ASDA, under those retailers’ own branding, along with outsourced foreign exchange services for banks and travel agencies.

The first blow came just before the pandemic. A ransomware attack in late December 2019 forced Travelex to take its systems offline in early January 2020. The disruption reached its partners immediately: online travel money services for banks and retailers, including Barclays, Royal Bank of Scotland, Tesco Bank, and ASDA, went down, and some partner services remained offline for weeks.

Then COVID-19 arrived. With international travel effectively halted, demand for foreign currency collapsed. Travelex announced redundancies in May 2020 citing the pandemic, and on August 6, 2020, key Travelex entities entered administration. Administrators at PwC said the cyberattack followed by the coronavirus crisis had hit the company acutely. Through a pre-pack sale, the wholesale and outsourcing business, including the supermarket contracts, was acquired by a new company controlled by Travelex’s lenders, and more than 1,300 UK jobs were lost. The entities in administration continued providing certain services under a transitional services agreement while contracts were moved to the new owner.

For Travelex’s partners, the dependency was double-sided. Their customer-facing service carried their own brand, but the systems, operations, and continuity of that service sat entirely with a supplier that was being restructured, sold, and reorganized during the worst year in its history.

The continuity lesson: dependency risk extends past the vendors your customers can see. When a critical service is delivered by an outsourced or white-label provider, that provider’s resilience becomes your resilience. The Travelex story also shows how disruptions compound: a cyber incident weakened the business, and a market shock finished the job. Continuity plans that assume only one thing will go wrong at a time tend to underestimate real-world risk. 

Global Eagle and Travel Technology: Bankruptcy Without a Shutdown

Travel technology was one of the sectors hit earliest and hardest. Global Eagle Entertainment, which provided in-flight connectivity and media services to airlines and the maritime market, filed for Chapter 11 bankruptcy protection in July 2020. The company said most of its airline and cruise line customers had drastically reduced or stopped operations. It also stated that it would continue serving customers throughout the proceedings, and expected to emerge with $475 million less debt.

Other travel technology companies followed similar paths. Montreal-based FlightHub was granted creditor protection in Quebec after its revenue fell by more than 90 percent in under two months. Danish travel booking company Nustay filed for bankruptcy after its sales dropped to about 5 percent of early 2020 levels.

These cases highlight a nuance that is easy to miss. A vendor filing for bankruptcy does not always mean the software disappears the next day. Many companies continue operating while they restructure. What changes is the certainty around the relationship: ownership can shift to lenders or new investors, product roadmaps can be cut, support teams can shrink, and contracts can be renegotiated or rejected as part of the process.

The continuity lesson: a vendor that is still operating is not necessarily a stable vendor. Bankruptcy and restructuring create a long period of uncertainty, and the organizations that rely on that software need a plan that holds up across every possible outcome. 

What These Failures Have in Common

Although the causes differed, the customer experience followed a recognizable pattern across these cases.

The warning time was short. Travelex’s partners saw their services go offline with no notice. ScaleFactor customers had weeks. Even in the more orderly cases, the time between public announcement and operational impact was far shorter than most replacement projects require.

Customers learned at the same time as everyone else. In nearly every case, affected organizations found out through public announcements, administrator notices, or customer emails. Few had any meaningful early visibility.

The crisis hit the customer too. During the pandemic, many organizations were managing their own revenue loss, staffing gaps, and remote operations while also trying to replace or stabilize a critical system.

The hardest part was what lived inside the software. Replacing a product is one challenge. Recovering the data, configurations, integrations, and institutional knowledge built into it is often the bigger one.

Why These Lessons Still Matter in 2026

It is tempting to treat COVID-19 as a one-time event. The operating conditions it created, however, are still very much in place, and in several ways the exposure has grown.

Organizations depend on more software than they did in 2019. The pandemic accelerated cloud adoption, remote work, and digital customer channels almost overnight. Many of those changes became permanent. Processes that once ran on internal systems or paper now run on SaaS platforms, often several of them connected together. Each one is a dependency, and each one carries the same type of risk that ScaleFactor’s and Travelex’s customers experienced.

Vendor failures did not stop when the pandemic ended. According to Carta, 966 U.S. startups shut down in 2024, up from 769 in 2023, and enterprise SaaS companies made up the largest share of those closures at 32 percent. SimpleClosure’s 2025 State of Startup Shutdowns report found that Series A companies rose from roughly 6 percent to 14 percent of all closures, with those failing companies averaging seven years old. These are not only early experiments; they are established vendors with real customers. Many software companies that raised capital during the 2020 and 2021 funding surge are now deep into their runway, and not all of them will reach the next round.

The triggers have changed, but the impact has not. Today’s disruptions are more likely to come from funding pullbacks, rapid consolidation driven by AI, acquisitions that sunset products, or cyber incidents than from a global lockdown. For the organization relying on the software, the outcome looks the same: a critical system becomes uncertain, and the timeline for responding is set by someone else.

Disruptions still arrive together. Travelex’s experience is a reminder that a single shock is often survivable, while two in a row can be fatal. A vendor that is already weakened by a security incident, a lost funding round, or a major customer departure is far more vulnerable when the next pressure arrives.

The practical takeaway is that the COVID-19 era was a stress test, and most of the conditions it tested are now part of normal operations. The organizations that treat those failures as a useful rehearsal are in a much stronger position than those that treat them as history. 

What Continuity Readiness Looks Like After the Contract Is Signed

Most organizations cannot control whether a vendor survives an economic shock. What they can control is how prepared they are if it happens. For mission-critical software already in use, that preparation usually centers on a few practical questions.

Is the technology protected in escrow?

A software escrow agreement places a vendor’s source code, documentation, and related materials with a neutral third party. If a defined release condition occurs, such as bankruptcy or the vendor ceasing to support the product, the beneficiary can request access to those materials. For cloud-based applications, SaaS escrow can extend that protection to the environment and information needed to keep a hosted service running.

Is the deposit current?

An escrow deposit is only as useful as it is recent. Software changes constantly, and a deposit made two years ago may not reflect the version your organization actually runs. PRAXIS Automated Escrow connects to a depositor’s repositories so that deposits stay current without relying on manual uploads. PRAXIS Infinite Retention keeps prior deposit versions available, so beneficiaries are not limited to the most recent snapshot. 

Has anyone confirmed the materials actually work?

This is where many escrow arrangements fall short. A deposit can look complete and still be missing build instructions, dependencies, or credentials needed to turn the code into working software. Technical Verification addresses that gap by testing whether the deposited materials can be used to rebuild the application. At Level 3, for example, PRAXIS witnesses and video-captures the depositor building the software from source code, documents the steps, resources, and artifacts required, and provides a comprehensive findings report. That recording becomes part of the deposit materials. 

Is the escrow arrangement itself on solid ground?

The escrow agent becomes part of your continuity plan, so its own stability and controls matter. PRAXIS is SOC 2 certified and operates under U.S. jurisdiction, which provides a clear legal framework when a release needs to happen quickly. Escrow Assurance adds a further layer of confidence for beneficiaries relying on the arrangement, and all-inclusive pricing keeps the cost of maintaining protection predictable year to year. 

Do you know who is behind your critical services?

The Travelex case shows why it helps to understand which providers actually deliver the services your organization and your customers rely on, particularly where a service is outsourced or white-labelled. Escrow will not address every one of those risks, but knowing where they sit makes it easier to decide which ones need protection and a contingency plan.

Learning From the Companies That Didn’t Make It

The pandemic did not create vendor risk. It compressed it. Failures that might have unfolded over years happened in months, and organizations that had treated continuity planning as a formality discovered how much of their operation depended on providers they could not control.

The organizations that came through these disruptions in the best shape were rarely the ones that predicted which vendors would fail. They were the ones that had already secured access to the technology they depended on, kept that protection current, and confirmed it would work when needed.

That approach is just as relevant in 2026. Software dependency is deeper, vendor failures remain a steady part of the market, and the next disruption may come from funding, consolidation, a cyber incident, or a combination of all three. The question for every organization relying on critical software is the same one ScaleFactor’s and Travelex’s customers faced: if that vendor stopped operating tomorrow, how quickly could you recover?