A recent series of Salesforce.com outages have put the San Francisco-based company and its Software as a Service (SaaS) model under fire. Salesforce.com, best known for its outspoken and flamboyant CEO, has until now been enjoying positive press coverage and ringing endorsements from its customers and market experts.
Naturally, the recent outages have provided plenty of ammunition to hosted CRM competitors eager to spread the news of Salesforce.com's troubles and tout their own offerings instead.
But the downtime has also drawn attention to the fact that Salesforce.com does not offer a standardized service-level agreement (SLA), or contract that describes and specifies performance criteria and service commitments.
"The bigger, more influential customers are more able to negotiate an SLA into their contract," said Liz Herbert, an analyst at Forrester Research who recently penned a research note on the issue. "The whole idea of SLAs and uptime and its reimbursement is standard in outsourcing and hosting, but Software as a Service [SaaS] -- likely because of the role the business user has taken -- doesn't have that same standardization."
Historically, the IT department was more closely involved in buying decisions and more attention was paid to service levels. But the rise of SaaS and its simple implementation has engaged more business users, and less input has come from IT.
Some hosted CRM vendors that compete with Salesforce.com do offer standardized agreements. For example, San Mateo, Calif.-based NetSuite Inc. unveiled a money-back guarantee last year. However, those measures tend to offer more reassurance to wary customers than real insurance for downtime. The agreements typically involve waiving the service fee for a month or reimbursement for just the time that the system was down. Those reparations don't necessarily make up for having a salesforce paralyzed because they can't access customer records and vital account information.
Salesforce.com declined to discuss its SLA policies, citing a quiet period prior to earnings announcements.
Salesforce.com's latest outage came last Monday, keeping some customers on the East Coast from accessing records for several hours, according to reports. A Salesforce.com spokesman said only that the system experienced some downtime but was up and running again the same day. Another outage occurred last month, shortly before the holidays. Competitors took the opportunity to make news for themselves, while still acknowledging that some downtime is inevitable.
"However, at some point it becomes unacceptable, especially on the last days of the month -- a crunch time for every salesperson," Jonathan Tang, president of Boston-based Salesnet, said in a statement. "Even more unacceptable is [Salesforce.com's] lack of follow-through with informing their customers."
Similarly, Bozeman, Mont.-based RightNow Technologies Inc. issued a statement yesterday touting 99.98% uptime in 2005.
It shows a shift in the marketplace that companies that once celebrated Salesforce.com's success as a "validation of the on-demand model" are now hoping to unseat the company, at the same time that Germany's SAP AG is making its entry into the market.
Salesforce.com is in the midst of a $50 million effort to build mirrored data centers on both coasts to handle exactly this sort of problem.
And while some vendors do offer SLAs, that doesn't mean anyone is collecting on them.
"The last time I checked, [none of the hosted providers] had paid out," Herbert said. "That likely means people aren't really tracking [their SLAs] and the vendors aren't doing it for them."
Herbert suggests hosted CRM customers approaching a new contract take the opportunity to negotiate for additional clauses that will provide some insurance and that prospective hosted CRM buyers insist on such clauses from the get-go.
Additionally, downtime of applications is something that is to be expected whether it is being run off site in a vendor's data center or on premise.
"The other thing to keep in mind is, it's not just about uptime," Herbert said. "It's also about performance and response time. Some of these solutions are slower to refresh. All the vendors need to focus not only on uptime but also on performance."