Salesforce.com's Outage: Will It Derail the SaaS Market?

The service disruption which Salesforce.com (CRM) experienced last week came at a bad time for the Software-as-a-Service (SaaS) and cloud computing markets. Although I believe the long-term prospects for SaaS and cloud computing remain strong, there are plenty of short-term challenges facing SaaS and cloud computing vendors in today’s tough economic environment.

Salesforce.com’s outage reignites the debate about the reliability of web-based services, and will intensify the concerns of those IT and business decision-makers who have been reluctant to adopt on-demand solutions. It also validates the claims of legacy software vendors that SaaS and cloud computing are not viable platforms for enterprise applications.

The ultimate irony is that the public website, which Salesforce.com created after it experienced a series of outages in 2005-2006 to demonstrate greater accountability, www.trust.salesforce.com, also went down during the latest outage. In 2006, Salesforce.com was quick to turn its problems into marketing opportunities. This time, however, there is even more at stake. Salesforce.com will have a hard time convincing software vendors and enterprise customers to adopt its Force.com platform unless it can build greater confidence in its service delivery capabilities.

It is not only important for Salesforce.com to quickly restore its own reputation, but also rebuild customer confidence in the overall SaaS/cloud computing industry. This is essential for SaaS/cloud computing companies to capitalize on their competitive advantage over legacy apps in today’s tough economic environment and rapidly changing workplace.

In fairness, Salesforce.com’s uptime record is still the envy of many IT and business decision-makers. That is why an increasing number of IT organizations are not only supporting the adoption of SaaS and cloud computing, but also benchmarking themselves and their operations against these on-demand service providers. However, legacy software vendors will attempt to exploit this latest disruption to make their case for sticking with on-premise applications. For example, Oracle (ORCL) has publicly stated that it is targeting Salesforce.com accounts and promoting its ‘pod’ approach as a hosted alternative.

Disclosure: None

Comments

[James Urquhart]

Ironically, this outage didn't really make a dent in the "cloud-o-sphere"--at least not to the extent that past Amazon and Salesforce outages did. I think any effect from this will be short term unless another significant outage happens in the next 3-6 months. If that happens, however, all bets are off.

2009 Jan 11 12:24 PM

[Jeff Spiller]

I am an application/system administrator for a medium sized company, and we apply a large amount of resourced to ensuring uptime, but we still experience outages from time to time. So to believe that this is a disadvantage to cloud computing is a bit one-sided. In the long run downtime is a wash between internal and external apps.

2009 Jan 11 01:36 PM

[Ian Hendry]

An outage at Salesforce.com doesn't spell doubt around the feasability of SaaS, in much the same way that the odd duff application on Windows doesn't have everyone buying Macs.

Fortunately, not all SaaS vendors aren't trying to take on what is arguably proving too much for Salesforce.com, so there isn't quite the same impact on the rare occasions when something fails. I pointed out when Marc Benioff's aspirations went beyond hosted CRM to becoming a platform for all business applications that it meant they'd have to ensure their service levels matched their CEOs ambitions. When you have a sales team unable to use their Sales Force Automation system for 40 minutes you can get them on the 'phones. When the WHOLE organisation is tapping its fingers and counting the minutes away you have a different scale of problem.

Ian Hendry
CEO, WeCanDo.BIZ
www.wecando.biz

2009 Jan 11 04:20 PM

[wallyton]

This "outage" is an important datapoint in the greater examination of SaaS and the Cloud as the future of all enterprise applications. It works for some companies, it works for some applications. It is NOT the answer for everything, and as SAP seems to think, it's not the answer for total ERP for all from some time (never? see tinyurl.com/9yzo4o). Like many important technologies that come along, it has some promise. There is likely to be something else with promise next week.

2009 Jan 12 12:39 AM

[Aad 't Hart]

This kind of 'outages' are just part of growing up. It will get better and better over time. They actually help to improve the overall up time.
It's up to the organization to quantify how critical the service is and when is a good moment to move towards SaaS.

2009 Jan 12 07:21 AM

[Ranjit Nayak]

The 40 minute outage experienced by Salesforce.com does catch a user's attention. With the high availability of most online services expectations are very high. In reality the outage was minor. To put things in perspective, one just has to remember how many times the laptop "froze" when an important presentation or demo was to be delivered. Users must understand that 99.99999% availability does not come cheap, and providers need highly redundant systems to make it a reality. To provide the same level of availability in house would be very expensive. The SaaS alternative is cost effective as more tenants share the cost.

As Ian rightly pointed out above, if a CRM is down for 40 minutes, it means some information is entered later or documented on paper. It is a totally different matter when online transaction systems are not available. Online Retail,auction and payment services losses can add up when the service is down. But then Amazon, eBay and Visa have done very well.

2009 Jan 12 12:06 PM

[User 296534]

Let me guess without even reading the piece. Mr. Kaplan would said SaaS is kicking ass and outages do not matter.

2009 Jan 16 12:10 PM