Salesforce.com's Latest Outage...
Posted by: Sarah Lacy on February 22, 2006
Midway through its fourth quarter earnings conference call, Marc Benioff had just finished his impassioned remarks about how seriously the company is taking recent service outages and how much better February had been. Then, after handing the call over to CFO Steve Cakebread, the conference line went dead. It was exactly the kind of thing Benioff would seize on with a witty quip if it hadn’t happened to him.
Practically speaking, it was little more than a rare moment of ironic levity on a conference call. What to make of the actual outages is a different story.
When I surveyed analysts and customers after the first outages in December, it seemed to be a non-issue. I mean, business software has a pretty low bar. What application works 100% of the time?
Interestingly, the person who made me rethink that was Salesforce's co-founder Parker Harris. At AMR's Strategy 21 conference he made the point that Salesforce.com isn't trying to be a software company, it's trying to be a utility and utilities need to be reliable.
Subsequent outages have intensified things with several angry blogs cropping up. (Bruce Daley had a nice posting on this issue too with a response from Benioff.) And Pat Walravens, of JMP Securities, did a survey of 16 customers and only six said they weren't looking at other options.
Benioff maintained in the conference call that this is not affecting the deals or even lengthening sales cycles. But with a new phenomenon like on demand, it's hard to know. There are a lot of businesses that are only now dipping a toe in the water-- and they could very well be spooked by this.
Bruce Richardson of AMR Research has a theory that Salesforce is the new Apple-- thanks to its niche, but cult-like following. There's not a lot of that in software and anything that diminishes it seems bad news for Salesforce- and the on demand movement. Particularly at a time when SAP, Oracle and Microsoft are getting serious about on demand and the company is girding for its first quarter without a sequential up tick in subscribers.