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Analysis: Cranky users want updates, SLAs

Feb 01, 20067 mins
CRM SystemsEnterprise Applications’s recent spate of outages has left some of the hosted CRM software provider’s customers venting about the company’s poor track record of keeping its users updated on service problems. It is also underlying the importance of negotiating and enforcing service level agreements when trusting key IT functionality to outside vendors.’s system was intermittently down for several hours on Monday, and the API customers use to integrate outside applications and data was disabled for most of the day. has offered no public explanation for the outages. Contacted Tuesday, company representatives referred questions to Vice President of Corporate Strategy Bruce Francis, who declined to discuss the crash’s cause, duration or severity.

Frustrated by’s reticence to promptly notify customers about its system problems, users took to their blogs. became a meeting point for the disgruntled, who posted rants and swapped log files to compare notes on the downtime. One cranky customer has created a dedicated blog, GripeForce, to chronicle his downtime complaints., based in San Francisco, trumpets its system’s stability but is cagey about discussing the precise uptime guarantees it offers customers. Francis declined to discuss the company’s SLA clauses. Several customers contacted for this story said they have no SLA guarantees in their contracts, although’s regulatory filings indicate that it has negotiated them with a handful of its customers.

“The company has entered into service level agreements with a small number of its customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits or terminate their agreements in the event that the company fails to meet those levels,” it wrote in its most recent quarterly filing with the Securities and Exchange Commission. “During the nine months ended October 31, 2005, the Company recorded a provision of approximately $500,000 for potential credits and paid out no amounts.”

After several years of rapid growth, now serves 351,000 subscribers paying from $65 per user, per month, for its hosted sales, customer service and marketing management software system. Its client list includes several large organizations licensing thousands of users, such as SunTrust Banks, Air Products & Chemicals and Staples. Such enterprise customers are unlikely to commit to major software deals without strictly specified SLAs and noncompliance penalties.

But much of’s customer base consists of small companies buying licenses for a dozen employees or less. For those customers, the company resists contractual SLAs and refunds for service outages.

“Despite my beating on their door really hard about a credit for the outages, they refused,” said Chad Meyer of Internet Creations, a New Jersey Web development firm that licenses for six employees. Even though he’s been frustrated about spotty service, Meyer renewed his contract earlier this month for another year. Pressuring his sales representative about the outages and other service problems, such as promised new features that weren’t ready on schedule, helped him negotiate his company’s monthly per-user pricing down from $110 to $100 for’s Enterprise Edition, which carries a $125 per-user list price.

Still, Meyer has considered switching to another hosted CRM provider and says he will again if doesn’t improve its customer communications. “They are a very arrogant company,” he said. “[On Monday], they acknowledged that there was a problem while it was happening, but they never provided an ETA for a repair, and there’s never any apology afterward.”

For other customers, the lack of SLA guarantees isn’t a concern. IT services firm DecisionOne in Devon, Penn., has been a customer since 2002 and licenses the software for 125 users. DecisionOne executive Frank Tait said he recalls only one outage in the past two years, and he remains very pleased with’s service. DecisionOne has no SLA in its contract, but because the service has run smoothly, Tait said he doesn’t see the need for one. has been a poster child for the rise of “on demand,” hosted enterprise application services, thanks in part to the fervor with which messianic CEO Marc Benioff evangelizes his “no software” vision. By turning the work of deploying and maintaining complex software systems over to outsourced service providers, companies can cut the costs and hassles associated with CRM systems and other enterprise applications, advertises.

Two major recent outages, one on Monday and one in December that attributed to database problems, have invited questions about’s ability to keep pace with its rapid growth. They’ve also drawn attention to what a number of customers say is an ongoing issue: service slowdowns. Even where the system isn’t fully crashed, “click and wait” is a common problem during busy times, according to several customers.

GuildQuality CEO Geoff Graham switched last year from to rival NetSuite to handle his small business’ back-office functions. With, downtime and sluggishness were regular plagues, he said. “It would be not working for an hour and we’d kind of be twiddling our thumbs,” he said. “It would happen often enough, for a half-hour here, two hours there.”

Graham initially shrugged off such glitches as the cost of doing business with a hosted service provider. He made the vendor switch not because of the outages but because he wanted the deeper enterprise resource planning functionality NetSuite offered for his Atlanta company, which runs customer satisfaction surveys for home builders. But since switching, he’s never encountered noticeable service interruptions. “I don’t think we realized we could have a service where that wouldn’t be an issue,” he said.

Internal applications aren’t immune to crashes, of course. Hosted software providers will inevitably suffer some crashes and problems. It’s how they handle the cleanup afterward that’s critical.

“The number-one criteria for staying with a software-as-a-service vendor is going to be customer service and support,” said Yankee Group analyst Sheryl Kingstone. She’s optimistic that will improve its customer communications as the company matures. Contingency plans are the sort of foundational structures young, rapidly expanding companies often lack at first, but develop as they grow, she noted.

In the meantime, competitors are eager to exploit’s weakness.’s customer base is significantly larger than that of any of its on-demand rivals, placing on it unique strains in managing such a large infrastructure. Still, challengers are quick to highlight their own uptime pledges and backup provisions. NetSuite guarantees 99.5% uptime Monday through Friday and most weekend hours, save those scheduled in advance for maintenance downtime. If in any month NetSuite falls short of that guarantee, it promises to issue credits for the month’s service.

Salesnet contractually guarantees 99.6% uptime and had less than an hour of unscheduled downtime last year, according to company President Jonathan Tang. But if Salesnet were to suffer a catastrophic crash — a two-hour outage is the scenario that triggers “code red” plans — it has a communications strategy in place. Top-tier customers would receive hourly phone calls from executive staffers with updates on the system status and repair plans, while lower-tier customers would be e-mailed by account managers.

“We would proactively reach out to our customer base and notify them,” Tang said. “I think that’s the most important thing.”

That kind of notification is what customers say they’d like to see improved. “I don’t expect 100% uptime, but I do expect 100% commitment to communicating to customers what the status is when there are problems,” wrote one customer at “At our company, there are 46 people that can’t work when [ goes] down, and when they can’t work, there are thousands of our customers who can’t get served.”