RSSEntellium fallout
Last week when Entellium's CEO, Paul Johnston, and Senior VP Parrish Jones unexpectedly stepped down and the company subsequently began to lay off staff, many of us wondered (despite the inevitable reassurances to the contrary) if we were going to see the first significant failure of a SaaS business and the subsequent ghastly fallout among customers who may lose both their software and their information in one fell swoop. Considering the state of the market and the thin margins in the business, it seemed like this was the first of many economically driven SaaS business failures. It turns out it was something more sinister. Johnston and Jones are looking at federal wire fraud charges from the wrong side of the prison bars today, facing up to 20 years and $250,000 fines for "overstating" Entellium's revenue to investors. In the economic climate we're currently in, with people baying for blood over various forms of corporate mismanagement, it's unlikely they'll find much sympathy when the case goes to court.
But the criminal sideshow is distracting us now from what was at the forefront of people's minds last week: how will the financial collapse of the service affect customers (although apparently there were fewer of those than we had been led to believe)? Was there a plan of some sort for returning the information? Several other SaaS vendors commit to delivering data in pre-arranged formats to customers in the event they halt operations… did Entellium provide such a guarantee? Apparently there has been some discussion between Avidian and Entellium's investors regarding a potential purchase of the company. If another company acquires the assets, will they continue operations? Will customers feel confident enough to keep their business there regardless?
As horrible as this downturn is, it may provide us with some of the first real data on what happens when your outsourced software services disappear, a mostly theoretical threat to this point which has been held out by more traditional software manufacturers as the Boogeyman to keep customers away from SaaS offerings. It's obvious that things could go poorly in such a scenario; it's less clear that they actually will. I know of many businesses who have been bit by circumstances in which their traditional software vendor has closed doors, or simply discontinued the product, and it's a problem, but never an insurmountable one. What remains to be seen is whether SaaS failures will fall into that same vein (which is my suspicion) or whether they really are more risky for customers than traditional software company failures.
Entellium is not going under and has kept a certain amount of employees to ensure constant customer satisfaction for their already existing customer base. The customer data is safe and housed via 3rd party, which in this day and age is crucial for a Saas company. My guess is whoever wrote this article only has a “outside” world view looking in the Saas industry. Your speculation and judgement do not play to your strengths in this article my friend, too liberal, too judgemental and just plain bad points of view. Know what you are talking about prior to engaging in what you may consider a conversation.
I agree with this stance and I like the use of “boogeyman” in this post. For years traditional software has spoke of On Demand being risky yet traditional software is as risky if not more the web based. I may ask whose servers are more secure, those stored in their own data center or room chewing up resources most likly causing organizations to invest the least amount possible in maintenance. Or the servers hosted in Web Based CRM vendors high tech datacenters who have the dollers to spend on ensuring the highest standards are upkept since each user pays a little towards this.
The tranisition from one traditional vendor to another can also be rather costly since these platforms were not built using any industry standards. In contrast the migratin of data from say Entellium to those showing interest like Avidian or Salesboom.com is much easier since web based crm is built using set standards. Some like Salesboom.com even have a web services api which allows the backend to open up for simple integration and migration. So considering these points I think the boogyman will remain a fictional character in the closet and SaaS will once again prove werthy at the enterprise level.
@CRMHero… Time will tell. We’ve heard a lot of “inside” people telling us how strong their businesses and industries are lately, and I think we can all see how accurate they were. It’s my job to offer outside perspective; outside is where the customers are, and they, as I am, are rightly suspicious of people at these companies who poke their noses out and claim that all is well. It doesn’t take a CRM expert to tell you that a company that lets go its sales and marketing staff in a down market is on its death bed… you build your business to get through problems like these; you don’t hunker down with the support crew and hope it gets better.
You should consider that your position with Entellium (and the fact you didn’t bother to disclose it in your statements) weighs heavily against the positions taken in your comment to most of us “outsiders.”
@Josh… I agree. I have actually done something similar with the Salesboom platform and it was strikingly easy compared to similar tasks with more traditional applications. I think it may take the failure of Entellium, or similar, to demonstrate that to the mainstream buyer, though, and while it may be painful for whichever SaaS company is the first to implode, it’s probably ultimately a good thing for the industry.