What about those outages?

The first objection to SAAS, particularly among enterprise IT customers, is that reliability and availability are in someone else's hands. So when Salesforce.com customers experienced significant service disruptions in December and January, it's no surprise that its execs were reluctant to comment and that other SAAS companies downplayed the incidents.

"I think these Salesforce outages have shaken things a little bit," says Robert Jurjowski, CEO of SAAS ERP provider Intacct. "They may have been overplayed, but ... because the nature of this game, if you have a SAAS company with lots of customers, there's this whole single-point-of-failure angle, and it's going to get a lot of press no matter what."

Salesforce.com CEO Marc Benioff puts the problem in perspective. "We had some reliability issues in January that we've bounced out of now. And in the last seven years, of course, we've had excellent reliability." As a show of good faith, last month the company launched trust.salesforce.com, which provides a running account and history of system status. And in addition to a $US50 million investment in a new redundant datacenter architecture that began rolling out in November, the company has committed to spend an additional $US1 million to $US1.5 million per quarter on that architecture's ongoing R&D.

Nonetheless, some customers have headed for the exits. Last December, Charlie Crystle, CEO of nonprofit fund-raising software developer Mission Research, vowed to cancel his Salesforce.com subscription, not only because of the outage but also because of what he described as repeated system slowdowns. Since then he has switched to a homegrown, in-house sales management system.

But, as Intacct's Jurjowski says, it's a little unfair to hold Salesforce.com to 100 percent availability when no internal IT organization can claim that, either. In fact, one Intacct customer in Florida considered SAAS to begin with because it appeared less risky than running an ERP system in-house.

After weathering Hurricane Andrew, Abraham Elias, CIO for Circle L Roofing, decided, "We didn't necessarily want to house the data ourselves. The first thing we looked at was possibly colocating some rack space, and then started looking into the cost of doing that, along with the cost of acquiring the software licenses. And it started getting very convoluted."

Instead, Circle L Roofing selected Intacct -- both as an ERP service and as a de facto business continuation solution.