Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More. has hit a couple of speed bumps in its drive to prove that an on-demand software company can be just as successful and—more importantly—just as effective as companies selling software that’s installed on premises.

The company has confirmed two services outages, one lasting nearly 6 hours on Dec. 20 that affected most of its customers and what it called a “minor” overnight outage in its Europe, Middle East and African market.

But as a number of customers have told eWEEK, problems with’s online CRM (customer relationship management) application service weren’t limited to these two incidents. Instead, they said they have had to repeatedly contend with “outages” and performance slowdowns in recent months.

The problems call into question whether, or any on-demand application service provider, can deliver consistently good service and meet its service-level agreements.

Read more here about performance slowdowns and outages that and its customers have had to deal with.

But the company officially has been very tight-lipped when it comes to talking about the cause, scope and solution to the problems. That attitude conflicts with the reality and the goal of the on-demand application market, which is that customers need to have the utmost confidence in the service’s reliability. CEO Marc Benioff says company system uptime has never fallen below 99 percent, but some of its customers may take issue with that claim when subscription renewal time comes.

You know whose head should roll when the application totally crashes. But whom do you blame when your Web application slows down? Is the fault of the hosted service provider, or is it due to local Internet conditions?

However, when a company stakes its credibility on the quality of service on the Internet anywhere on the globe, blaming it on local Web conditions or the quality of the ISP’s service isn’t an acceptable excuse.

It’s not just a question of’s long-term success and prosperity. The viability of the whole software-as-a-service concept is challenged when customers complain about application performance and availability.

Granted, so far it appears that it isn’t’s biggest companies that are complaining the loudest. But major customers like Phoenix Technologies and Analog Devices have noticed performance problems and have expressed their concern. While they say they remain generally satisfied with the service, they also indicate that their patience is limited and they wouldn’t want to see performance problems continue for months more without end.

Benioff contends that has plenty of large-scale customers that it works overtime to keep happy, including Cisco Systems with 4,500 subscribers, Automated Data Processing with 6,700 customers, and Sprint Communications with 3,100 customers.

Next Page: Growth from AppExchange.

That’s why Tuesday’s announcement about the introduction of the Winter ’06 release of’s online CRM service and the general release of its AppExchange on-demand applications platform is important to the company’s future growth.

To prepare for this release, spent $50 million to build two new data centers with new servers and networking equipment. It plans to mirror these two data centers in February so that customer data is automatically backed up for added data security and availability.

It was the launch and debugging of the new data centers that caused at least some of the performance problems that customers experienced. Benioff says it will be these data centers that provide the capacity, scalability and reliability that will enable the company to grow to 1 million subscribers.

Click here to read about the bug that caused a 6-hour service outage at

But it’s AppExchange that gives the best change of reaching that goal. The company says that AppExchange gives it the opportunity to become the eBay of software as a service because it will be the interface through which any company can launch on-demand Web applications. is pitching AppExchange as a Web operating system that can serve as the development platform for countless business applications in the same way that Windows serves as the operating system for desktop PC applications. The company launched AppExchange Tuesday with in excess of 160 applications and more than 50 add-on components.

The development of software as a service is spearheading the development of what calls the “business Web” as the successor of the “consumer Web” that evolved in the 1990s. contends that AppExchange and its entire on-demand infrastructure will be robust enough to handle not only its expanding population of 351,000 subscribers but also a nascent community of development partners and nearly 19,000 customers who all can be contributing to applications to AppExchange.

Ideally this will generate a critical mass of “social” application production in which any of’s customers or subscribers could be contributing new applications.

But the big test will be whether’s newly tested and presumably debugged data center can deliver the robust service required to support all of this activity.’s ambitious plans will all come to naught if the basic features of platform don’t leap onto the screen with every mouse click.

John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. He can be reached at

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