'Cloud-Rush' Attracts Shady Characters

Posted on December 5th, by thinkstrategies in cloud computing, Cutter Consortium, SaaS, SaaS Showplace, THINKstrategies. 2 comments

I’ve been suggesting for a few months that the Software-as-a-Service (SaaS) and ‘cloud computing’ market has been experiencing a ‘gold-rush’ era of accelerated growth. The rapid adoption of SaaS solutions was confirmed by THINKstrategies’ latest survey in conjunction with Cutter Consortium.

Just like in the original gold-rush of the 1800s, today’s ‘cloud-rush’ is not only attracting a proliferation of players, but also an assortment of unsavory characters.

The scandal surrounding IT Factory of Denmark is the most recent example. If you haven’t been keeping track of this one, it is worth reading about. The company’s CEO, Stein Bagger, disappeared before Thanksgiving after financial ‘irregularities’ were discovered at his company and a half billion kroner were found to be missing from the company’s bank accounts. Bagger is presumed to be hiding out in Dubai, and his company has fallen into bankruptcy.

The scandal doesn’t only affect the company’s employees, customers, partners and creditors. It also is a black-eye for the tech industry. As TechCrunch reports, just this September the Danish version of Computerworld named IT Factory “Denmark’s Best IT Company 2008″.

Another scandal involving a SaaS company unfolded in October. In this case, Entellium’s CEO and CFO were arrested for keeping two sets of books to disceive the company’s board of directors and investors. The company is facing bankruptcy and its assets are likely to be sold to another vendor.

Once again, the impact of this scandal extends beyond the company’s employees, customers, partners and investors. Entellium won numerous industry awards for the quality and innovative nature of its SaaS solutions from a variety of industry associations and publications before the company’s executives were discovered to be cooking the books.

While these might be isolated cases, they are a clear indication that the SaaS/cloud computing market has grown to the stage in which it is likely to be a target for more of this type of deceitful behavior.

For instance, I’ve even discovered a new online directory which is structured curiously like my SaaS Showplace and includes almost an identical list of companies which is attempting to exploit the SaaS/cloud computing market.

These ethical threats to the SaaS and cloud computing movements could undercut the success which the on-demand services marketplace experienced over the past year, and could combine with the uncertain economy to derail the momentum many SaaS/cloud computing companies were anticipating in 2009.

All of us who have worked hard for years building the SaaS/cloud computing market will have to work even harder now to combat these threats and safeguard the integrity of the on-demand services industry from these opportunistic, scurrilous characters.

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