The service disruption which Salesforce.com experienced this week came at a bad time for the Software-as-a-Service (SaaS) and cloud computing market.

Although I believe the long-term prospects for SaaS and cloud computing remain strong, there are plenty of short-term challenges facing SaaS and cloud computing vendors in today’s tough economic environment.

Salesforce.com’s outage reignites the debate about the reliability of web-based services, and will intensify the concerns of those IT and business decision-makers who have been reluctant to adopt on-demand solutions.

It also validates the claims of legacy software vendors that SaaS and cloud computing are not viable platforms for enterprise applications.

The ultimate irony is that the public website which Salesforce.com created after it experienced a series of outages in 2005-2006 to demonstrate greater accountability, www.trust.salesforce.com, also went down during the latest outage.

In 2006, Salesforce.com was quick to turn its problems into marketing opportunities. This time there is even more at stake. Salesforce.com will have a hard time convincing software vendors and enterprise customers to adopt its Force.com platform unless it can build greater confidence in its service delivery capabilities. 

It is not only important for Salesforce.com to quickly restore its own reputation, but also rebuild customer confidence in the overall SaaS/cloud computing industry. This is essential for SaaS/cloud computing companies to capitalize on their competitive advantage over legacy apps in today’s tough economic environment and rapidly changing workplace.

In fairness, Salesforce.com’s uptime record is still the envy of many IT and business decision-makers. That is why an increasing number of IT organizations are not only supporting the adoption of SaaS and cloud computing, but also benchmarking themselves their operations against these on-demand service providers.

However, legacy software vendors will attempt to exploit this latest disruption to make their case for sticking with on-premise applications. For example, Oracle has publicly stated it is targeting Salesforce.com accounts and promoting its ‘pod’ approach as a hosted alternative.

PS: Click here to read about the lingering concerns of some customers who participated in THINKstrategies’ most recent customer survey in conjunction with Cutter Consortium.

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