I received some difficult news this week that could end up being a terrible loss for hundreds, if not thousands of businesses & users. NetBooks, an accounting-centric solution for small businesses, and Entellium, a Sales Force Automation (SFA) and Customer Relationship Management (CRM) provider for medium-sized companies, appear to have ran into serious problems.

NetBooks:

• Halted new registrations to take on new customers (but they can register to be a beta customer for their ‘next version’).
• In my opinion, the inability to take on new customers is a very bad sign, which may indicate problems with the software, customer service, architecture, scalability, financial concerns, etc.
• I checked their blog and observed no activity since March, 24th, 2008. In times like these, it helps to communicate with customers and prospects, openly.

Entellium:

• CEO & SVP abruptly left the company last Wednesday.
• Entire marketing and sales staff laid off on last Friday.
• Brent Leary blogged about the events in an entry titled Trading Spaces.
• The Seattle Business Journal has an article detailing the reductions in staff.

Although we bump into both of these companies every now and then as competitors, I’m very disappointed with the news. Both organizations have brought legitimacy to the Software-as-a-Service (SaaS) world. Even though NetBooks’ core is accounting, they have the right mindset around small businesses needing much more than ‘typical’ CRM software to be successful.

Small businesses need a more comprehensive solution that includes CRM, contact management, billing, accounting, sales automation, etc. (We at Infusionsoft see marketing & marketing automation as being the core of the comprehensive small business solution, but that’s for another entry.) The word on the street on Entellium was that they had done a good job at building an SFA-based CRM which sales representatives in medium-sized companies could actually use — and their users were using it! It’s hard to see a fellow brother-in-arms go through struggles like this.

These two companies aren’t alone, investors have downgraded Salesforce (NYSE: CRM) and their stock has reached the lowest point over the past year, $35.94 as of this entry. Indeed, these are challenging times for commercial SaaS vendors.

Does anyone out there have insight or comments on these events?

[Image Credit: "Kruis Almagel", GeS]

UPDATE: Response from NetBooks’ CEO, Ridgely Evers:

The reason we stopped was that we discovered some pretty deep flaws in the software architecture, flaws that would not allow us to scale.  Rather than subjecting new customers to what would be a less-than-positive experience, we made the tough (and, I think, correct) decision to stop adding new users while we re-tool.

As you might imagine for a product with the scope of NetBooks, re-tooling is not a simple process, and will take another quarter or two.  But rest assured, we’re in this for the long haul and will absolutely be back — better than ever!
(Source: Cloud Ave.)

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