Hosted CRM Wars Turn Ugly As Salesforce.com Sues UpShot

Salesforce.com, one company that claims leadership in the hosted CRM business, on Monday sued rival UpShot, which has also laid claim to the top-dog title. The legal action was launched in the U.S. District Court for the Northern District of California.

Salesforce.com maintains that UpShot ads constitute "false advertising, unfair competition and unfair business practices," according to a statement from San Francisco-based Salesforce.com.

The company had previously complained via the Better Business Bureau's National Advertising Division. According to Salesforce.com, that group had concluded that UpShot's ad headline, "The Better CRM Online Solution," and its claim to be the "leading Web-based sales-focused CRM solution" were not supported and should be changed.

"We believe in competing fairly in the marketplace, not in deceiving prospects through false and misleading advertising," Marc Benioff, Salesforce.com CEO, said in a statement.

Both companies, along with NetLedger and Salesnet, have been duking it out in hosted CRM. Because these companies tend to offer predictable cost per user, typically around $60 per user, per month, vs. open-ended and pricey in-house CRM implementations using Siebel Systems or PeopleSoft software, they have seen a lot of interest.

Just three weeks ago, Salesforce.com claimed to be the first ASP, or "software-as-services" company, to post a profit. For its quarter ended April 30, 2003, the privately held company said it logged $19.1 million in revenue, nearly twice the year-ago figure of $9.6 million. On that $19.1 million it said it made a profit $188,000 on an unaudited basis.

Neither Benioff nor UpShot CEO Keith Raffel could be reached for comment on the suit. Dan Starr, chief marketing officer of Boston-based Salesnet, weighed in, however. "I think that the Salesforce.com marketing machine's going into overdrive ... looking to make news when there is no substantial news," he noted.

Salesforce.com is indeed known for its flashy and creative public relations moves. Last month, it hosted a splashy San Francisco event featuring Arnold Schwarzenegger and a sneak preview of his new movie "T3: Rise of the Machines."