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Downtime is a constant problem, say critics. Only last month, Salesforce went down for at least 24 hours over the Easter period as the application was upgraded. It is understood something similar happened when the previous version was rolled out in November 2003. "I am sure Salesforce.com is aware that new release-related issues cost Salesforce.com customers millions in lost productivity and did not help organisations dealing with the in-house versus outsourcing debate," wrote one irate user on a Salesforce discussion board. (Salesforce, which is constantly adding redundancy to its systems, says the upgrade was deliberately timed over Easter and few users were affected.)

There has been embarrassment, too, for Siebel. Just days after launching CRM OnDemand in Europe, the company confirmed that the service would be read-only one weekend in April as planned maintenance work was carried out.

While it might seem responsible to carry out maintenance during off-peak times, experts warn that some customers' CRM applications might require almost 100% uptime. After all, it is perhaps less disruptive to take down SFA or marketing automation applications, which tend to be used during weekday office hours, than customer service applications, which can be in use for 24 hours a day. Another problem is that customers may receive advance warning about maintenance but are rarely, if ever, consulted on its timing.

To make matters worse, few (if any) application service providers offer standard service-level agreements to their customers. Zach Nelson, NetSuite's CEO, says that the woollier notion of 'service-level targets', not even always supported by some form of compensation, became the standard in the CRM application service sector.

But things do seem to be improving, perhaps as a result of greater competition between service providers. NetSuite, which provides a range of front- and back-office application services, recently began offering customers money-back guarantees if it failed to hit its uptime target of 99.5%. Aspective, which gives customers credits for missing targets, has beefed up its (rather modest) targets from 95% to either 97.5% or 99.9% availability. And Salesforce, which until recently held all customer data in a single location in Silicon Valley, close to the San Andreas Fault, with some backup in San Francisco, has added redundancy to its system by establishing a business continuity facility in Pennsylvania.

Integration between CRM application services and back-office systems is another headache. Broken integrations and lost customer data, particularly following a service upgrade, were not uncommon at one time, say critics. Although some customers have still to be convinced (see box highlighting Airclaims' concerns), analysts do say that things have improved in the last two years. Crucially, some service providers began using better connectors and XML-based application programming interfaces. For example, Salesforce.com's Enterprise Edition, launched in 2002, offers an 'XML gateway' that connects to enterprise applications via an API-based integration server residing behind the customer's firewall. But analysts at Forrester say customers must run Tibco middleware if they wish to connect Salesforce with Siebel, SAP, Oracle or PeopleSoft.

Siebel this month launched an OnDemand version of its Universal Application Network integration server, which is designed to link its CRM service with on-site enterprise applications including Siebel's own software. But critics of the UAN say that it does not yet cover enough integration scenarios (around 150 at the last count) for most large enterprises.

Seventh heaven

Where is all this going? Listen for long enough to ASP purists like Marc Benioff, Salesforce's chairman and CEO, and you might be forgiven for thinking that CRM will one day become a commodity. Benioff argues that CRM at the very least should be regarded as a business service, rather than technology to be licensed. Gartner analysts have coined this potential phenomenon the 'seventh wave of software' (ASP comes in about the third wave), in which companies subscribe to business services and processes.

Inforte's Turk, for one, is sceptical. He believes that some companies will always regard the information that they keep on their customers as a differentiator. "In no way does an ASP CRM tool create competitive advantage," he says.

Ultimately, he might be proved right. Certainly, Siebel believes (or rather, it hopes) that CRM application services will complement in-house CRM applications. The former, it thinks, will serve a specific purpose, such as rolling out a version of Siebel to new branch offices, while the latter will still be where the data is kept and out of which competitive advantage can still be obtained. "Companies are adding OnDemand around the edges," says David Schmaier, Siebel's executive vice president.

But this vision arguably says as much about Siebel's new business model, and its keen desire to avoid cannibalising its core business, as it does about what every customer will want.

What is clear is that CRM application services are finally coming of age. And not before time, says Schmaier. In 1995, Siebel executives first talked seriously about the idea of a CRM service, but kept it on the backburner, he says. Later, the company launched an ill-fated training and information portal for sales professionals, called Sales.com, which closed in 2002. After several false starts, mainstream customers and big enterprises may finally be ready for CRM application services. "In the technology industry," says Schmaier, "timing is everything."