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Salesforce.com Outage Forces Reality Check

A widespread service outage hit customers of Salesforce.com (CRM - Get Report) on Tuesday, making it impossible for some businesses to access critical data for much of the day.

Salesforce executives were not returning calls Wednesday, but the failure was confirmed by two analysts who follow the business software provider and by pages of outraged chatter on stock-related bulletin boards.

The outage comes as the company is deep into its fourth quarter and could slow the progress of pending deals as prospective customers -- and those ready to renew existing agreements -- wonder about the company's ability to keep their data accessible, said analyst Peter Goldmacher of SG Cowen.

Salesforce, a leader in the burgeoning "on-demand" category, provides software that helps manage customer data; but unlike traditional software suppliers who sell licenses, it hosts the applications on its own servers and charges for a service.

Although Salesforce applications are not as robust as those sold by Siebel Systems (SEBL) or SAP (SAP), the company has gained significant market share in the last two years, because most analysts believe its customers save money by not managing the software themselves. Efforts by Siebel, soon to be swallowed by Oracle (ORCL - Get Report), to match Salesforce at its own game have met with only limited success.

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