As Entellium Leaders Take Plea Deals, Can CRM Software Vendors Make It Through 2009?

Last month, I offered some tips to determine whether your CRM software vendor deserves your business. This month, the Seattle technology community is buzzing with news about the plea deals and imminent sentencing for Entellium's former CEO and CFO.

* Paul Johnston, the former Chief Executive, has plead guilty to a single count of wire fraud. Attorneys estimate that he pocketed $1.4 million from customers and investors while inflating the company's profit statements.
* Parrish Jones, the company's former CFO, deposited about $865,000 of Entellium funds into his own account over his four years there. By managing a second set of books, Jones helped lure high profile investors and clients.

And the bad news doesn't end there. A hosted CRM provider that offered credit card transaction processing for youth sports teams and other not-for-profit organizations appears to have misplaced about a million dollars' of its customers' money. Coaches and development directors from around the country hope to recoup donations while executives at Count Me In claim to be restructuring their organization.

Fortunately, these cases offer examples of the extreme exceptions in the hosted CRM industry. Most CRM software vendors are doing well, even if they aren't all generating Google-style profits. Yet, these stories may scare off prospective hosted CRM customers. Therefore, I'll add another question to my previous list.

* Are they processing funds on your behalf? Many hosted CRM providers for small businesses and for charity groups also offer credit card processing services. Because merchant accounts can be especially hard to set up for non-profits, services like Count Me In attracted customers by promising quick setup and seamless payments in exchange for service fees. Experts recommend using an independent merchant account to prevent vendors from spending your funds during a "float" period. Failing that, vendors with shorter float periods pose less risk than vendors that sit on income for more than 30 days.