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Softscape Says It Wrote Controversial Document, but Not for External Distribution

SuccessFactors says a federal court granted a temporary restraining order that, among other things, prohibits Softscape from distributing any product or document using SuccessFactors’ trademarks or trade secret information.

March 14, 2008
Related Topics: HR Services and Administration, Internet, Technology and the Law, Latest News
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In the latest twist in a spat between vendors of HR software, Softscape admitted this week it created a PowerPoint presentation harshly critical of rival SuccessFactors.

But Softscape says the presentation was not meant to get beyond the walls of the Wayland, Massachusetts-based firm.

“Although the document was based on substantiated facts, it was intended for internal use only and was not designed or intended for external distribution,” Softscape said in a statement Friday, March 14. “We are conducting our own thorough investigation to determine how an internal document ended up in outside hands.”

In addition, SuccessFactors said Friday that a federal court granted a temporary restraining order that, among other things, prohibits Softscape from distributing any product or document using SuccessFactors’ trademarks or trade secret information.

The legal tussle is between competitors in the fast-growing market for talent management software. SuccessFactors and Softscape sell tools for such key HR tasks as employee performance and compensation management.

On March 12, San Mateo, California-based SuccessFactors announced it had sued Softscape alleging unfair competition, false advertising and other claims. The suit centers on a PowerPoint presentation SuccessFactors says was sent anonymously to customers and prospects earlier this month. At least 25 customers and prospective customers received the presentation, according to SuccessFactors’ complaint.

Workforce Management saw a copy of the presentation. Titled “The Naked Truth,” the document suggests that it may have been written by a former customer or customers of SuccessFactors. “These facts represent the measure of SuccessFactors’ lack of corporate integrity and why many of us have left them,” the presentation states at the outset.

The 43-page document alleges a variety of failures and problems at SuccessFactors, including significant customer attrition. It claims that SuccessFactors had 208 customers in January 2005, but in January 2008 “only 76 of the 208 still remain.”

In its suit, which was filed in U.S. District Court for the Northern District of California, SuccessFactors calls the document “false and misleading.” The company contests sections of the presentation including the customer attrition portion. “… SuccessFactors enjoys annual retention rates of 90 percent or higher,” the company said in its complaint, “and even using the methodology set forth in the presentation, SuccessFactors’ true customer attrition was far less than half the figures claimed during the period identified.”

The circulation of the presentation has hurt SuccessFactors, according to the suit. “Customers who received the presentation while in negotiations to make purchases from SuccessFactors have indicated that whatever the truth of the allegations of the presentation, those allegations generate far too much negativity for SuccessFactors to overcome,” the suit states.

Softscape portrayed the creation of the presentation as standard business practice. “It is common in a highly competitive market for vendors to review each other’s presentations, Webinars and demonstrations and have competitive sales tools,” Softscape said in its statement Friday. “The SuccessFactors lawsuit is an act of desperation by a hostile industry predator.”

—Ed Frauenheim

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