SuccessFactors Alleges it Was Scammed by Halogen

Feb 15, 2011
This article is part of a series called News & Trends.

Editor’s Note: given all the discussion around competitive intelligence (CI) last week at SourceCon NYC, we feel that John Zappe’s article on the Halogen situation highlights the fine line between ethical and unethical CI gathering.

Fool me once, shame on you. Fool me twice, shame on me.

That adage came to mind this weekend after the news broke that SuccessFactors is suing Halogen Software alleging it had been scammed by its Canadian competitor in the HR software business.

Whether or not the claims made by SuccessFactors are true, it’s the second time in the last two years the San Francisco Bay area vendor has gone to court alleging it was pimped by a competitor.

In March 2008 it sued Softscape (since acquired) over a disparaging PowerPoint that was supposedly created by an unhappy SuccessFactors’ customer and circulated to clients of the company.

In the latest legal battle, the technology news service IDG reported Friday that SuccessFactors claims Halogen created a dummy company with a sham website in order to trick SuccessFactors into providing detailed company and product information, including confidential pricing information.

By fraud and deceit, says SuccessFactors, Halogen obtained proprietary information it otherwise couldn’t get, which “will cost (SuccessFactors) considerable, untold sales,” the IDG report says. A copy of the SuccessFactors complaint is here.

Halogen’s legal response asks that the suit be dismissed outright. IDG quotes this from the Halogen documents:

“SuccessFactors is embarrassed about what it has done, and it has brought suit alleging untenable claims that are all superseded by California’s Uniform Trade Secret Act in an effort to punish Halogen for SuccessFactors’ own failings … SuccessFactors fails to identify any ‘property’ that has been permanently deprived by Halogen, any instance in which its information was used or disclosed by Halogen, any specific ‘economic relations’ that have been interfered with, or any lost sales or profits as resulting from the conduct complained about.”

A Halogen spokeswoman said the company “will not comment” on the suit, though she noted, “The claims put forth by SuccessFactors are not proven.”

A SuccessFactors spokeswoman said the company would email me a statement, which hadn’t arrived when this post went live.

HR technologist and strategy consultant Naomi Bloom tweeted about the suit over the weekend, telling her nearly 2,900 followers: “I wouldn’t presume to know the legalities, but if #Halogen has done what is alleged, they they’ve been at a minimum stupid and unethical.”

She added: “Courts will resolve legalities of #SuccessFactors v #Halogen, but #Halogen prospects should take a hard look at the complaint against them.”

While the allegations, if true, would certainly make something of a mockery of Halogen’s corporate social responsibility declarations, the whole episode does make me wonder about how SuccessFactors vets its leads and prospects.

Not assuming the worst about the companies that contact you is not only excusable, but admirable. However, somewhere along the line it would seem reasonable to do a little research on a prospect that claims to be a 500-employee business process management consulting firm.

According to the IDG report of the suit, SuccessFactors said the prospect company called itself The Magnus Group. Its now-gone website listed it as located in Valparaiso, Indiana.

A Google search now turns up dozens of Magnus-related listings, but nothing for a company in Valparaiso. Nor is there anything on LinkedIn, either for The Magnus Group or SuccessFactors’ contact, Anna Rodriguez, with whom the vendor had multiple meetings.

Perhaps if SuccessFactors hadn’t been the victim of a scam before, not doing the basic homework on the client might be just embarrassing, as the Halogen legal response says. But that apparently didn’t happen until after Ms. Rodriquez informed the sales staff that The Magnus Group was no longer interested in the product.

“Fool me twice, shame on me.”

Update: SuccessFactors has issued a statement noting that both sides in the suit have stipulated to a restraining order prohibiting Halogen from disclosing or using any of the information it may have gained via the Magnus Group. SuccessFactors President Doug Dennerline said:

Although we would rather devote all our energy to building great products and providing great services to our customers and more than 8 million users, we have a responsibility to take action to protect SuccessFactors, including our employees, customers, investors and partners, in the face of such a blatantly fraudulent and unethical attack. We plan to vigorously pursue this lawsuit.”

This article is part of a series called News & Trends.
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