In a recent post Jeff Kaplan takes a look at several companies which are giving SaaS and Cloud Computing a bad name. In both cases, the owners were less than honest with investors and clients. While it is easy to hide irregularities in an overheated economy, as managers borrow against future growth, as the economy begins to slow, the "wheels start to come off the cart".

The scandal surrounding IT Factory of Denmark is the most recent example. If you haven’t been keeping track of this one, it is worth reading about. The company’s CEO, Stein Bagger, disappeared before Thanksgiving after financial ‘irregularities’ were discovered at his company and a half billion kroner were found to be missing from the company’s bank accounts. Bagger is presumed to be hiding out in Dubai, and his company has fallen into bankruptcy.

Another scandal involving a SaaS company unfolded in October. In this case, Entellium’s CEO and CFO were arrested for keeping two sets of books to deceive the company’s board of directors and investors. The company is facing bankruptcy and its assets are likely to be sold to another vendor.

While the SaaS industry is not immune to dishonesty, I don’t believe this is typical of the industry either.  Many reputable SaaS, Cloud Computing, and data center firms, with solid financial plans have build and are continuing to build strong companies which will change the way companies store and process data.