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HubSpot last week triggered a firestorm among customers after announcing a plan to use some of the data they store with HubSpot’s customer relationship management app to power a forthcoming AI-powered feature. While HubSpot reversed course four days later, the episode shows how sensitive customers are to software firms using their data in the AI era. HubSpot’s reversal is also another demonstration of the leverage that businesses have with the traditional software firms nowadays. We've noted before that some large customers have been able to shorten their contracts with software firms, which are keen not to lose clients given fears of rising competition from AI companies. Let’s get back to HubSpot, whose shares are down 75% since early last year on fears AI would hurt its business and whose executives said sales growth would be slightly slower this year compared to last year. On July 1, HubSpot announced it would use some customer data for a new AI feature that helps customers find new sales leads, which was set to launch next month. HubSpot told customers in an email that it would collect such data by default and that customers would have to manually cut off access if they didn’t want Hubspot collecting it. HubSpot also said it may share their data, including “business contact details, employer information, and email deliverability signals,” with other customers. (HubSpot also said it had updated its terms of service, privacy policy and other customer agreements to reflect the change in its data collection practices.) This didn’t sit well with some HubSpot customers. Some of them vented frustrations on LinkedIn and said they planned to switch to other customer management software providers. “I was floored reading this email in my inbox this morning,” one HubSpot customer wrote. On Sunday, HubSpot reversed course. In a post on its website, Duncan Lennox, HubSpot’s chief product and technology officer, apologized for the terms of service changes, characterizing them as “a mistake” and said the company would not be implementing them. (HubSpot executives didn’t respond to repeated requests for additional comment.) This isn’t the first time a software provider has found itself in hot water over customer data usage policies. In 2024, Salesforce's Slack faced a backlash when online sleuths on Hacker News pointed out that Slack’s privacy policies permitted Slack to use its customers’ data to train certain AI models. It was the customers’ responsibility to contact Slack to opt out of that policy, which very few of them seemed to know about in the first place. And in 2023, Zoom customers uncovered language in the company’s terms of service that appeared to authorize it to use their video, audio, and chat data to train its AI models. Zoom later clarified in its terms of service that it would not use such information for AI training. What’s different about the HubSpot uproar is that it involves customer management data, which many companies consider to be a competitive asset. The data include details customers have collected for years and stored in the app about their sales processes, customer contracts and business strategies. “If that data becomes a shared resource for HubSpot customers, that destroys that work,” said Caitlin Bigelow, chief marketing officer at Blazel, an AI startup that helps companies post content on LinkedIn. (Blazel was a HubSpot customer until a couple of weeks ago, when it decided to switch to another CRM provider called Attio, mainly for cost reasons, she said.) An executive at a current HubSpot customer, who didn’t want to be identified, said they, too, had been contemplating moving off HubSpot for cost reasons and that the data collection episode increases the likelihood of such a move.
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