HEAD IN THE CLOUDS: Salesforce Weakens Price Protections and Google Cloud Ramps Hiring

This week, I take a look at Salesforce’s removal of their standard renewal price protection from their Master Subscription Agreement and what it means for current and future enterprise customers.  I also analyze the recent news that Google Cloud has hired their first North American Sales Lead, a former Red Hat and Microsoft executive.

Salesforce Removed Its Standard Renewal Price Protection – Did You Notice?

Unfortunately, many Salesforce enterprise customers have been living with Salesforce’s standard renewal price protection that provides a commitment that the customer’s pricing would not increase by more than 7%.  Of course, there were conditions that had to be met in order to get the benefit of this protection.  Here is the renewal price protection language that used to exist in Salesforce’s standard Master Subscription Agreement (MSA):

“The per-unit pricing during any renewal term will increase by up to 7% above the applicable pricing in the prior term, unless SFDC provides Customer notice of different pricing at least 60 days prior to the applicable renewal term.  Except as expressly provided in the applicable Order Form, renewal of promotional or one-time priced subscriptions will be at SFDC’s applicable list price in effect at the time of the applicable renewal. Notwithstanding anything to the contrary, any renewal in which subscription volume for any Services has decreased from the prior term will result in repricing at renewal without regard to the prior term’s per-unit pricing.”

I say the renewal price protection “used to exist” because Salesforce has changed this language in the current standard MSA, and most specifically removed the language that includes the 7% price increase cap commitment.  Here is the new renewal price protection language that is missing that first sentence:

“Except as expressly provided in the applicable Order Form, renewal of promotional or one-time priced subscriptions will be at SFDC’s applicable list price in effect at the time of the applicable renewal. Notwithstanding anything to the contrary, any renewal in which subscription volume or subscription length for any Services has decreased from the prior term will result in re-pricing at renewal without regard to the prior term’s per-unit pricing.”

Beside the fact that the prior standard price protection was already not competitive or adequate, the fact that it is now worse is eye-opening and something that enterprise customers need to be aware of and need to address as part of any renewal negotiation or discussion they are having.  In fact, my recommendation would be to raise this as an issue now.  You may want to ask your sales rep or point of contact at Salesforce why they didn’t bring this to your attention (if they didn’t already).

If you are considering adding Salesforce and one or more of the various products they offer to your portfolio for the first time (e.g., Sales Cloud, Service Cloud, etc.), I would highly recommend you make renewal term price protections one of your top issues when structuring your contractual relationship.  The standard renewal protection wasn’t good enough before, it is not good enough now, and the fact that Salesforce made it worse is concerning.

As you can imagine, without improvement to the new standard renewal price “protection”, that shiny one-time “special” discount Salesforce may be offering you (or for current customers, the discount achieved) doesn’t look so great anymore and doesn’t mean much if you are left paying list prices (i.e., a significant increase to what you have been paying).  It is not impossible to address the issue at renewal.  It can be done, but it is obviously much more difficult given the high probability of renewal.

It is important to mention that Salesforce is not necessarily hiding these changes, even though they are most likely not proactively bringing them to the attention of their current customers.  The current and previous versions of the MSAs can be found on their website.

Google Cloud Hires First North American Sales Head – Of Course They Did!

Google Cloud recently announced they had hired Kirsten Kliphouse to be the first North American sales lead.  Kliphouse was most recently at Red Hat as SVP and General Manager and prior to that was VP Enterprise Sales and Partners for 25+ years at Microsoft.  This perfectly aligns with “newish” Google Cloud CEO’s plan to make investments geared towards putting Google Cloud in the best position possible to land more enterprise customers.

Kurian has made it clear that one of the investments Google Cloud will be making is expanding their sales team to include established enterprise sales executives.  Kurian brought in former SAP executive Robert Enslin as President of Global Customer Operations back in April and recently hired former Oracle colleague Eduardo Lopez as Google Cloud’s first Latin America sales head.

In addition to leading North American sales, it has been reported that Kirsten Kliphouse will also be responsible for overseeing how customers actually use G Suite and other Google services and products.  A clear focus on both sales and use makes perfect sense given the fact that cloud vendors are increasingly interested in driving use in the same manner as they have been driving revenue growth (ACV).

As I have discussed and covered previously, cloud vendors realize that it is actual use that leads to “stickiness” and it is “stickiness” that leads to “lock-in.”  Lock-in creates significant leverage to add on more products or higher editions to the portfolio (upsell) and increased pricing come renewal time.  Use also will deepen and widen the moat around Google’s castle to better keep out the competition.  Google Cloud doesn’t want to exert all this time, money and effort to only lose the castle back to whom they probably took it from in the first place (like Microsoft or Amazon).

I fully expect to hear more announcements in the coming months that additional seasoned enterprise sales executives are joining Google Cloud.  I also suspect there will be even more strategic hires aimed at landing more enterprise customers and beating Microsoft and Amazon, but they may not rise to the “public announcement” worthy level.  In fact, I wouldn’t be surprised if Enslin has not already targeted, reached out to or even hired some of his former SAP colleagues.