Organizations need to ensure Salesforce’s aggressive determination to grow adds real value
Boston, MA – September 1, 2021 – UpperEdge, an independent third-party advisory company that empowers companies to get the most value from their IT supplier relationships describes how customers could be tapped to help Salesforce achieve their lofty goals.
Double-digit revenue growth and a constant upward trend of success has become the norm for Salesforce. While the SaaS cloud subscription model is built to increasingly raise customer’s costs and dependency over time, Salesforce has taken this to the next level with their incredibly effective sales tactics and marketing machine.
Several recent key indicators point to the fact that Salesforce aims to dramatically expand spend within current customer accounts:
Indicator #1: A Lofty $50B Goal. Their full year FY21 results showed that Salesforce blew past its $20B target. They also raised FY22 revenue guidance to about $26B and forecasted they expect to generate $50 billion in annual revenue by fiscal 2026. By raising their guidance and putting out the $50B marker, they plan to double their revenue in just 4 years. They will need customers to add more products, use more of the products they already have or hit them with price increases to achieve this.
Indicator #2: Higher Sales and Marketing Spending. Historically, most of Salesforce’s operating expenses have been put towards Sales and Marketing. On average, SaaS companies spend around 40% of their operating costs on Sales and Marketing and roughly 20% on Research and Development.
Salesforce’s Sales and Marketing expenses, on the other hand, have been increasing steadily and account for well over half of its total operating expenses at an astronomical 64% over the past five years with a plan to spend even more on sales moving forward. They have also just launched Salesforce+ streaming services, an indication of further increasing their marketing spend in the near term.
Indicator #3: Transforming the Entire Customer Experience. Like many large technology vendors, Salesforce acquires companies to expand its portfolio of solutions and to grow its customer base. For Salesforce, it comes down to making their Customer 360 portfolio of products larger and more integrated with its acquisitions of Slack, Tableau, MuleSoft, Demandware, ExactTarget, Vlocity, and ClickSoftware.
“While Salesforce will strive to include as many of these acquired solutions into your portfolio as possible, keep in mind that each product needs to provide value to you, since your increased Salesforce portfolio will renew at a higher rate,” said Adam Mansfield, ServiceNow Practice Leader at UpperEdge.
“If you have renewals coming up, they’ve earmarked you for more than you’ve likely planned with the goal of spending more with Salesforce,” Mansfield added.
Adopting some of these products, however, could include concessions from Salesforce. The key here is to focus on the investment value your business will get from the additional Salesforce products and ensuring your Salesforce account executive stays focused on that, rather than simply selling you the next thing.
Based on the hundreds of Salesforce deals we have reviewed as part of our client engagements, we have built a massive database of Salesforce-specific pricing and commercial term benchmarks. Click here to request a consultation where we can share our Salesforce insights in the context of your unique situation.
UpperEdge maximizes the value its clients receive from their key IT supplier relationships by helping them develop and execute fact-based sourcing, negotiation, and program execution strategies. Visit www.upperedge.com for more information.