Salesforce is one of the largest cloud software companies in the world, and their cloud solutions have been adopted by many companies. While most Salesforce customers have the more standard, multi-year Main Service Agreement (MSA) in place, there are some large enterprises that supposedly have more strategic contractual and commercial arrangements in-place, known as Salesforce Enterprise Licensing Agreements (SELA).
While there are certainly benefits and drawbacks to either structure, knowing which is a better fit for you and your organization will be critical as you prepare for your negotiations with Salesforce. This way, you put yourself in the best position to ensure that you don’t spend more than you should and are set up for success downstream. Positioning your organization this way becomes even more important given the fact that we fully expect Salesforce to start pushing more customers down the SELA path.
Are SELAs Actually More Strategic?
Truthfully, SELAs are not always more strategic than an MSA, but they can be. Alternatively, if the contractual agreement is not set up to be aligned with an organization’s longer-term vision and roadmap, a SELA could be a detriment.
When first entering into a SELA structure with Salesforce, it is really easy for them to tout the value of this alternative structure. Here are a few examples of what this could look like:
- Enhanced Flexibility is something that Salesforce will claim is a benefit of moving to a SELA. Specifically, they will highlight the ability to transfer subscriptions between organizations or accounts that all roll under the Enterprise License Agreement. Of course, this can be of value as an organization optimizes their entitlements on an ongoing basis and can essentially share what has been purchased across a larger pool, rather than having to make additional purchases in some organizations while others have underutilized licenses.
- Predictability is another benefit that Salesforce claims you would receive under a SELA arrangement. By aligning on a fixed fee for the duration of the deal, this allows for spend to be planned for, tracked and managed in a predicable manner.
Pricing is another area where Salesforce will sometimes claim that there are differences between a SELA and standard MSA structure. While this is a nuanced topic that could make for its own Blog topic, having an understanding of what Salesforce can and can’t do is something that is important when you are considering the options.
It is also important to note that many of the benefits from SELA agreements can also be achieved under a standard MSA arrangement with Salesforce. It is not as simple as asking for these types of concessions, and there are nuances with what is achievable, but strategic relationships and contractual arrangements can certainly be achieved under a more standard MSA structure.
What are the Biggest SELA Pitfalls?
One of the biggest issues with going with the SELA structure is the lack of transparency when compared to a standard MSA structure. Often, line-item pricing is removed, and an organization subscribes to a set of product entitlements based on a fixed-fee. When there are no line-item breakdowns of the fees tied to each product, as you would find under a traditional MSA structure, it becomes easy for Salesforce to manipulate things behind the scenes when you are negotiating.
Another key issue tied to SELAs is that Salesforce will often target customers that are growing and increasing their commitment to Salesforce products. Salesforce will use that future trajectory to establish commitments tied to that growth. If your organization is going to grow a certain percent over a certain period of time, and they are going to need more subscriptions, Salesforce will do what they can to have those subscriptions pulled in.
For many organizations, the most critical issue with SELA agreements is not what happens upfront, but what happens when you look to renew. The transparency issue tends to compound itself during renewal negotiations:
- If your organization is growing and needs more of a product or multiple products, how is this change impacting total fees? How can you differentiate between the fee increases that Salesforce is trying to impose, versus the added requirements that your organization needs? It is no secret that Salesforce likes to impose fee increases, even with organizations that are looking to grow or make additional Salesforce product adoptions.
- What happens if your organization over-committed when establishing the initial SELA? How will Salesforce react when you want to remove shelf-ware and reduce your footprint? I can tell you that it won’t be a favorable reaction. The inflated starting place is now your baseline moving forward.
With transparency removed from the equation, and in conjunction with likely entitlement issues and the need to optimize or right-size your portfolio, Salesforce has you right where they want you at renewal. The bottom line is that SELA deals can be highly beneficial with the right level of protections and flexibility in-place. Knowing what a successful SELA deal looks like is only half of the battle.
One of the best ways to determine which contract structure is the best fit for your organization is to get advice from a trusted third-party expert. UpperEdge has a robust team of unbiased Salesforce advisors who understand your needs and can empower you at the negotiation table.