Are you a customer of Salesforce Support (such as Premier Success), Production/Development environments (such as Sandbox) or Security solutions (such as Shield)? If you’re feeling good about your recent negotiation or feel that you have a good handle on your upcoming purchase or renewal, you may want to take a step back and consider whether you received the transparency needed to truly understand the cost impact of your long-term relationship with Salesforce.
Downstream Costs are Often Overlooked
While upfront pricing is, of course, important, there are several elements within Salesforces’ pricing that many organizations don’t have any insights into. Many Salesforce solutions have more complicated metrics than the simple per/user/month pricing that comes to mind when you think of a typical cloud subscription.
In fact, some Salesforce products are priced based on a percentage of your total net spend. For instance, if you subscribe to Premier Success, utilize Salesforce security features (e.g., Shield or any components of it) or utilize Sandbox for production instances, development, and testing, your fees are directly impacted by the rest of your portfolio. They will naturally increase as your relationship grows with Salesforce.
If you didn’t know how these fees were derived, you’re not alone. Even if you did have some insight, did you negotiate a longer commitment regarding what those fees will look like? If you didn’t, you’re still not alone.
The lack of transparency that Salesforce provides to the market is astounding when you consider the millions of dollars that are simply taken as “the cost of doing business with Salesforce” by many organizations. While you were busy trying to drive down the price of Service Cloud or Sales Cloud, Salesforce was making up for it with things such as support fees.
Though pricing is important, your deal is simply not as competitive as you think if you failed to achieve the right level of transparency and negotiate other concessions regarding protections and flexibility. In fact, many organizations end up leaving a lot on the table during their negotiation which can have a material impact on their budgets down the line.
The Impact is Compounded
The way that Salesforce derives fees from these “percentage of the net” solutions leaves plenty of room for organic fee increases. Keep in mind that Salesforce has told the market that they plan to double its revenue and grow to $35B by 2024. It’s no secret that one of the ways they plan on doing this is by increasing the annual commitment amount from their current customer base. The simplest way to increase revenue is to increase the price. When you add in Salesforce’s aggressive pushing of net-new product adoptions and just general organic growth that exists, Salesforce’s path to success becomes that much clearer.
This brings us back to the topic at hand; when fees are derived as a percentage of other fees, any future price increases are compounded when you consider that the percentage being charged now applies to a larger base number. If you achieved a reduction in those percentages but did not secure a longer-term commitment regarding the percentage, you are exposed to significant fee increases. Since these products are generally excluded from any price protection, many organizations experience fees based on a higher percentage of net fees when they look to renew.
This is further compounded with the renewal price increases that Salesforce has in store for you along with that shiny new product they want you to adopt. By the way, all of these things are happening as Salesforce solutions become more deeply ingrained within your organization and too “sticky” to truly consider an alternative. Trust has become a significant focus for Salesforce and they will be asking you to trust them in the face of meeting their aggressive revenue goals with your organization’s dollars.
How to Approach Salesforce
While it is critical for all organizations to understand how their Salesforce solutions are priced and change over time, the fact of the matter is that it is not easy to get what you need from Salesforce. It is important to treat each Salesforce solution or service as its own product and consider the cost impact beyond the upfront total cost numbers being put in front of you.
Each solution or service should be treated the same way that we would recommend approaching each vendor – with its own business case and in-depth analysis. If support, security, or development are a part of your future roadmap, the fees will be too. And as previously mentioned, these fees are naturally increasing as a product of time (i.e. additional volume or future price increases to current products – those are coming).
If you are feeling less confident about the rosy picture Salesforce is painting for you, be sure to set the right expectations and ask the right questions. Achieving greater transparency and price protections will result in a more competitive Salesforce contract now and in the future.