Key Points to Remember When Negotiating Your Salesforce Master Subscription

Customer Relationship Management (CRM) has become one of the most expensive IT investments for organizations around the world according to the annual “IT Trends Study” conducted by the Society of Information Management. ​

This IT investment growth is being fueled by two primary industry drivers:

1. Large organizations are both replacing homegrown systems as well as utilizing their CRM platform to further connect their internal and external stakeholders, processes, and communication strategies; and,
2. Small to medium-sized organizations are rapidly acquiring this technology to make a positive step-change in their customer interactions and client prospecting.

​While there are many Software-as-a-Service (SaaS) CRM platforms to choose from in the marketplace today, Salesforce continues to dominate the space. Subsequently, if you are looking at CRM solutions in the marketplace, you’re likely considering Salesforce as an option.

Why is Salesforce (SFDC) the market leader and what makes it different than the others?

‍While this article is not intended to be a tactical comparison of CRM solutions available today, our vast experience and focus on Salesforce naturally has revealed a few key points:

• SFDC has been, and continues to be, very strong in outbound and inbound marketing tactics;
• SFDC arguably was the first mover in defining a SaaS CRM solution that is decoupled from any other large enterprise agreement (ex: Microsoft, Oracle, etc.) making it easier to obtain;
• SFDC developed a buying channel that is direct to a business end-user vs. going through a channel partner/value added reseller (VAR);
• SFDC was founded with the intent of truly being a platform where vertical applications could easily connect and integrate (like the Apple App Store); and,
• SFDC has perfected the sales process inside of organizations in a way that their divide and conquer sales tactics commonly identifies continues growth opportunities across the organization.

Why is negotiating a Salesforce agreement so difficult?

‍The funny thing is that the entire go-to-market model of SFDC makes it very easy to acquire licenses as needed. This is in fact one of the many elements that make negotiating with SFDC difficult. In other words, very often our clients come to us after they have identified SFDC has spread throughout their organization without their knowledge and/or with very little governance. Our clients often describe this situation similar to an “internal virus” (their words, not ours) that spreads organically at a very fast pace. The result of this unmanaged growth can lead to the following (by no means comprehensive):

• Little to no license asset management leading to “shelfware” (acquisition of more licenses than are being used);
• Incorrect license purchase creating higher costs than needed;
• Different monthly subscription fees for the same license type;
• Lack of an enterprise agreement leading to contractual risk (etc.);
• No defined growth or utilization strategy; and;
• A platform that is very difficult to disengage which drastically increases the internal cost of
• change.

CIOs and IT Procurement leaders often find it difficult to negotiate a more favorable agreement when renewing their SFDC agreement.

‍We find the following to be the primary drivers:

• Like other very well-known and established software companies, SFDC has developed a sales process that is very difficult to crack if you don’t deal with them every day (like we do); Find out more about this here.
• The standard SFDC SaaS contract allows for SFDC to introduce price adjustments at any time;
• If a client is reducing their license count, SFDC’s standard contracts permit higher per unit pricing;
• SFDC sales leadership and staff are highly motivated to continuously drive revenue growth at existing clients;
  • To be explicitly clear about this, if a client’s contract is renewed with flat revenue, this is a very negative reflection on your account management team;
• SFDC licenses are constantly changing; and,
• SFDC account management changes (by design) every 6 – 18 months which naturally negates knowledge continuity, etc.