SALESFORCE DEAL SIZING OVERVIEW
Total Salesforce cost is dependent on two variables: price and quantity. Too often customers believe price alone is what prevents them from reducing their Salesforce costs. The reality is that Salesforce product quantity is equally important in the total cost equation and Salesforce sales reps are skilled at manipulating volume to drive additional costs in negotiations. To justify any Salesforce deal, we need to ask ourselves “do we need the licenses we’re purchasing?”
This Salesforce Rightsizing report focuses on key demand forecasting techniques to mitigate purchase risk and highlights key topics related to purchasing licensing effectively to reduce Salesforce cost:
1. Salesforce License Under-Purchase Risk
Fear of over-purchasing causes many customers to avoid committing to long-term licensing needs, and only purchase Salesforce licenses when needed. This leads to multiple small purchases at sub-optimal Salesforce pricing. Without forecasting for Salesforce license growth, you are eliminating a main negotiating lever. This section details the risk of under-purchasing with Salesforce, specific Salesforce products that are consistently under-purchased, and the impact this can have on long-term Salesforce costs.
2. Salesforce License Over-Purchase Risk
Salesforce sales reps are experts at inflating demand forecasts, leading to customers buying more than they need. This section details the Salesforce products that are commonly over-purchased, and the impact over-purchasing has in a recurring SaaS pricing model. We detail how to identify and plan for situations where over-purchasing is a potential risk and mitigate long-term shelf-ware Salesforce costs.
3. Salesforce Purchase Demand Forecast Checklist
To help clients mitigate over- and under-purchasing, ClearEdge developed a checklist for building more accurate demand models when engaging in a Salesforce purchase. Building your own demand model prevents Salesforce from doing it for you, which often leads to inflated proposals and costs. Understanding how much Salesforce product you need and when you need it is central to your ability to obtain the best Salesforce deal for your enterprise.
4. Salesforce Deal Structures
Understanding the differences between Salesforce deal structures is essential in figuring out which one is appropriate for your business. We examine each of the following common Salesforce deal structures:
Standard Transactional Salesforce Deal Structure: Salesforce’s standard deal structure separates transactions between different business units. Each purchase will have a separate order form and separate terms governing them. This deal structure is common when organizations adopt Salesforce product for the first time or in small increments, but poses the issue of disparate Salesforce pricing across different business units within the same organization.
Tiered Price Schedule Salesforce Deal Structure: Tiered price schedules are commonly used to provide transparency on add-on rates for additional Salesforce licensing. Though this structure clearly indicates pricing for future purchases, discounting included in Salesforce price tiers are typically sub-optimal. We dive into when it’s advantageous to use Salesforce tiers and where it makes sense to avoid them.
Salesforce Enterprise License Agreement (SELA): Potentially the most popular deal structure, the Salesforce Enterprise License Agreement, also know as a SELA, is Salesforce’s enterprise agreement offering. A capped number of provisioned Salesforce licenses are given to a customer with add-on rates for additional licensing. It’s common for customers to achieve a lower bottom-line Salesforce cost in this model, but its bundled elements make it difficult to validate a competitive price. Learn the specific risks hidden in a Salesforce Enterprise License Agreement and ways to use this deal structure to your advantage in your next Salesforce negotiation.
Salesforce Unlimited License Agreement (ULA): The Salesforce Unlimited License Agreement is a less common deal structure used by Salesforce, but is often pitched when a customer is unsure of their future licensing levels. Having the ability to flex up and down with no add-on costs or license restrictions sounds appealing, but the reality is that the Salesforce Unlimited Agreement is packed with multiple risks and hidden costs that will present themselves during your next Salesforce renewal. This section will highlight the reasons Salesforce pitches the Unlimited License Agreement and what Salesforce risks you need to be aware of in this deal structure.
Salesforce beats customers in negotiations not only through price, but through inflation of demand profiles. Over-buying and under-buying cause long term cost risk, so creating an accurate demand forecast is essential for achieving a successful Salesforce deal. For additional assistance on your Salesforce purchase, review some of the other ClearEdge resources listed below to help plan your strategy and mitigate risk.