Spend Matters welcomes this guest post by Gregg Spivack, Director of Client Services, NPI, a spend management consultancy, focused on eliminating overspending on IT, telecom and shipping.
Salesforce.com has always pushed the envelope – first with its cloud-based CRM application that brought SaaS into the mainstream, and then with its ambition to define a new era of cloud computing. That ambition has clearly paid off. Last week, the company reported profits that beat market expectations. CEO Marc Benioff commented: “Salesforce has surpassed the $6 billion annual revenue run rate faster than any other enterprise software company, and our current outlook puts us on track to reach a $7 billion revenue run rate later this year.”
That’s a pretty hefty accomplishment for a company that got its start as a small CRM vendor. But, with acquisition rumors swirling around, it has become apparent that Salesforce has a lot to win (or lose) based on how well it can continue to grow revenues within its existing client base.
In other words, Salesforce customers should consider themselves warned. The pressure to spend more will be high as will the risk of overspending. As the Salesforce.com estate expands beyond the sales department in many organizations, the complexity of sourcing and managing that estate has grown. More users, more licenses and more data translate to higher spend that can be unwieldy across multiple facets of the organization.
Salesforce customers should be wary of the following cost risks as they purchase, renew or expand their Salesforce estate:
Buying the wrong license type. Companies often buy full-use licenses for users who only need a lower license profile – a typical example is application architects and developers. It’s important to understand the business’ unique usage requirements and align license types accordingly.
Overbuying support. Premier support for Salesforce.com can be expensive – and not every customer needs it. Many customers can get away with a lower tier of support services or – even more cost-effective – work with a third-party support provider to provide comparable levels of service at a much lower price. Customers must know their support requirements and should explore alternatives to premium options.
Failure to maximize discounts. While Salesforce.com is not known for its pricing flexibility, the vendor does grant substantial discounts to companies that know how and when to demand them. For volume purchasers, strategic customers and competitive sourcing events, discounts can be 70% or more.
Unanticipated monitored costs. The amount of data amassed, number of objects used, number of tabs, number of fields, etc., in the Salesforce application is staggering – and the vendor is eager to monetize. The management of these system measurements can easily be a 5- or 6-figure expense for customers that are document-, data- and custom-object intensive.
As Salesforce embarks on the next phase of its journey (possibly as an acquisition target), customers should be prepared for the ride. Customers that know how to centralize and bring transparency and predictability to their spend – as well as leverage an increasingly competitive landscape – will be able to keep costs in check.