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Salesforce.com Review — An Independent Assessment

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Salesforce Pricing Review

CRM Software Pricing
Salesforce.com pricing is largely based on the per user per month subscription model. The Salesforce pricing model is relatively straight-forward, although can get more complex when considering add-on products and options such as the logon-based pricing for the customer portal.

There is a strong onus on customers to fully understand the functional capabilities and supported use cases among the Salesforce.com editions—in order to avoid version-creep and the all too frequent surprise of discovering the software functionality you need is actually only available in the higher up, and much more costly editions.

The company offers multiple CRM software editions with varying sophistication and price points.

  • The Contact Manager Edition was $5 per user per month, managed contacts and tasks, integrated with Outlook and Google Apps and offered mobile access. This edition has been deprecated.
  • The SalesforceIQ Starter edition (previously called the Group Edition) costs $25 per user per month and tracks opportunities, contains some pre-built dashboards and provides web to lead, Google AdWords integration and other limited capabilities.
  • Professional Edition is $65 per user per month and offers more granular security, email marketing, custom dashboards, forecasting, basic customer service, rules based workflow configuration and improved reporting.
  • At $125 per user per month, Enterprise Edition adds sales team collaboration, territory management, a sales genius function, offline access and API access.
  • The final pricing tier of $250 per user per month gets the Unlimited Edition which adds 24x7 Premier support, developer sandboxes, customizable mobile products, third-party apps and increased storage.

The Service Cloud is separately priced at $60 for Desk.com (previously called the Professional Edition), $135 for the Enterprise Edition and $260 for the Unlimited Edition. With each of these clouds, there will likely be additional charges for products such as Jigsaw, Force.com and Salesforce Mobile as well as services such as customer portal access, storage and customer support.

Marketing cloud is based on a number of services and products. Marketing cloud pricing is unnecessarily complex and CRM buyers will have to contact Salesforce to learn software prices.

Salesforce CRM buyers must be aware that there are many supplemental and add-on prices for additional clouds (i.e. Community, Service, Marketing), analytics (Wave), tools (Force.com), products (Data.com, Pardot), various versions of initially free products (i.e. Chatter Plus and storage) and sometimes unplanned upgrades among cloud products (i.e. moving from Enterprise to Unlimited in order to get needed functionality). To avoid Salesforce pricing surprises, it is critical that you fully understand exactly what your solution includes, or fails to include.

Although not widely known by prospects and customers, Enterprise License Agreements (ELAs) are becoming much more popular with Salesforce.com. Salesforce also introduced Social Enterprise License Agreements (SELA) in 2011, which has expanded to include social tools such as Heroku and Radian6. These all you can eat subscription agreements can be attractive for rapidly growing customers or customers looking to rapidly deploy the bulk of Salesforce's software portfolio. However, buyers should recognize that if they fail to scale or adopt the volume of software apps in the timeframe anticipated, the ELA or SELA may result in a materially higher cost than standard subscription pricing.

For reasons that are unclear, non-US customers seem to pay about a 45% premium. For example, the Enterprise Edition in the European Union, Australia and Japan is priced at about €135/user/month; AU$180/user/month and ¥15,000/user/month respectively.

The Salesforce.com sales model is largely based on inside telesales (internally referred to as corporate sales) with field sales pursing middle market and enterprise sale opportunities. The company also supports a channel program, however, it's primarily a referral and consulting network as opposed to the Solution Provider or reseller channels more common in the business software industry.

Multi-national and larger businesses are likely to discover that the standard Master Service Agreement (MSA) is insufficient for most enterprise organizations. Many negotiate the MSA to incorporate items important to them, however, such negotiation may impact pricing. Obviously the larger the sale opportunity, the more flexibility you can expect. Salesforce.com is known to show pricing flexibility when negotiating deals at 100+ users and when competing with primary competitors such as Microsoft Dynamics CRM, Oracle and SAP CRM.

Vendor Viability
Salesforce is a growing, sometimes profitable company with strong intellectual property, a solid brand and impressive executive leadership. However, pricing pressures are inevitable, customer exit costs are relatively low compared to prior software publisher models, the market is fluid and the company faces significantly increased competition.

Salesforce.com confronts more direct threats now than anytime prior and is increasingly vulnerable in the cloud markets which it helped to create. The company is diversifying from a product perspective which has the effect of reduced focus and investment in each product area. This is significant as Salesforce.com is a fraction of the size of most of its primary CRM competitors such as Microsoft, Oracle and SAP and its PaaS competitors such as Amazon, IBM and Google. While Salesforce.com achieved first mover advantage, any of these much larger competitors can likely out-invest Salesforce.com by a multiple factor, and in fact each claims they intend to do just that.

Salesforce.com also competes against an increasing list of innovative start-ups. The top four CRM software companies, of which Salesforce.com is ranked number one, account for less than half of the CRM market. While Salesforce must keep close tabs on SAP and Oracle now that these companies have demonstrated keen intent to reassert their leadership roles, Salesforce.com must also be wary of smaller and more focused competitors who compete on innovation, specialization, geography, price and service. These smaller competitors often create highly specific vertical market CRM solutions that may erode entire industries from Salesforce.com.

Salesforce continues impressive growth, but organic growth rates are not what they use to be, and the company's acquisitions are making up some of the difference. Salesforce.com's operating margins are much lower than its major competitors. As the market further commoditizes and pricing gets squeezed, Salesforce.com may be put into a precarious position of choosing between current R&D investment levels or profitability metrics.

Next - Salesforce.com Strengths and Weaknesses >>

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Salesforce.com faces more direct threats now than anytime prior and is increasingly vulnerable in the cloud markets which it helped to create.

 

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