It’s been an interesting year for Salesforce. For the second time in under three years, co-CEO Marc Benioff will part ways with his co-CEO. There appears to be internal strife around the company’s acquisition of Slack, the most expensive subscription software acquisition of all time. And perhaps most telling is the vendor’s revenue growth rate. According to the vendor’s recent quarterly earnings, revenue grew 14% – the slowest since Salesforce went public in 1994.
CFO Amy Weaver shed some light on the factors behind Salesforce’s revenue slowdown during the company’s Q3 earnings call a few weeks ago. Longer sales cycles, more layers in the purchase approval process, and macroeconomic conditions were to blame. According to Weaver, this drove “intense customer scrutiny on every investment dollar to ensure the highest return possible.”
NPI anticipates this trend of heightened scrutiny by customers to continue in 2023 for three reasons:
- The global economy is at a crossroads and, depending on who you ask, we’ll either narrowly avoid a recession or officially enter a mild one in the coming months. Regardless, this volatility is driving more fiscally conservative behavior across IT and IT procurement – it’s unlikely to translate into shrinking IT budgets, but it will translate into more careful spend oversight so that budgets deliver maximum value.
- For some large enterprise customers, the Salesforce estate has become quite bloated. Typical enterprise deployments contain thousands of licenses across numerous departments and business units, which creates two issues: (a) it’s difficult to manage licenses and (b) it virtually guarantees overspending on unused or underutilized licenses. Large-scale software deployments like Salesforce (as well as others like Microsoft 365, Adobe, Workday, etc.) will be targets for SaaS license and cost optimization.
- Salesforce will do whatever it can to improve its growth trajectory. That includes pulling out all the stops to maximize annual revenue per customer, particularly among its largest customers.
Tips for Improving Salesforce Contract Negotiation Outcomes
Over the last year, NPI has published several resources to help customers improve the outcome of Salesforce contract negotiations. These are a must-read if you have a Salesforce renewal or purchase planned in the coming year:
- Why Does the Salesforce Renewal Negotiation Have to Be So Hard? – Salesforce negotiations are tough – excruciating even. The first step in streamlining the Salesforce purchase or renewal is understanding the Salesforce psyche. What makes it so difficult? Why do customers overspend and where? NPI explores 4 key challenges (and how can you solve them).
- Salesforce Vendor Management: When to Start Working on Your Salesforce Renewal – Waiting to strategize your Salesforce renewal until the last few months prior to contract expiration is a grave mistake. In this article, we discuss when is the best time to start working on your renewal and how the right amount of runway translates into leverage.
- How to Cut Costs on Your Salesforce Renewal – Customers must go into their next Salesforce renewal more prepared than ever and with full visibility into the blind spots that lead to overspending. In this post, we share two areas that every customer should focus on to weed out overspending.
The First Step in Reducing Salesforce Costs and Sprawl
NPI’s SaaS license optimization assessment is the first step in breaking the cycle of overspending and overbuying. It thoroughly analyzes usage to identify licenses that can be terminated or harvested for redeployment (thus avoiding/minimizing the need to purchase new licenses). It also establishes a fact-based renewal baseline, so you can ensure you’re paying for what you need and at an optimal cost.
If you have a renewal planned in the coming year, NPI can help. Our team of IT procurement advisors and Salesforce licensing experts can help you make the most of preparing for your next Salesforce renewal. Contact NPI today to learn more.