With the vendor’s fiscal year-end quickly approaching (Jan. 31), many enterprise customers are staring down a Salesforce negotiation for a renewal or new purchase. These transactions can be ground zero for overspending with long-tail impacts on IT budgets and software asset management hygiene.
Most enterprise-scale Salesforce deployments have grown exponentially over the years. The vendor is highly skilled at expanding its footprint across multiple business units and departments, making it hard for customers to have a clear picture of what they own.
Furthermore, customers rarely validate renewal requirements based on actual usage. They simply renew what they have and buy more. Inevitably, customers end up with bloated Salesforce estates and costs that grow exponentially from renewal to renewal.
Another risk inherent in Salesforce negotiations? Software license audits.
Salesforce Software License Audit Risks
Historically, noncompliance hasn’t been an issue for SaaS deployments because the concept of over-deployment doesn’t really apply – users can’t be enabled if you don’t have a paid license. But as SaaS vendors’ solution portfolios become more complex, there’s a new wrinkle: product use rights. At NPI, we’re starting to see enterprise SaaS vendors auditing customers to discern if software is being used according to online service terms. And just like software license audits of perpetual license deployments, SaaS vendors are using audits to “motivate” customers to migrate to newer solutions so they increase lock-in and revenues.
In Salesforce’s case, there are two main areas where the vendor can audit you:
- Restricted Use Licenses: The onus of compliance is on the customer to monitor and adhere to terms of restricted use listed on their order form. Common pitfalls that lead to noncompliance exposure are misconfiguring or failure of IT procurement to communicate restricted use terms to IT (these terms are often accepted in exchange for more attractive discounting). Out-of-compliance licenses are typically subject to the difference between the quoted price and the then-current list price. That’s a substantial cost jump for most customers!
- Consumption-based Marketing Products: For these products, customers typically estimate usage and pay accordingly. While some customers negotiate overage rates, Salesforce has historically been pretty flexible and allowed customers to re-up with a new order when consumption limits are reached. If overage rates have not been negotiated (or well negotiated), the cost implications can be quite high. Salesforce is under intense pressure to boost revenue, making it more likely the vendor will start charging overages that could be 125 to 150% of a customer’s base price.
Salesforce Negotiation Best Practices
Here are three things Salesforce customers should do to prepare for their next Salesforce renewal or purchase. These actions have the potential to save enterprise customers millions of dollars.
Assess Actual Usage to Identify Opportunities to Right-size or Liberate Licenses
A license optimization assessment is the crucial first step in cutting risk and eliminating cost waste in your Salesforce environment. It provides a detailed analysis that identifies specific individual licenses that can be terminated or repurposed, helping you avoid unnecessary new purchases. Cost savings usually emerge in two key areas:
- Rightsizing license assignments: Instead of defaulting to a standard license, you can find opportunities to assign more cost-effective options tailored to users’ actual needs.
- Freeing up license currency: By analyzing usage data, you can identify inactive licenses—whether it’s no-pulse users like printers, former employees, or users with multiple active licenses—and either cancel or redeploy them.
Get Your Compliance House in Order Before Negotiating with Salesforce
Getting your compliance house in order is crucial for Salesforce customers to avoid unexpected costs and headaches. Ensure consumption-based products are being used properly. Conduct an internal audit to make sure usage is in accordance with restricted use terms. Don’t forget to negotiate overage rates in your next agreement. You’ll be glad you did if/when they’re ever triggered!
Optimize All Aspects of Your Salesforce Agreement
With a fact-based usage baseline in hand, it’s time to tailor your Salesforce renewal to match your actual needs. What licensing mix aligns with your verified usage and future demand projections? How will different licensing scenarios impact costs? Which strategy best supports your technical and business goals throughout the full term of the agreement? Answering these questions ensures you only pay for what you need while choosing the right licenses for your users and business model.
Another key step is minimizing cost risks over the agreement’s term. Start by conducting an IT price benchmark analysis to confirm that your pricing and discounts are at or below fair market rates for each component of your renewal. Don’t forget to optimize business terms like compliance, SLAs, and data ownership to prevent unnecessary costs down the line.
Interested in reducing cost and risk during your next Salesforce negotiation? NPI’s Salesforce cost optimization experts can help. Contact us.
RELATED CONTENT