NPI is often asked by clients, “How much time before the end date of our current Salesforce contract term should we begin working on the next renewal?” The answer may surprise you – especially since many Salesforce customers wait until a few months, sometimes even weeks, before the renewal date to start thinking about it.
With Salesforce specifically, NPI recommends using a different approach: Begin working on your renewal on day 1 of the new contract term!
Let’s break down why. One of the most important aspects of driving the best outcomes with Salesforce during the contract renewal process is customer leverage. When NPI clients begin looking for leverage in the months before their renewal, they realize that they don’t have the time to invest in the best practices that drive the most positive outcomes.
For example, they don’t have time to assess the value of the products they’ve licensed. And since Salesforce is often purchased by multiple business units with different objectives, it can take some time to gain consensus on a set of common objectives for the next renewal. In addition, relationships that take months, and sometimes years, to build are key to your Salesforce vendor management strategy.
NPI recommends that Salesforce customers focus on the following areas to build up their leverage:
Product Usage and Consumption
Salesforce doesn’t make it easy for customers, particularly larger customers, to get consolidated license information that helps them determine if their investment is optimized. Due to the nature of Salesforce’s products, and to their “divide and conquer” sales strategy (also used by most of the leading enterprise software vendors), Salesforce typically sells into individual business units rather than selling to a centralized core IT organization (we share more in this post). It is typical for companies to have multiple siloed Salesforce Orgs across different business units.
This fragmentation is exacerbated by the fact that Salesforce has not invested a great deal of time building performance management and monitoring tools to help customers gain insight into how their users are using the products that they purchase. This includes the products that are license-based (such as Sales Cloud or Service Cloud) and products that are consumption based (such as Marketing Cloud and Commerce Cloud).
Establishing a clear understanding of your Salesforce estate, level of optimization, consumption rates, and usage rates on an annual basis will give a great deal of insight into how to structure your negotiating position prior to the renewal. It will also give you visibility into unused licenses that can be reallocated (vs. buying additional licenses throughout the agreement term). NPI recommends that you conduct a formal review at the start of each contract year to optimize the current state and plan for the next year. The data insights you gain from this approach will be instrumental in your renewal negotiations.
When Salesforce begins negotiations with a customer, the sales team usually dominates all communications. Relationships with leaders and teams outside the sales organization at Salesforce are critical for driving the best outcomes and influencing your Salesforce vendor management approach. There are two key reasons for this:
- Having relationships with other business units and leaders outside of sales can help with issue escalation and resolution. A common pain point for Salesforce customers is a general lack of responsiveness from the Salesforce support organization.
- Relationships are also critically important in escalating issues when the Salesforce sales organization refuses to make reasonable concessions during the renewal negotiations. Having access to leaders within Salesforce can be instrumental in putting pressure on the sales organization – particularly when sales is taking a heavy-handed or aggressive approach in the negotiations.
Many NPI clients who are Salesforce customers report some issues that Salesforce can’t, or won’t, resolve. It begins with support issues but can expand to other areas such as unexplained interruptions in service, contractual/legal issues that haven’t been resolved, SLAs, and even compliance issues faced by Salesforce customers in a variety of industries.
NPI clients who experience the best outcomes are those that are keeping a close eye on issue management by Salesforce. Issues that require escalation should be documented and shared with Salesforce as they occur, especially in the months leading up to the renewal negotiation. This is particularly helpful when Salesforce takes the position that if you pay more, you will get more in relation to better support – which is something they often do.
Salesforce does a masterful job of identifying and nurturing relationships with the power-users in your organization. While this is good in terms of enabling Salesforce sales reps to understand your needs and plans, it is also an area of “leakage” at renewal time – unintentional, but damaging. Understanding who those boosters are, and proactively aligning roles and communication guidelines as the renewal approaches, is critical for driving the best negotiation outcomes.
Because Salesforce works directly with business stakeholders, IT groups often struggle to keep pace with business unit demands that drive technology purchases. As a result, it is hard for IT organizations to think strategically about their Salesforce investment because Salesforce does not provide that level of partnership to customers unless asked.
NPI recommends that IT organizations begin driving strategic planning with Salesforce in the spirit of partnership. First, NPI advises clients to ask for regular product roadmap briefings on the primary products in use at least twice per calendar year. Second, NPI recommends that senior leaders in your organization (CIO, CTO, VP of IT, etc.) ask for annual corporate and product strategy briefings to be certain that Salesforce’s vision for the future aligns with the IT and business strategy of those leaders. This is also an excellent way to build relationships with key leaders in the product and services (Customer Success) divisions at Salesforce.
Start Planning Today
Waiting until the last few months prior to a Salesforce renewal will cede significant leverage to Salesforce sales reps. Salesforce has thrived because of aggressive sales tactics in a marketplace that it was able to disrupt. They effectively implement divide and conquer strategies and withhold information to gain the upper hand in negotiations. The only way to effectively counter these tactics and level the playing field is to proactively address the areas we’ve highlighted in this article long before it comes time for your renewal. A small investment of time and effort can yield a large ROI when it is time for your annual renewal.
NPI’s 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 set up a free consultation.