This month, Salesforce’s price hike has come into effect, increasing the costs of its products by an average of nine percent.
When making the announcement in July, Salesforce highlighted that this is the first time it has raised its prices in seven years.
Moreover, the nine percent hike is lower than inflation across that period.
As such, many onlookers may not bat an eyelid. Yet, for end-users, the price increases could become a deal-breaker.
After all, many already have qualms with Salesforce’s pricing model, as recent contract renegotiations have brought to light.
Salesforce Renewal Troubles
Over the past couple of years, many five- or seven-year Salesforce warranty deal contracts have come up for renewal.
According to Liz Miller, VP & Principal Analyst at Constellation Research: "That has been one of the top renegotiations we’ve been doing."
Indeed, Miller recognizes the frustration many hold about being locked into mandatory increases in end-user numbers, which they’re not hitting. She continued:
Is every vendor going through this? Yes. But, I hadn’t seen how loud it was getting for anyone else, other than Salesforce.
Miller suggests that much of this heat comes from how easy it is to scale on Salesforce. As a result, customers add modules at a whim, and - over time - costs build up.
"All of a sudden, the CFO is in the doorway, asking: “What did we just do on Salesforce?!” Because all the invoices started coming in," she noted.
Unfortunately, for Salesforce, you had the issue of lots of renegotiations, grousing, and lots of angsty feelings at the same time they’re coming out with new packages.
Indeed, nine percent may not seem like a particularly wild price increase. But, it was an increase enough for people to go back and look back at their contracts.
As that trend takes hold, "Salesforce is going to really have to watch out for in the next six months," concluded Miller.
Time to Rethink the "Layer Cake" Pricing Model?
Agreeing with Miller, Michael Fauscette, Founder, CEO & Chief Analyst at Arion Research, voiced his long-time concerns with Salesforce’s pricing strategy.
"You add a new module, you may not think about it, but - over time – it has spread across all these parts of your operation, and you think suddenly… I may need a loan," he noted.
"Each layer of the Salesforce cake is thin, but over time it builds up."
Take the price tags Salesforce recently announced for Sales GPT and Service GPT as an example.
On face value, each will cost $50 per user per month. Yet, there may be additional costs, as a business’s use will impact its spending.
Shelly Kramer, CEO of V3B, noted this, stating:
There is a credits option for if you exceed the number of queries you get – and they haven’t disclosed pricing on that.
That is something Salesforce customers must consider and discuss with their peers.
Indeed, many will engage in conversations regarding these kinks and the overall pricing model, which may go along the lines of:
"Anyone else feel like their Salesforce bill has gotten out of control over the last couple of years?"