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Salesforce customers should expect pricing headaches, says Forrester

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21st Apr 2015
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The Salesforce juggernaut is ‘hitting snags’ and customers are not happy with the pricing structure of Marc Benioff’s behemoth, according to Forrester Research’s recent report into the CRM provider’s market position.

Much in the same vein as Amazon, Salesforce’s profit-making plays second-fiddle to its growth commitments, as it grapples to compete with and surpass industry stalwarts like Oracle, Microsoft and SAP. However, Forrester states its “original CRM solution won’t support this growth goal” and that will almost certainly mean future pricing headaches for Salesforce customers – all 150,000+ of them.

One key issue, the report states, is that Salesforce’s ambition to unify all customer operations “assumes clients will adopt its many products”.

However, this type of per-sear, per-function strategy means costs are being driven up for customers.

“Customers are not happy with Salesforce’s pricing model,” the report states. “Many CIOs are willing to accept higher long-term costs for a product that they perceive to be the best and that is being consistently updated with major new functionality through automatic upgrades.

“But the top two negatives about Salesforce in our survey were the high cost of ownership over time (52% agreed) and the rigid and inflexible pricing model (42% agreed). As one client said, “There are a lot of hidden fees that don’t surface until you get a detailed quote”.

“While Salesforce does in fact post its fee structures, pricing can be complex, and fees often surface without users realising it. Examples include extra charges for sandbox environments, which can run 15% or more of annual subscription fee, and integration and API usage fees.”

Salesforce’s effort to become recognised as an all-ecompassing Marketing Cloud player “isn’t working”, according to the report.

While Sales Cloud and Service Cloud represent one-quarter of its revenue, Marketing Cloud represents just 10%, and is “a work in progress”.  

“Salesforce covers the entire customer life cycle with marketing, sales, and service cloud offerings,” the report adds. “In practice, the marketing and sales clouds have different user interfaces, tap into different customer databases, and leverage different workflow products to automate customer engagement.

“We found high levels of dissatisfaction with the Marketing Cloud product among the clients we surveyed, with almost three-fifths saying they intend to renegotiate their contract or move to another vendor.”

The report also takes a swipe at AppExchange, which it refers as a “community of dwarf companies”, and adds that Salesforce’s issue of offering Software as a Service (SaaS) products as opposed to on-premise software means the company is often missing out when subscriptions drop off:    

“Like cable company clients, Salesforce clients lose service as soon as they stop paying subscription fees. This, along with the high cost of switching providers, gives Salesforce leverage to act like a cable company through rising fees, added charges, and pressures to upgrade. While Salesforce lacks the franchise monopolies of cable companies, is much more innovative, and has much higher customer satisfaction, we still found that many of those we interviewed were concerned about getting locked into a tight Salesforce relationship. That’s why 50% of the firms with 1,000 or more employees said that they planned to renegotiate that contract and another 11% planned other.” 

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