Strategies For Negotiating With Salesforce.com In The Wake Of Its Growing Product Set And New Editions

Despite an increasingly crowded market of cloud applications, salesforce.com is still very much the “darling” of the SaaS world. Some evidence of the provider’s continued fast-paced growth?

1)      Strong stock market performance. On June 12, 2013, when salesforce.com announced the completion of its acquisition of ExactTarget, salesforce.com stock (CRM) was trading at $37.58. On February 19, 2014, it closed at just over $63, a gain of 67.7% over that period (for reference the NASDAQ Composite did roughly 25% over the same period).

2)      External accolades for its ability to innovate. In August, salesforce.com was names by Forbes as the world’s most innovative company for the third year running.

3)      Steady flow of new products and editions. In November, salesforce.com announced its new Salesforce1 Service Cloud – a platform to be used for cloud-based application development. This product represents a significant improvement in the mobile salesforce.com experience which will ideally aid them in meeting their aggressive financial predictions. Not long before that, salesforce.com had announced Social.com, in April 2013.

4)      Revenue growth. Salesforce.com’s recent fiscal results (Q3 2013) conservatively project revenue growth of more than $1 billion for both this year and next ($4.05 billion for FY 2014 and $5.15 billion for FY 2015, compared to $3.05 billion in FY 2103).

So, it is no surprise then (in light of salesforce.com’s massive scale and continued expansion) that we continue to receive a heavy volume of Inquiries into Forrester about how to negotiate with salesforce.com.

To help clients who are negotiating (or renegotiating) their salesforce.com deals, we (@lizherbert, @MarkBartrick, and @FTibbetts) are currently working on a new Forrester report to help clients with negotiation strategies they should use in light of evolving licensing types and products and the state of salesforce.com today. (This will be the latest addition to our “Quick Guide To Help You Prepare To Negotiate” series, which currently has reports on IBM, Oracle, and SAS.)

Key tips we have uncovered?

1) Make sure you are thorough in your understanding of your current and future salesforce.com usage. (Much easier said than done of course!)

2) Watch out for "hidden" extras – and understanding whether they are the right value (versus alternative options) for your dollar. Examples include Premier Support, storage, and sandboxes.

3) Consider new (and creative) payment models. Some clients are considering complex licensing that may "switch" once it hits a volume tipping point. Some are considering the enterprise license agreement (in one of its multiple flavors). Very large clients will find salesforce.com can be more flexible on its pricing than its advertised "per user per month" pricing.

As part of this ongoing research (which we will publish in April), we would like to solicit your tips: best practices and lessons learned. We are in the midst of our interviews now and interested in your recent experience negotiating (or re-negotiating) with salesforce.com. (Perhaps some of you have just gone through a negotiation as SFDC wrapped up their most recent fiscal year – and perhaps you would be willing to share that experience and your learnings with us.)

If you have ideas that you can contribute to this research, please contact me or my colleague Fraser Tibbetts (ftibbetts@forrester.com). Otherwise, look for this report to hit the Forrester website (in April timeframe). If you are not a current Forrester client, we will provide a copy of this research as a thank you for your time.

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