Does Salesforce.com pricing continue to appeal?

by admin on January 7, 2010

in Cloud Computing/SaaS

When Salesforce.com started, it aimed squarely at the SMB market. Ten years on, it has steadily climbed the food chain. When I recently met with SFdC execs, it was clear they feel comfortable with the larger deals. But has its pricing for the SMB remained attractive enough to continue growing that segment of the market, especially in a recessionary economy?

Manoj Ranaweera questions that. Referring to the Xero integration, he says:

The combine cost of subscribing to Xero and Salesforce.com now needs to go up from an affordable £264 to over £1000 to achieve integration. This is clearly not an acceptable situation for us.

The key problem for the very small business is the cost of the integration from SFdC which requires you to either pay extra or subscribe to an upgraded service. Xero provides the service as a no-cost option.

In fairness to SFdC, it is morphing into a platform play where its Force.com platform provides developers with the opportunity to build many kinds of integration and new applications. That requires significant development, the costs of which need to be absorbed or defrayed. There is an argument for charging but as I have said many times before, SaaS business models are evolving. As a side issue, if you are a very large business then you’ll pay much less than the price book amount per user, making the apparent discrimination look even more peculiar.

One interesting aspect of this situation is that the Xero/SFdC integration is one way only. Per the Xero FAQ:

The S2X package you install on your Salesforce.com organization contains logic that makes application programming interface (API) calls to get information from Salesforce.com to Xero. These are event-driven calls and are only sent when you add or change a company/contact.

If Salesforce.com decides that an update to the contact/company needs to be sent to Xero, an API call is made from Salesforce.com to Xero via the internet.

The synchronization is only 1 way: from Salesforce.com to Xero, so treat Salesforce.com as the master set of data for your accounts and contacts.

Having ONE version of the customer data is vitally important for many kinds of analysis. Taking the ‘one way’ approach might seem restrictive but it places a discipline on the business that should be welcomed. It also means business technology use is focused initially on the customer relationship. Can you argue this alone makes paying for the API worth the additional cost? It might but that’s a judgment call only the business can make. On balance I believe Salesforce.com needs to moderate its pricing policy. It built its empire off the back of VSBs. Losing sight of that will drive customers away to others like Javelin and Tactile. While these alternatives may not have the depth or breadth of an SFdC, they have ‘good enough’ functionality and more VSB end user friendly pricing.

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Commence CRM

CRM is essential for growing businesses, but it is important to carefully select your CRM partner. This blog article “Don’t Make a CRM Buying Mistake : 7 Points to Consider Before Selecting Your CRM Solution” has advice on selecting a CRM solution. » Commence CRM Blog http://www.commence.com/blog/index.php/2010/01/20/...

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Commence CRM

CRM is essential for growing businesses, but it is important to carefully select your CRM partner. This blog article “Don’t Make a CRM Buying Mistake : 7 Points to Consider Before Selecting Your CRM Solution” has advice on selecting a CRM solution. » Commence CRM Blog
http://www.commence.com/blog/index.php/2010/01/20/...

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bernardlunn

Great post Dennis. It looks like SFDC is OK on pricing ie they have a $5 per month option. But the cost of integrating multiple solutions is a big headache/cost for small biz.

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bernardlunn

Great post Dennis. It looks like SFDC is OK on pricing ie they have a $5 per month option. But the cost of integrating multiple solutions is a big headache/cost for small biz.

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Bernard Lunn

Great post Dennis. It looks like SFDC is OK on pricing ie they have a $5 per month option. But the cost of integrating multiple solutions is a big headache/cost for small biz.

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Dennis Howlett

@jason - that's an excellent point. It seems a pity that so many SMB's (as you're experiencing it as partner) are not really 'getting' the value of integration. Perhaps if more did then SFdC could be more flexible. The value argument is critical. I wonder how well SFdC articulates this. Not so well it seems.

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Jason M. Lemkin

I've thought a lot about this Dennis as both a SFDC customer and partner for 4+ years. I think what I've learned is this: SFDC pricing is both cheap, expensive and clever. At the low end, for VSBs who have never used CRM, Contact Manager and Group edition ($5-$17/mo) are very cost-effective (much cheaper than WebEx or GoToMeeting or even eFax). This is how we started -- one seat of what is now called Group edition ;) However, if you want to truly run your corporate business processes (not just your contacts, but your workflows and sales-related business processes) on Salesforce.com, you're going to later upgrade to at least Professional. Then, realistically, SFDC will flip from a pretty cheap app to the most expensive SaaS purchase an SMB will likely make on a per-seat basis. SFDC then has to deliver a lot of value. The reality is, it does -- ONCE you base your entire business on it (workflow, support, dashboards, analytics, SOPS, etc.)As a data point supporting this hypothesis, we've also been on AppExchange for 4+ years and I think we've received only a handful of queries about using EchoSign for SFDC Group edition. This can't be b/c EchoSign isn't appealing to SMBs - 80% of our customers are SMBs. Rather, I suspect it's because those who buy Group edition (which is cheap) are only looking for a rather basic point solution for contact management, and don't really get into APIs, add-ons, platform, etc.

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ManojRanaweera

Point well made about the origins of SFDC. Having just completed Marc Benioff's book, it does not make sense for them to penalise small businesses with locking up the API. I actually think this is historical rather than tactical. Surely, it cannot be a strategic decision given the openness of force.com. The more we discuss this point, the better chance we have of changing their minds!I am sure they do not want to find themselves in a scenario where force.com is used to built an app simply to integrate with a third party CRM due to integrating costs with SFDC.

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Jason M. Lemkin

I've thought a lot about this Dennis as both a SFDC customer and partner for 4+ years. I think what I've learned is this: SFDC pricing is both cheap, expensive and clever. At the low end, for VSBs who have never used CRM, Contact Manager and Group edition ($5-$17/mo) are very cost-effective (much cheaper than WebEx or GoToMeeting or even eFax). This is how we started -- one seat of what is now called Group edition ;) However, if you want to truly run your corporate business processes (not just your contacts, but your workflows and sales-related business processes) on Salesforce.com, you're going to later upgrade to at least Professional. Then, realistically, SFDC will flip from a pretty cheap app to the most expensive SaaS purchase an SMB will likely make on a per-seat basis. SFDC then has to deliver a lot of value. The reality is, it does -- ONCE you base your entire business on it (workflow, support, dashboards, analytics, SOPS, etc.)As a data point supporting this hypothesis, we've also been on AppExchange for 4+ years and I think we've received only a handful of queries about using EchoSign for SFDC Group edition. This can't be b/c EchoSign isn't appealing to SMBs - 80% of our customers are SMBs. Rather, I suspect it's because those who buy Group edition (which is cheap) are only looking for a rather basic point solution for contact management, and don't really get into APIs, add-ons, platform, etc.

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dahowlett

@jason - that's an excellent point. It seems a pity that so many SMB's (as you're experiencing it as partner) are not really 'getting' the value of integration. Perhaps if more did then SFdC could be more flexible. The value argument is critical. I wonder how well SFdC articulates this. Not so well it seems.

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Jason M. Lemkin

I've thought a lot about this Dennis as both a SFDC customer and partner for 4+ years. I think what I've learned is this: SFDC pricing is both cheap, expensive and clever. At the low end, for VSBs who have never used CRM, Contact Manager and Group edition ($5-$17/mo) are very cost-effective (much cheaper than WebEx or GoToMeeting or even eFax). This is how we started -- one seat of what is now called Group edition ;)

However, if you want to truly run your corporate business processes (not just your contacts, but your workflows and sales-related business processes) on Salesforce.com, you're going to later upgrade to at least Professional. Then, realistically, SFDC will flip from a pretty cheap app to the most expensive SaaS purchase an SMB will likely make on a per-seat basis. SFDC then has to deliver a lot of value. The reality is, it does -- ONCE you base your entire business on it (workflow, support, dashboards, analytics, SOPS, etc.)

As a data point supporting this hypothesis, we've also been on AppExchange for 4+ years and I think we've received only a handful of queries about using EchoSign for SFDC Group edition. This can't be b/c EchoSign isn't appealing to SMBs - 80% of our customers are SMBs. Rather, I suspect it's because those who buy Group edition (which is cheap) are only looking for a rather basic point solution for contact management, and don't really get into APIs, add-ons, platform, etc.

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dahowlett

@jason - that's an excellent point. It seems a pity that so many SMB's (as you're experiencing it as partner) are not really 'getting' the value of integration. Perhaps if more did then SFdC could be more flexible. The value argument is critical. I wonder how well SFdC articulates this. Not so well it seems.

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ManojRanaweera

Point well made about the origins of SFDC. Having just completed Marc Benioff's book, it does not make sense for them to penalise small businesses with locking up the API. I actually think this is historical rather than tactical. Surely, it cannot be a strategic decision given the openness of force.com. The more we discuss this point, the better chance we have of changing their minds!I am sure they do not want to find themselves in a scenario where force.com is used to built an app simply to integrate with a third party CRM due to integrating costs with SFDC.

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