Skip to content
Tiatra, LLCTiatra, LLC
Tiatra, LLC
Information Technology Solutions for Washington, DC Government Agencies
  • Home
  • About Us
  • Services
    • IT Engineering and Support
    • Software Development
    • Information Assurance and Testing
    • Project and Program Management
  • Clients & Partners
  • Careers
  • News
  • Contact
 
  • Home
  • About Us
  • Services
    • IT Engineering and Support
    • Software Development
    • Information Assurance and Testing
    • Project and Program Management
  • Clients & Partners
  • Careers
  • News
  • Contact

Why is Salesforce hiking prices, and how does it affect customers?

Salesforce’s decision to raise the price of its software products starting in August can be attributed to a combination of factors, including inflation and pressure to fuel revenue after a pause in price hikes during the pandemic period — issues that are affecting other major technology suppliers, analysts said.

“We have seen a general rise in software prices coming out of the pandemic as inflation has put pressure on operating costs of technology vendors, and these costs still remain high,” said Liz Herbert, principal analyst at Forrester.

Software vendors generally put a halt on price hikes when Covid hit, but started increasing prices as the pandemic subsided, Herbert noted.

For example, Microsoft announced a price increase for its 365 suite in the range of 8%-20%, depending on the edition, in late 2021; SAP increased its maintenance pricing by up to 3.3% in late 2022; and Slack increased prices by 8%-9% around the same time. Meanwhile, other vendors increased prices without making public announcements. Oracle, for example, raised maintenance pricing by 8%, though it did not announce the increase publicly, Herbert noted.

“We are also seeing some pricing changes anecdotally, for example, one client told us they were facing more than a 25% increase in their Citrix renewal, and another cited approximately a 10% increase in their Adobe deal related to a consumer price index (CPI) clause,” Herbert said. 

Salesforce, according to a company blog post published on Tuesday, said that it would be increasing prices across Sales Cloud, Service Cloud, Marketing Cloud, Industries, and Tableau by an average of 9% from August, after seven years of no price hikes.

“The new list prices will be Professional Edition $80 (up $5), Enterprise Edition $165 (up $15) and Unlimited Edition $330 (up $30). These editions will be priced comparably in other currencies,” the company wrote in the post, adding that similar price increases will go into effect for Tableau, CRM Analytics, Marketing Cloud Engagement and Account Engagement offerings.

Revenue pressure drives price hikes

Investor pressure to drive more revenue from products is a major reason for the price hikes, according to Herbert.

“When considering the general market conditions and the specific profit pressure that Salesforce is under, this price increase should not be too much of a surprise,” Herbert said.

Although strong user uptake of Tableau business intelligence and MuleSoft data automation and integration software fueled a surprising 14% year-over-year jump in revenue for Salesforce’s fourth quarter, the company underwent several tumultuous months starting late last year, as  the company cut around 10% of its workforce, shut numerous offices, and saw co-CEO Bret Taylor and Slack CEO Stuart Butterfield step away from the company.

During the earnings call for the recent quarter, CEO Marc Benioff said that Salesforce needed to “radically accelerate the transformation plan timeframe” as the company entered the fourth quarter.

“We needed to press the hyperspace button and bring the two-year goals forward quickly and exceed them,” Benioff said during the call, according to a transcript from Seeking Alpha. Further, Benioff added that the company had put mechanisms in place to talk to investors and listen to their concerns before making changes in the company’s go-to-market strategy.

The move to hike prices, according to Omdia’s chief analyst Bradley Shimmin, will help the company maintain profit levels amid a maturing marketplace where the move to the cloud has already happened for most enterprises.

At the moment, though, cloud revenue for most cloud services providers, including Salesforce, is continuing to grow at a compound annual growth rate (CAGR) of 17%,  according to IDC research vice president Alan Webber .

Meanwhile,  new generative AI capabilities, such as Einstein GPT, likely played a very small to a negligible role in determining the change in pricing, several experts agreed.

Forrester’s Herbert pointed out that in its latest AI Day event, Salesforce said that pricing for its generative AI services was still being worked out.

“GenAI pricing is likely to evolve over time as there are still many unknowns about costs, usage, competitive pricing pressure, and more,” Herbert added.

How will customers deal with the Salesforce price hikes?

The change in pricing strategy will impact Salesforce’s many enterprise customers almost immediately, and may force relatively smaller enterprises to look at other options, such as Zoho or Oracle, according to Shimmin.

The increase in prices comes at a time when companies are trying to manage costs in an uncertain macroeconomic environment.

“As a result, customers will continue to evaluate the number of licenses that they hold for Salesforce applications to ensure they are getting optimal value from the number of licenses they have,” Webber said.

The price increases may have less of an effect on larger customers.  Futurum Group’s research director Keith Kirkpatrick said that customers will “not blink” at the price hikes as “large customers are unlikely to see actual net price increases of 9%, given their scale”.

Additionally, the change in pricing is not going to affect enterprise customers who are locked in three-to-five-year deals with Salesforce.

“Real pricing changes for these enterprises won’t hit them until renewal time or unless they are adding a new cloud,” Herbert said, adding that it was difficult to quote a final impact of the price change as Salesforce discounting has historically ranged very dramatically.

CRM Systems, Enterprise Applications
Read More from This Article: Why is Salesforce hiking prices, and how does it affect customers?
Source: News

Category: NewsJuly 13, 2023
Tags: art

Post navigation

PreviousPrevious post:Sustainable IT: A crisis needing leadership and changeNextNext post:ESM Efficiency: How Buchanan IT improved quality of service and doubled case support volume

Related posts

휴먼컨설팅그룹, HR 솔루션 ‘휴넬’ 업그레이드 발표
May 9, 2025
Epicor expands AI offerings, launches new green initiative
May 9, 2025
MS도 합류··· 구글의 A2A 프로토콜, AI 에이전트 분야의 공용어 될까?
May 9, 2025
오픈AI, 아시아 4국에 데이터 레지던시 도입··· 한국 기업 데이터는 한국 서버에 저장
May 9, 2025
SAS supercharges Viya platform with AI agents, copilots, and synthetic data tools
May 8, 2025
IBM aims to set industry standard for enterprise AI with ITBench SaaS launch
May 8, 2025
Recent Posts
  • 휴먼컨설팅그룹, HR 솔루션 ‘휴넬’ 업그레이드 발표
  • Epicor expands AI offerings, launches new green initiative
  • MS도 합류··· 구글의 A2A 프로토콜, AI 에이전트 분야의 공용어 될까?
  • 오픈AI, 아시아 4국에 데이터 레지던시 도입··· 한국 기업 데이터는 한국 서버에 저장
  • SAS supercharges Viya platform with AI agents, copilots, and synthetic data tools
Recent Comments
    Archives
    • May 2025
    • April 2025
    • March 2025
    • February 2025
    • January 2025
    • December 2024
    • November 2024
    • October 2024
    • September 2024
    • August 2024
    • July 2024
    • June 2024
    • May 2024
    • April 2024
    • March 2024
    • February 2024
    • January 2024
    • December 2023
    • November 2023
    • October 2023
    • September 2023
    • August 2023
    • July 2023
    • June 2023
    • May 2023
    • April 2023
    • March 2023
    • February 2023
    • January 2023
    • December 2022
    • November 2022
    • October 2022
    • September 2022
    • August 2022
    • July 2022
    • June 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
    • December 2021
    • November 2021
    • October 2021
    • September 2021
    • August 2021
    • July 2021
    • June 2021
    • May 2021
    • April 2021
    • March 2021
    • February 2021
    • January 2021
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • January 2020
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • January 2018
    • December 2017
    • November 2017
    • October 2017
    • September 2017
    • August 2017
    • July 2017
    • June 2017
    • May 2017
    • April 2017
    • March 2017
    • February 2017
    • January 2017
    Categories
    • News
    Meta
    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org
    Tiatra LLC.

    Tiatra, LLC, based in the Washington, DC metropolitan area, proudly serves federal government agencies, organizations that work with the government and other commercial businesses and organizations. Tiatra specializes in a broad range of information technology (IT) development and management services incorporating solid engineering, attention to client needs, and meeting or exceeding any security parameters required. Our small yet innovative company is structured with a full complement of the necessary technical experts, working with hands-on management, to provide a high level of service and competitive pricing for your systems and engineering requirements.

    Find us on:

    FacebookTwitterLinkedin

    Submitclear

    Tiatra, LLC
    Copyright 2016. All rights reserved.