The inconvenient truth about Salesforce

Earlier this month, Salesforce, the undisputed leading customer relationship management software provider in the world, announced it would lay off 10 percent of its workforce — more than 7,350 employees — and close some offices.

“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” said CEO Marc Benioff in a letter to employees. “We hired too many people that led to this economic downturn that we are now facing, and I take responsibility for that.”

These cuts come after previous job cuts last fallthe departure of key figuresand an unprecedented decision not to predict earnings for the upcoming fiscal year 2024 due to “a very unpredictable macro environment as our clients work to ensure their businesses are healthy in the long run as well.”

Should those of us in the CRM industry be concerned about Salesforce? I do not think so. The company, like many other big tech companies, is taking cover under an economic and financial slowdown to trim the fat of tens of thousands of unproductive workers.

But Salesforce’s problems expose a very inconvenient truth that many of us in the company have known for a long time: the cost of their software cannot be justified by most of their customers.

Salesforce isn’t cheap. For sales opportunities only pricing starts at $25 per month per user, but that’s for the bare-bones “Essentials” package. Most businesses looking to take advantage of workflows, pipelines, and forecasting will want to use the Professional version, which costs $75 per month per user. Many of my clients want advanced reporting and 24/7 vendor support, which is only accessible through the Enterprise version, which costs $150 per month per user. That’s $36,000 a year for a sales team of just 20 people. It’s a pretty hefty fee.

And that’s just for sales. If you want the option track service calls or to perform marketing campaigns you would have to subscribe to additional modules that range from $150 a month to… well… you just have to “call us for pricing” where you are guaranteed to get the hard sales pitch from an overly enthusiastic and slightly desperate salesperson who fights for their commission. If Salesforce still doesn’t address a specific need, there are plenty of third-party products that can, but they don’t come cheap either.

If your company wants service (as most do), then that’s a different ball game. CRM software vendors like to say how “user-friendly” their products are. But the reality is that the customers who subscribe are not CRM experts and need outside consulting help for installation, implementation, integration, customization, and training. Because Salesforce has traditionally been aimed at larger enterprises, the partner channel is littered with gigantic (yes, it’s a real word – I looked it up) companies like accent, McKinsey and PwC who, while excellent at what they do, charge hefty fees for their consulting services. There are many other great Salesforce consultants out there. But these are not cheap either.

I get that you get what you pay for and Salesforce really is the Lamborghini of CRMs. But aside from a minority of companies that have these needs, the reality is that most small and medium-sized businesses — which make up the lion’s share of American businesses — need a mediocre level of CRM features to help them grow. They need contact management and pipeline reporting and relatively simple workflows for responding to requests or urging staff not to forget a task. They must have the ability to log incidents and not miss major issues. They want to send mass emails to different groups and make sure the responses are tracked. If you ask a small or medium business owner if they currently do all of these things, you’ll probably roll your eyes because they’re not.

However, all these things can be done with some affordable CRM platforms like Zoho, Rapid, Sugar and many others (my company implements some of the products mentioned in this column). When I say affordably priced, I mean literally half the price of Salesforce when you take into account all the features their modules include. And because the partners and consultants who help with these products don’t work for Accenture or PwC, the costs for their services are also much lower.

Which brings me back to the inconvenient truth about Salesforce. Because the company’s products are so expensive relative to the market, their small and medium-sized customers end up spending far more on software licenses than on what they really need: service. They get stuck with that Lamborghini when all they really need is a Camry. The salespeople at Salesforce get their commissions. The customers get a super sports car and have no idea how to drive it.

That fact was hardly acceptable when economic times were booming. But as the economy cools down, companies are much more focused on value for money. They take a closer look at the technology they already own and are stricter about new technology investments. They’re avoiding overpriced technology and instead refocusing on getting more production out of the more affordable CRM tools that, with a little outside help, can do pretty much what Salesforce does, but at a much lower cost.