(This column originally appeared in Forbes)
Earlier this month Salesforce, the undisputed leading customer relationship management software provider in the world, announced that it was laying off 10 percent of its workforce — more than 7,350 employees — and closing 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 leading into this economic downturn we’re now facing, and I take responsibility for that.”
These cuts come after previous job reductions last fall, the departure of key executives, and an unprecedented decision not to forecast earnings for the upcoming 2024 fiscal year due to “a very unpredictable macro environment as our customers are working to ensure their businesses are also healthy for the long term.”
Should those of us in the CRM industry be worried about Salesforce? I don’t think so. The company is, like many other large tech companies, taking cover under an economic and financing slowdown to cut the fat of tens of thousands of unproductive employees.
But Salesforce’s troubles do expose a very inconvenient truth that many of us in the business have known for a very long time: the cost of their software cannot be justified by most of their customers.
Salesforce is not cheap. For sales capabilities alone pricing starts at $25 per month per user, but that’s for the bare-bones “Essentials” package. Most businesses that want to take advantage of workflows, pipelines and forecasts will want to use the Professional version, which is $75 per month per user. Many of my clients want advanced reporting and 24/7 support from the vendor which can only be accessed from 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 ability to track service calls or to perform marketing campaigns you’d have to subscribe to additional modules which run anywhere from $150 per month to…well… you’ll just have to “call us for pricing” where you can be guaranteed to get the hard sales pitch from an overly eager and slightly desperate sales rep fighting for their commission. If Salesforce still doesn’t address a specific need, then there’s a myriad of third-party products that may, but these aren’t cheap either.
If your company desires service (as most do) then that’s another ballgame. CRM software providers love saying how “user friendly” their products are. But the reality is that the customers who subscribe aren’t CRM experts and need outside consulting help for setup, implementation, integration, customization and training. Because Salesforce has traditionally been targeted for larger enterprises its partner channel is littered with ginormous (yeah, it’s an actual word — I looked it up) firms like Accenture, McKinseyand PwC who, though excellent at what they do, charge hefty fees for their consulting services. There are many other great Salesforce consultants. But these too aren’t cheap.
I understand that you get what you pay for and Salesforce is truly the Lamborghini of CRMs. But, other than a minority of companies that have these needs, the reality is that most small and mid-sized companies — who make up the lion’s share of American businesses — require an intermediate level of CRM features to help them grow. They need contact management and pipeline reporting and relatively simple workflows to respond to requests or nudge staff not to forget about a task. They need the ability to log incidents and not let any big problems fall through the cracks. They want to send mass emails to various groups and ensure that responses are tracked. If you ask any owner of a small or mid-sized company if they are currently doing all of these things you’ll likely get the eye roll, because they’re not.
However, all of these things can be done with a number of affordably priced CRM platforms like Zoho, Nimble, Sugar and many others (my company implements some of the products mentioned in this column). When I say affordably priced, I mean at literally half of the price of Salesforce when you take into consideration all of the features their modules include. And because the partners and consultants who help with these products don’t work for Accenture or PwC the cost for their services are much lower too.
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 mid-sized customers wind up spending much more on software licenses then on what they truly need: service. They get stuck with that Lamborghini when all they really need is a Camry. The sales reps at Salesforce get their commissions. The customers get a super-charged sports car and no idea how to drive it.
That fact was barely acceptable when economic times were booming. But now that the economy is cooling, businesses are significantly more focused on getting bang for the ever decreasing value of their buck. They’re looking harder at the tech they already own and being tougher about new tech investments. They’re avoiding over-priced technology and instead re-focusing on getting greater production from the more affordable CRM tools which, with a little outside help, can pretty much do what Salesforce does but at a much lower price point.
