How to reduce Salesforce licensing cost

How to reduce Salesforce licensing cost

Posted by: Nayab Naseer
Category :Salesforce

While Salesforce makes for a great CRM, its licensing is a bit complex. A number of AppExchange installations fail because of wrong user licenses or features, and many organizations pay way too much than required because they fail to understand how to optimize their licenses.

tips to reduce salesforce licensing cost

Here are some tips on how to reduce your Salesforce licensing costs.

  1. Take the Right License

Many enterprises simply purchase the Enterprise Edition users license, which grants full access to standard CRM and AppExchange apps. While such licensee holders can access any standard or custom app as required, free of any restrictions, they may actually never use all the functionality available and end up paying for it.

Many other available licensing options allow enterprises to leverage the power of Salesforce CRM without shelling out a hefty license fee.

Salesforce Platform License: Organizations with a strong in-house development team may be better off developing their own apps and taking the Salesforce Platform license. Users with this license can access custom apps developed by themselves or uploaded into the AppExchange, but they cannot access standard CRM functionality. It allows access to core platform functionality such as accounts, contacts, reports, dashboards, documents, and custom tabs, but with restrictions on user permissions and a few other restrictions. For instance, they cannot create or edit dashboards.

Salesforce Platform Light: The Salesforce Platform Light license is even better for small and medium businesses. This is the same as the Salesforce Platform license, but with limits on the number of times the user can log in monthly.

These licenses work perfectly well for most organizations that have created custom objects to handle new data sets and do not need the readymade CRM objects, such as “Cases,” “Leads,” “Solutions,” “Campaigns” and others available in Salesforce Enterprise Edition. The cost to develop similar objects in and use these Platform licenses is in most cases substantially lesser than availing the Salesforce Enterprise Edition license for all users.

Do not Take Packages Blindly: Not all packages may be a good deal. For instance, the Social Enterprise License Agreements (SELA), which includes social tools such as Heroku and Radian6, is an attractive proposition for businesses in the midst of a growth phase and/or wanting to deploy the bulk of’s software portfolio on a rapid basis. But it would turn out more expensive than standard subscriptions for other businesses who cannot scale up or adopt the volume of software apps in the expected timeframe.

  1. Use License

Businesses can save on licensing substantially by subscribing to licenses for its users rather than subscribing to the Salesforce Enterprise Edition license.

Salesforce Enterprise license costs about $1500 a year per license while a Enterprise license costs just $300 per license per user per year. Organizations thus save $1200 per license every year. and Salesforce Enterprise Edition access the same database. users co-exist along with Salesforce Enterprise users, and get the same full access to accounts and contacts that Salesforce Enterprise Edition users get.

The Enterprise user can access up to 10 custom objects with the same functionality available in Salesforce Enterprise Edition. Upgrading to App Bundle Edition gives users access to 200 custom objects for $960 per license per year, which is still a saving of $540 per license per year.

It gets better. – One App License: Users who need access to just one custom app can save significantly by subscribing to the – One App license. These licenses are also the same as the Salesforce Platform license, with the difference being that they are limited to the use of just one custom app, and read-only access to Accounts and Contacts objects. Such license users have access to an unlimited number of custom tabs. – Free license: The – Free license allow users to run one custom app. This license is the same as the – one app license, but without any access to accounts and contacts objects and no standard CRM functionality.

Users that access only accounts, contacts and custom objects, which are usually users from human resources department, project management and others, do not lose anything by taking a license.

When users need access to some of the CRM objects not included in, then it becomes pertinent to undertake a trade-off between the costs of developing objects that meet the needs of the CRM objects not available in versus yearly savings of the licenses.

  1. Decide What Exactly is required

The type of license notwithstanding, adopts a modular approach, offering add-on functionality at an additional cost to the basic offering.

For instance, mobile functionality, knowledge base module, offline access, visual workflow, partner and community portals and more, each costs extra as top-up to the basic license fee. Research major Gartner estimates that achieving the desired industry-specific process functionality in the Service Cloud offering could result to an additional 25% or more in costs to the basic subscription.

While the modular structure allows users to pay only for what they need, reaping the advantage requires having a clear-cut idea on the exact functionality required. Simply adding on functionality just because it is the in-thing and seems good may result in the enterprise incurring costs for something they may not require.

Organizations would also do well to use feature licenses judiciously, as required. A feature license entitles a user to an additional Salesforce feature, such as Marketing or Connect Offline. It selects users who really require such features rather than subscribing it for all users.

Also, many Salesforce subscriptions fail to calculate the correct capacity in terms of storage, objects and tabs requirements, and end up either getting billed for exceeding capacity or overbuying capacity. For instance, if the required level of customer support is not done at the time of sign-up, it can cost as much as 15% to 25% to an Enterprise Edition subscription when added later.

  1. Manage Users Proactively

Regardless of the type of license taken, one license allows only one user to log-in, and it is not possible to share login credentials for one user with other users.

It makes sense to log a case with “License Reduction” in the subject field and follow it up as soon as a user is de-activated and the license is not required to be re-assigned to someone else. Organizations with a large number of licenses can reduce the license costs substantially over time if they take this up proactively.

Salesforce terms and conditions do not allow reduction in the number of users’ subscriptions during the subscription term, and as such the reductions would apply only during the license renewal time. This makes it worthwhile to go in with the minimal number of license required and add to it, as required. If a user leaves the organization mid-way through the license period, it is better to reassign the license to another user rather than letting it remain idle and still attract license fees.

  1. Negotiate

Finally, it pays to negotiate. Gartner estimates that subscribers who do not negotiate renewal price protections will see significant increases in costs before the second renewal. adopts a flat per user fee system. The license fee does not vary with actual usage. Also, everyone in the organization uses the same edition.

Track actual usage of the app over time, and if usage is low, try and negotiate with during the annual renewal phase. For example, if the organization has 500 enterprise user licenses but only 250 users log in at any given point of time, it is worthwhile to negotiate for a discount for this mismatch of functionality. Success depends on whether such an argument is supported with cold facts – in this case, the usage data.

Salesforce ranks amongst the best CRMs in the market. A major criticism against it is the relatively higher costs. However, as evident from above, such criticism has more to do with unawareness or inability to select the right licensing package rather than high costs per se. Use the above tips to enjoy the power of this great CRM without spending too much.

Comments (3)
Raphael (2 years ago)

Hi, Great analysis. A few questions. It i snot clear what is the difference between "Salesforce Platform License" and What is the price of "Salesforce Platform License", and where on the web can more information be found? You mention coexistence of and regular CRM licenses. Are you saying that they are on the same org and thus have access to same objects? Does SFDC allow that? --Rafi

Timo Ruohomäki (2 years ago)

The key thing with CRM license vs. platform license is the access to Opportunity and it fields. This is also important from the data model point of view. Whenever some ERP -type of functionality is required, it is easy to accomplish by adding some custom fields into opportunity. This is logical also since the ERP is related to what is sold and the product lines sold belong to opportunity. The problem is, these additions require more expensive licenses. So when you need functionality related to delivering what has been sold, build it into custom object(s) as early as possible. The license prices at enterprise level are ok when talking about sales people, but if every delivery man and warehouse person would require enterprise level subscription that would be of course too much. Also remember, that you need an actual subscription for roles that read and write into objects. If you need just a view on something (e.g. a list of orders need to be collected today), that data can be pushed through the API into some sort of intranet thing that could have a function to tell the CRM when the order is ready to be delivered or has been delivered already. This kind of thingy could of course be an iOS or Android app for phone or tablet.

Tim Lynch (2 years ago)

Nayab - great post. Do you see the license mismatch happening more on the initial roll out or after 2-3 years of usage?

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