Determining TCO of Salesforce
Many organizations struggle with determining Salesforce implementation budgets and TCOs (Total Cost of Ownership).
While pricing is pretty clear & transparent on the Salesforce side, problems usually arise when trying to figure out which Salesforce platform, edition and add-ons are required.
On top of that, there are implementation, data migration and ongoing maintenance costs that must be considered.
Considerations
A common Internet wisdom is that for every 1$ spent on licensing per year, a 0.75-1$ will be spent on implementation
While it is a good start for planning, the actual numbers will depend on business specifics, goals and implementation scope. A business that plans on using Salesforce as a CRM for basic account, contact and opportunity tracking will be different than a full quote-to-cash implementation for a cloud service provider.
However, regardless of these specifics, all costs can be broken up into four categories:
| Component | Description |
|---|---|
| Base licenses | This boils down to Salesforce Platform and Edition. Platforms are named “something cloud” and group features per business area: sales (Sales Cloud), support (Service Cloud), marketing (Marketing Cloud). Editions (e.g., Professional, Enterprise) determine which features are available within the platform. |
| Add-on licenses | This may include Salesforce add-ons that are not part of platform/edition or, more likely, third-party ones for integration of Salesforce with systems currently in place. To get an idea about what add-ons may be required for an automated, “zero-touch” CRM, please take a look at the following post: https://nextian.com/salesforce/implementing-zero-touch-crm-with-salesforce/ |
| Customization & configuration services | Business-specific configuration, customizations, application development, data migration, integrations, etc. |
| Maintenance & support | On-going maintenance and support: supporting users, applying patches, building new reports, developing new functionalities, etc. |
Base licenses
Salesforce pricing is transparent, for example, Sales Cloud/Professional Edition is priced at $75 per month per user, so for 30 users the annual spend will be:
$75 * 12 * 30 = $27,000.00
The following decisions will have to be made to determine base license pricing:
- Edition: will Professional be enough, or should I switch to Enterprise?
- Platform Components:
- Is Sales Cloud enough or will I need CPQ?
- Will I need Service Cloud to implement my customer support?
- Will I need Marketing Cloud for marketing?
(combinations have their own pricing e.g., Sales + Service Cloud)
- Number of instances: for advanced development & data migration full sandboxes might be needed – they are also priced separately.
Tip Salesforce end of fiscal year is by the end of January and January is the best month to negotiate pricing. |
Add-ons
While add-ons typically cost less than base licenses, a few of them might be needed. At the end their total cost may turn out to be considerable.
Typical add-ons include:
- Duplicate data prevention (e.g., DupeBlocker)
- Data cleanup tools (e.g., Validity Demand Tools)
- Synchronization with Outlook 365 or Gmail (e.g., Salesforce Inbox)
- DocuSign (or other electronic signature) envelopes
- Integration with unified communications for click to call from Salesforce and effective call logging information (e.g., RingCentral or Cisco)
- Salesforce REST API for integrations (an add-on for some Salesforce editions)
- Database integration (e.g., Skyvia)
Add-on licensing is typically on a monthly per seat basis just like base licenses.
Customization/application development
Some organizations are happy with using Salesforce “as-is” with a few occasional fields and flows, others treat Salesforce like a development platform rather than a product and invest considerable efforts into:
- Developing their own functionality and apps
- Building integrations with other systems
- Legacy data conversions
This is no different than, for instance, developing software in Java or C#. The resulting IPR can be a considerable asset.
| Important | While this post does not constitute accounting or legal advice and you should consult with your own accounting experts, auditors and attorneys, it is a common practice to treat costs incurred in customization/development as a capital expense. |
Maintenance & support
Even after all the configuration has been completed, day-to-day Salesforce administration is required.
It may include user & security management, page layouts, validations, workflows, minor data imports and cleanups, problem resolution, release reviews, applying updates and others.
For organizations that develop their own functionality/apps, while it’s true that most of development costs is one-time and is incurred up front, there are always bugfixes, changes and on-going improvements that need to be addressed.
Conclusions
The model outlined above is high-level and is intended as a starting point for TCO and budget estimations. It should be a part of a broader planning to:
- Establish a long-term strategy what will Salesforce be used for in the organization (sales, delivery, customer support, channel management?)
- Plan the budget and establish with accounting which expenses can be capitalized
- Create a roadmap and break the roadmap up into smaller manageable projects with individual ROIs
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