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Wait! Don’t Add that License!

The day before yesterday I blogged about how SalesForce.com’s contracts force you to pay for the maximum licenses you’ve needed instead of the number you currently need.

Let’s consider what effect that might have on you as a SalesForce.com customer: Because of the very high penalty for adding licenses that are later not needed, you should be very careful before adding a new license.  If you add a license you later don’t need then tough; you still have to pay for it! (godforbid you add a large number of licenses you later don’t need!)

So SalesForce.com contracts create a big disincentive for companies to add licenses because they can never subtract licenses from their bill.  Stupid, stupid, stupid.

5 Responses to “Wait! Don’t Add that License!”

  • Mike responded:

    It’s definitely a risk reward proposition, but at least the Saleforce.com licenses are only annual and carry no infrastructure costs.

    Consider the downside of purchasing 100 *perpetual* license seats, a server, and Sys Admin for an on-premise solution that goes seasonally unused.

    The perpetual license fees are amortized over 3-5 years, whereas the ROI of sForce is usually achieved within the year.

  • Mike Schinkel responded:

    Hi Mike and thanks for the comment. See http://www.thoughtsonsalesforce.com/2006/06/dont_accept_a_p.html

    On another note, do you work for SalesForce.com, or are you just a fan? Just curious.

  • Mike responded:

    I don’t work for sForce… but I can see the ad-hominem direction this debate would take.

    L8R

  • Mike Schinkel responded:

    Mike, Thanks again for the comment. I don’t think it’s fair to say I attacked the messenger. I think I only attacked the message. Isn’t that a fair assessment?

    Your first comment is very valid and yes SaleForce’s can cost less than buying a packaged solution. However, my point was not to compare SalesForce with a packaged solution but instead compare it with a version of itself that it could be.

    BTW, in a larger organization that doesn’t worry about cash flow, you can use time-value-of-money comparisons to compare SaaS with packaged. OTOH in smaller businesses that live and die by cash flow (which is my case), once the packaged solution is purchased it’s no longer a drain on monthly cash flow. So there a packaged solution can be a better scenario cost-wise than SaaS, especially if revenues have recently declined because of external market factors.

    Once again, I’ll do my best never to attack the messenger, but I will strongly debate my positions on the message so please take no offense, it’s just a debate.

  • Mike Schinkel responded:

    Oh, and something else just occurred to me. If you *were* a SalesForce.com employee and were commenting in support of their position without making your employment clear then I would consider a mild attack justified.

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