Lightning struck last week when Salesforce announced its new Sales Cloud and Service Cloud Lightning Editions. The new editions come with a whopping 15-20 percent across-the-board price hike.
In its announcement, Salesforce said, "Over the past 17 years, we've delivered thousands of features across our products, increased our data center capacity, and we continue to make our systems more trusted, bringing additional value to our customers."
While this sounds laudable, it doesn't pass our bullshit test. For all its talk of adding value to customers, Salesforce spent a paltry 15 percent of revenue on Research & Development in 2015. Meanwhile, 51 percent of its operating expense went into customer acquisition (i.e. sales and marketing).
Known already for lofty prices, Salesforce uses the "customization and configuration" sleight of hand to justify this new luxury tax. Last we checked, the implicit promise of cloud applications was that new features, updates, and versions are included in the subscription fee.
The Dark Side of the Force
Reckless spending to acquire customers, unmindful of profitability, always ends badly – as price increases for customers. Well, it's been 17 long years of unprofitable growth for Salesforce and their recent price hikes confirm that shareholder pressure is taking its toll.
We're not the only ones who saw this coming. In April 2015 Forrester predicted that the "original Salesforce CRM software, for which the company is known, will not support this revenue growth on its own." Forrester added this: “What is good for Salesforce’s investors is not necessarily good for its clients.”
Salesforce's Lightning editions reflect this exact dilemma. Consider two-factor authentication--a method that uses a combination of two different ways to authenticate every user--that's become essential to secure cloud data. Salesforce provides two-factor authentication only in their $150 per month premium plan. At Zoho we see security as a right; we've even made it part of our free edition. The pressure for investor returns at Salesforce has supplanted customer data security, precisely as Forrester predicted. Salesforce cloud security is now just for the one percent.
Over-investments and poor investments cause higher prices, which end up burning customers. Just examine Salesforce's real estate plans. Perhaps CEO Marc Benioff can explain to Jim Cramer on his next "Mad Money" appearance why they're spending $1.1 billion on a fancy new office tower in the most expensive city in the country while customers are watching prices go up. Mad Money, indeed.
An Innovative Cloud For All
Salesforce's price hikes fit the time-worn strategy of a bloated, aging software company retreating to large risk-averse enterprise customers. Raising prices, soaking smaller and medium sized businesses to serve the largest, and overpricing in international markets (even under a strong dollar) is a far cry from the promise of cloud software: to reduce costs and make amazing software technology affordable. “King of Cloud” it does not make.
Salesforce's new prices and market strategy reaffirm our distinctly different mission at Zoho: To bring innovative, high quality software to any business at unmatched value.
Consider the combined cost of Salesforce's Sales Cloud, Marketing Cloud, and Service Cloud, which will likely be upwards of $500 per user per month. Zoho's equivalent offer is CRM Plus. It is a suite of 8 different apps - spanning marketing, sales, and customer service - and costs $50 per user per month. Which means a year's subscription of Salesforce will buy you a decade with Zoho. Small and medium companies all over the globe can afford what used to be the prerogative of the very large in making their businesses efficient. This is the revolution of the cloud.
Your Salesforce Discount Code: Zoho
A closing note: If you're ever in negotiation with a Salesforce rep, just let them know you're considering Zoho. There isn't a faster way to squeeze out a fat discount.