Salesforce and the SaaS cost explosion

This white paper merges two professional perspectives: those of the customer (Jochen Hagenlocher) and the solution vendor (Dr. Matthias Vianden) for a comprehensive understanding of SaaS spend challenges.

Consumer view - Jochen Hagenlocher

Working for a large global organization as head of Software Asset Management (SAM) gives me the opportunity to discover new trends in their earliest stages. It is no secret that what we used to consume as on-premises software in our own data centers is now available as an instant, real-time service from providers around the world. Cloud offerings come in many flavors.

The most popular are Infrastructure as a Service (laaS), Platform as a Service (PaaS), and Software as a Service (SaaS). With laaS or Paas, the providers offer a flexible approach to dynamically extending the computing power of your organization. SaaS allows the business to launch any application within minutes and just a few clicks. But this flexibility comes at a price, and often a high one. That's why the costs of your cloud environment have to be managed 24/7. Greater flexibility means higher spend.

Vendor view - Dr. Matthias Vianden

As a SAM vendor on the other hand, we've been following the technical and contractual changes in software for years. Many aspects of Saas technology and licensing are not new. There have always been applications that were licensed by account and were subscription based. But now, because everything is hosted in the cloud and not on-premises, the consumption data is no longer in reach.

Getting the details - if possible - requires significantly more effort for each vendor. So, our part in this change is to make sure that our technology can cover the needs of today's hybrid architecture enterprise.

Follow the SaaS money!

A lesson we've learned from managing on-premises software is just as valid in the cloud: "Follow the money." Your first step is to gain transparency into your global contracts and your actual usage. Once you have this overview and have assessed the situation, you can make important decisions to help you save on your SaaS investments.

Salesforce SaaS pricing

Your biggest Salesforce savings will come from two places: contracts and storage costs. Several contract options can be negotiated to lower your overall pricing:

• Number of custom objects per Org

• Yearly payment increase

• Regional restrictions ("emerging market licenses") 

However, these options are not automatically monitored and controlled by the Salesforce platform, so if customers aren't paying attention and end up, for instance, with too many custom objects in an Org, they can face non-compliance fees. It's still the customer's responsibility to ensure their compliance and provide compliance data if Salesforce audits them, something that Salesforce has a history of doing.

The contract should allow unused licenses to be transferred from one Org to another with few restrictions and limitations. Make sure that:

• Used product variances can be reduced to only what is absolutely essential.

• Restrictions are uniform across the Orgs or they are convertible, e.g. custom object limits should be multiples of each other.

• While storage is not technically limited, customers will be invoiced for additional storage consumption.

• Storage limits are calculated by the number of provisioned licenses in the Org. Depending on the license price, it could be cheaper to add additional licenses than to purchase additional storage. But most of the time storage will be cheaper than additional user licenses.

Don't skimp on set-up

This point bears repeating because it can drive up your costs if you're not careful.

Better data means higher savings.

Many organizations still manually collect and report on their SaaS estate. A data collection cycle typically involves multiple support organizations that download the user and usage details. The data is then consolidated and normalized to enable some form of reporting. Depending on your estate's size, a collection cycle can easily take four weeks or more. Furthermore, under the EU's new General Data Protection Regulation (GDPR), circulating Excel sheets with end-user information poses a threat to customer data security. Manual data gathering and reporting often results in formatting and collecting errors. A Software Asset Management solution is the only way to keep your data secure and to eliminate manual data collection errors.

Automated tools and processes can significantly reduce your reporting periods and provide the data you need to effectively optimize your license costs on a global level.

Salesforce SaaS add-on costs

Even though Salesforce Orgs are free, how they are set up can influence your costs. Add-ons are one of the largest cost drivers because the fees are tied to the overall number of users in that Org. If your goal is to consolidate Orgs and save money on individual user licenses, then expect the costs for add-ons to increase. Also keep in mind that consolidating Orgs is a timely and complex process that involves setting up a new Org and then migrating data from the other Orgs into that new central Org.

Smaller Orgs provide more flexibility, but they also increase costs because users require a license for each Org they use. Orgs must also be centrally managed to see who has access to which Org, monitor inactivity, and reassign licenses. This adds to the complexity.

Usage is also limited by the product edition, so editions need to be uniform for all Orgs. For instance, an Org can use either Sales Cloud Lightning Enterprise or Sales Cloud Lightning Unlimited licenses but not both. If you don't have the right licenses, then your users could run into problems accessing the Orgs.

Security measures can also influence costs. You want to prevent users no longer with the company from accessing your Orgs, which you can do by requiring single sign-on (SSO) to the Org. While this secures your Orgs, if you don't have a Joiners, Movers, Leavers (JLM) process in place, licenses might still be assigned to former employees, which will continue to cost you even if they don't have access.

In this case, your best option is to get a Software Asset Management tool that automatically deactivates unknown users. This frees up the license for other users and guarantees the security of your data.

Salesforce SaaS users

If your company uses multiple Salesforce Orgs, each end-user will need a license to use each Org. So, an end-user with access to five Orgs needs to pay five times the annual subscription fee. This might make financial sense if it is only a small handful of users who need access to all your Orgs, but if there is a lot of overlap between your users and Orgs, then you might consider consolidating your Orgs. This is why the initial Org design is so important to long-term cost management. When you're setting up Orgs, consider who or what roles are going to need to be in each Org, and consolidate where you can to avoid having too many users who need access to multiple Orgs.

Engage all stakeholders

SaaS solutions are designed with specific problems and sometimes even specific business units in mind. This means that the solutions are often owned and managed by a business unit instead of central IT. As a customer relationship management tool, Salesforce, for instance, is often the responsibility of the sales teams who requested and purchased it. But optimizing a company's entire solution estate requires involving all stakeholders and establishing clear and effective communication policies.

Salesforce SaaS best practices

As a CRM tool, the responsibility for managing Salesforce licenses falls to CRM teams and not with central license management. So your CRM teams will need to be heavily involved in analyzing and optimizing Salesforce licenses, and they will need a set of best practices to get the job done quickly and effectively.

We recommend:

• Each Org should have an Org owner.

• The Org owner needs transparency into the licensing of their Org.

• The Org owner should also be involved when implementing automated means for deactivating users.

• Each Org will have several admins. These admins need to create accounts for technical systems.

• As admins are typically involved in manually deactivating inactive users and in ensuring an Org is correctly licensed, they need to be involved in any licensing initiative to avoid delay or cross-communication.

• Activities such as implementing automatic re-harvesting of licenses from inactive users should be thoroughly communicated inside the organization.

• This could have an impact on the sales and service teams, for example, so it's important they are prepared for any potential delays and disruptions.

• When using a tool to automate your Software Asset Management for Salesforce, make sure that it allows you to whitelist accounts as well to prevent automatically deactivating the accounts of important users who might be inactive for longer periods of time.

• To ease the process for the end-user, a tool could allow a user to re-enable their account for a short period of time if they have been automatically deactivated.