salesforce

SalesForce SELA – Enterprise License Agreement

salesforce

SalesForce SELA – Enterprise License Agreement

What is Salesforce SELA?

  • SELA (Software Enterprise License Agreement) offers unlimited access to the Salesforce platform.
  • Includes extensive features: Comprehensive usage of Salesforce tools and services.
  • Long-term commitment: Typically involves multi-year contracts.
  • Financial obligations: Significant annual costs and potential penalties for overage.
  • Suitable for: High-growth companies needing extensive Salesforce integration.

What is a Salesforce Enterprise License – SELA Agreement?

What is a Salesforce Enterprise License

A Salesforce Enterprise License Agreement (SELA) is a customized, long-term contract between Salesforce and an enterprise-level customer.

This type of agreement is tailored to meet the specific needs of larger organizations that require a more comprehensive and flexible licensing arrangement for their Salesforce CRM solutions.

To help negotiate with Salesforce, read our negotiation guide.

Key Features of a Salesforce Enterprise License Agreement (SELA)

A Salesforce Enterprise License Agreement (SELA) comes with several key features that may include:

  1. Volume Discounts: SELA often provides volume-based discounts for organizations with many users, helping reduce the overall cost of Salesforce licenses.
  2. Customized Terms and Conditions: Unlike standard Salesforce licensing agreements, SELA allows for the negotiation of specific terms and conditions that cater to the unique needs of the enterprise customer.
  3. Flexibility in License Types: With a SELA, organizations can mix and match different Salesforce license types, such as Sales Cloud, Service Cloud, or custom solutions, to create a tailored CRM package that best fits their needs.
  4. Scalability: An SELA is designed to accommodate an organization’s growth, making adding or removing licenses as needed easier. This flexibility enables companies to scale their Salesforce CRM solution according to their evolving business requirements.
  5. Longer Contract Duration: Standard Salesforce agreements typically last for one year. However, a SELA may extend for multiple years, providing the enterprise customer long-term stability and a predictable cost structure.

SELA vs Salesforce Subscription Agreement

SELA vs Salesforce Subscription Agreement

Overview

When evaluating the SELA (Software Enterprise License Agreement) and the Salesforce Subscription Agreement, it’s important to understand the fundamental differences in their approaches to access, pricing, and product offerings.

Both agreements cater to different organizational needs and offer unique advantages.

SELA (Software Enterprise License Agreement)

Unlimited Access:

  • Access to Full Platform: SELA provides organizations unlimited access to the entire platform. This means users can utilize all available features, tools, and services without any usage restrictions.
  • Flexible Usage: The number of users, transactions, or data used is not limited, allowing organizations to scale their usage as needed without incurring additional costs.
  • Predictable Costs: The pricing model typically involves a single, all-encompassing fee that covers unlimited use. This makes budgeting straightforward and predictable, with no hidden costs or surprises.

Benefits:

  • Comprehensive Utilization: Organizations can fully leverage the platform’s capabilities without worrying about hitting usage caps or upgrading for additional features.
  • Simplified Management: With one agreement covering all aspects, managing the license becomes simpler, reducing administrative overhead.
  • Scalability: Ideal for growing businesses, SELA supports expansion without additional licensing negotiations or costs.

Example Scenario: A large enterprise with multiple departments and a diverse range of software needs might find SELA particularly advantageous.

They can deploy various tools across all teams without worrying about individual licensing for each tool, fostering greater collaboration and efficiency.

Salesforce Subscription Agreement

Set Prices for Set Products:

  • Tiered Pricing Structure: Salesforce operates on a tiered pricing model, where costs are based on the number of products and users. Each product (e.g., Sales Cloud, Service Cloud) has its pricing structure.
  • Customizable Plans: Organizations can select and pay for only the products and services they need, tailoring their subscriptions to their specific requirements.
  • User-Based Licensing: Pricing is often based on the number of users, with additional costs incurred as more users are added or as more advanced features are required.

Benefits:

  • Customization: Companies can customize their subscriptions to align with their specific business needs, ensuring they pay only for what they use.
  • Upgradability: Salesforce allows businesses to start with basic plans and upgrade to more advanced features as needed, providing flexibility as the business grows.
  • Focused Spending: Businesses with specific needs can avoid paying for unnecessary features, optimizing their investment.

Example Scenario: A mid-sized company focused on sales and customer service might choose the Salesforce Subscription Agreement.

They can start with the Sales Cloud for their sales team and add the Service Cloud as their customer service operations expand, maintaining control over costs.

Key Differences

Access and Flexibility:

  • SELA offers unlimited access to all platform features, making it ideal for organizations needing comprehensive solutions without usage limits.
  • Salesforce’s subscription model allows tailored access to specific products, offering flexibility and cost control based on precise needs.

Cost Structure:

  • SELA provides a single, predictable cost for unlimited use, simplifying budgeting and financial planning.
  • Salesforce’s model involves variable costs based on selected products and user numbers, which can save costs but requires careful management to avoid unexpected expenses.

Scalability and Customization:

  • SELA supports unlimited scalability within the agreement’s scope, which is suitable for large or rapidly growing organizations.
  • Salesforce offers scalable plans that can be upgraded and customized as business needs evolve. These plans are suitable for businesses preferring a pay-as-you-grow approach.

The choice between SELA and the Salesforce Subscription Agreement depends on the organization’s size, growth plans, and specific needs.

SELA’s unlimited access model is suited for enterprises seeking comprehensive and predictable licensing, while Salesforce’s tiered, customizable approach provides flexibility and cost efficiency for targeted use cases.

History of SELA

Early Days of SELA:

In its early growth phase, Salesforce introduced the Software Enterprise License Agreement (SELA) to attract new customers by providing unlimited access to its platform. This strategy aimed to accelerate customer acquisition and growth.

  • Initial SELA Model: Early SELA deals typically involved $10 million annually over a 5-year term and offered unlimited access to the entire Salesforce platform.
  • Growth Impact: This approach significantly contributed to Salesforce’s exponential growth, scaling its reach by 100 times in its formative years.

Present-Day SELA Agreements:

Today, SELA agreements have evolved with added restrictions, usage limits, and substantial financial commitments.

These changes reflect Salesforce’s current strategy to balance customer access with sustainable revenue growth.

  • Usage Ceilings: Modern SELAs include specific usage caps, limiting how many platforms a customer can use.
  • Financial Commitments: Companies must commit to significant financial investments, often tied to their projected growth.
  • Risk of Overage: Exceeding the agreed-upon usage limits can lead to hefty financial penalties and renegotiation of terms.

Why a SELA Might Be a Bad Idea for Most Companies:

SELA agreements can be problematic for many organizations, particularly those experiencing high volatility or operating in industries with frequent mergers and acquisitions.

  • Fixed Terms: SELA contracts are typically locked in for 3-5 years, with terms based on current needs when signing. This inflexibility can be a challenge for dynamic companies.
  • Complex Overages: A company exceeding its SELA caps can trigger a significant renegotiation event, often leading to increased costs. Breaking SELA caps involves a comprehensive sales event, unlike simple additional licensing purchases.
  • Price Increases: Salesforce may use overages in one product area (e.g., Pardot) to justify raising prices across the board, shifting power back to their hands.

Alternatives to SELA Agreements:

A standard Salesforce Subscription Agreement may offer a more manageable and cost-effective solution for most companies.

  • Cost Reduction: On average, a standard subscription agreement can reduce costs by 41.3% compared to a SELA.
  • Flexibility: Subscription agreements allow for more flexible terms and can be tailored to specific needs without the long-term commitments of a SELA.
  • Negotiated Terms: Careful negotiation of subscription terms and conditions can often achieve benefits similar to those of a SELA.

When a SELA Might Be Appropriate:

In certain scenarios, a SELA might still be a suitable choice.

  • High-Growth Companies: A SELA can benefit rapidly growing IT firms with substantial funding and minimal IT resources, where Salesforce is a crucial part of their technical infrastructure.
  • Strategic Fit: Companies with strategic requirements for extensive use of the Salesforce platform may find the unlimited access feature of a SELA advantageous.

Conclusion:

While SELA agreements initially provided unlimited access to Salesforce’s platform, modern SELAs include more restrictions and financial commitments.

For most companies, the risks and complexities of SELAs outweigh the benefits. Standard Salesforce Subscription Agreements offer a more flexible and cost-effective alternative, with the potential to negotiate terms that meet the organization’s needs without the financial and legal risks associated with SELAs.

FAQs about SELA Agreements:

What happens if I exceed the caps on a product in my SELA Agreement?

If you exceed the caps on a product in your SELA Agreement, Salesforce will use this as leverage during the renewal negotiation. They may charge an overage fee or push a new product in exchange for waiving the fee. This could result in a higher total cost of ownership.

  • If you notice the overage, you can take corrective action to decrease product quantities. However, you will still be obligated to pay the overage fees at the published retail rate.
  • If Salesforce notices the overage, they may charge a heavy fee and push new products.
  • Negotiating specific language that limits financial liability to the reduced rate instead of retail is recommended.

How to approach negotiating an existing SELA Agreement?

  • Create a Salesforce Roadmap: Start by building a 5-year roadmap of the products and services that Salesforce needs, including needs and wants. This will help determine if a SELA agreement is suitable for the organization.
  • Benchmark your SELA Spend: Gather the Right Price data to benchmark the spend against the roadmap and ensure you’re paying the right price for each product.

What is the typical annual spend for a Salesforce Enterprise License Agreement (SELA)?

The typical SELA customer is a multinational organization with an annual revenue of over $10B and a total spend of $15M+ per year with Salesforce.

How long does it take to renegotiate a SELA Agreement?

Renegotiating an SELA Agreement typically takes 2.5 months. However, to prepare adequately, we engage with our clients at least six months before their renewal date. Planning is critical to a successful negotiation, so it’s best to plan for your SELA renewal one year in advance.

Who should be involved in a SELA Agreement negotiation?

On your organization’s side, the following individuals should be part of the negotiation team: Head of IT Sourcing, IT Leadership in charge of the Salesforce platform, IT Finance Representative, and CIO (optional).

Do I need to switch from a SELA to a standard MSA and Order Form agreement?

In most cases, switching from a SELA Agreement to a standard MSA & Order Form agreement is the best option for customers. The lack of transparency in a SELA makes it challenging to measure the value you’re receiving, and your Salesforce account team may use this to their advantage. With an MSA & Order Form contract, you can compare your specific needs with those of Salesforce using Right Price Data to determine the correct price. This transparency has consistently delivered cost savings for our clients.

How can I achieve the same flexibility as a SELA with a Salesforce Subscription Agreement?

Adding Seasonal Worker Licenses to your subscription agreement can still have the same flexibility as a SELA. These licenses are intended for seasonal contingent workers, college interns, factory workers, etc., who increase and decrease throughout the year.

Here are five tips for negotiating with Salesforce

salesforce sela negotiations
  1. Plan: Start preparing for your negotiation at least six months in advance. This will give you time to gather all the necessary information, build a roadmap, and prepare your negotiation strategy.
  2. Build a roadmap: Before you start negotiating, build a roadmap of the specific products and services you need from Salesforce over the next five years. This will help you determine your needs, set expectations, and benchmark prices.
  3. Gather the right price data: Once you have a clear roadmap, gather the right price data to understand what you should pay for each product. This will help you negotiate from a position of strength and avoid overpaying.
  4. Involve the right team: Ensure that the right individuals from your organization are involved in the negotiation. This includes your Head of IT Sourcing, IT Leadership in charge of the Salesforce platform, IT Finance Representative, and CIO (optional).
  5. Consider switching to an MSA & Order Form agreement: In most cases, it makes sense to switch from a SELA (Salesforce Enterprise License Agreement) to a standard MSA & Order Form agreement with Salesforce. This will give you greater transparency and the ability to compare your specific needs with Salesforce directly using Right Price Data.

By following these five tips, you can negotiate with Salesforce effectively and achieve significant cost savings for your organization.

Salesforce License Optimization and Negotiation Service

Our service offers a comprehensive approach to Salesforce license optimization and negotiation, which includes:

  1. License Usage Assessment: We assess current Salesforce license usage and identify any overages or unused licenses.
  2. Contract Review: We review the current Salesforce contract and identify areas for negotiation.
  3. Strategic Planning: We develop a strategic plan to negotiate your organization’s best pricing and terms.
  4. Proprietary Approach: We utilize our proprietary approach and market intelligence to ensure the best outcome.
  5. Ongoing License Management: We provide ongoing license management and optimization services to ensure cost savings.
  6. Transparent Reporting: We offer nuanced and comprehensive reporting on license usage, costs, and savings.
  7. Expert Guidance: We provide expert guidance and support throughout the negotiation process.

Contact us today if you need help negotiating a more optimal Salesforce SELA agreement.

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, improving organizational efficiency.

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