Customer relationship management software giant Salesforce Inc. is planning to raise the prices of some of its most popular cloud and marketing tools in August, by an average of 9%.

Salesforce said today that the price hikes for products including Tableau Software, Sales Cloud, Service Cloud, Marketing Cloud and Industries will affect both its new and existing customers, Reuters reported. It will be the first time in seven years that the company has increased the price of its software.

The increased costs come at a time when Salesforce’s revenue growth has been slowing down, after accelerating during the COVID-19 pandemic. In its most recent earnings call in May, the company beat expectations as it delivered $8.25 billion in quarterly revenue, but its stock fell after it reported rising capital expenditures and said it was experiencing greater delays in customers signing new contracts.

At the same time, Salesforce has been stepping up its investments in new technologies such as generative artificial intelligence. Over the past seven years, it has spent more than $20 billion on its research and development efforts. Those investments have paid off for Salesforce, at least, with the company announcing multiple new AI capabilities in its products this year, including Einstein GPT, Sales GPT, Service GPT and AI Cloud.

Big technology firms have come under increased pressure this year as enterprise customers look to optimize spending amid a slowing economy and an increase in the cost of borrowing.

Analysts from Constellation Research Inc. told SiliconANGLE they were critical of Salesforce’s plans. Holger Mueller explained that while the price increases are probably in line with inflation, Salesforce was already in the high price bracket. “Marc Benioff and co need to ask themselves –- are they also delivering value to customers, and what is Salesforce doing to lower costs and pass these efficiency gains on to them?,” he said. “That is certainly what the buyers are looking for.”

Ray Wang was even more critical, saying that the whole point of SaaS is that pricing is supposed to get cheaper over time. “Salesforce was the standard bearer of this, but unfortunately customers now pay for licenses before implementation, they overbuy licenses and can’t reduce them, and now they’re subject to vendor lock-in and price increases despite record profits from cloud providers,” Wang said. “Customers should band together and reject these price increases before it’s too late.”

Salesforce can at least argue that it isn’t the only big tech provider to increase the cost of its SaaS products recently. The 2023 ITAM Insights Report shows that multiple software firms have either increased or harmonized their pricing in certain regions. For instance, IBM Corp. in January raised prices for a whole host of its Passport Advantage Eligible offerings. Canadian customers were hit with a 19% increase, while in the U.K. and Europe, prices were hiked by 24%.

In April, Microsoft said it would bring international prices for its cloud services in line with the U.S. dollar, resulting in price hikes ranging from 9% in the U.K. to 11% in Europe and 20% in Japan. It also hiked the price of SQL Server by 10% globally that same month. Oracle increased the cost of its U.S. support services by 8% last year, while SAP SE increased its support costs by 3.3% in January.

Although customers probably won’t be too happy about the price hikes, investors were much more receptive to the idea, as Salesforce’s stock rose more than 3% following the report.

Photo: Salesforce