Optimizing Salesforce ISV/OEM Agreements: Negotiation Tactics for Embedding Salesforce in Your Product
How to Approach Salesforce ISV/OEM Licensing Strategically
Embedding Salesforce in your product can unlock powerful functionality for your customers, but it also introduces complex Salesforce ISV/OEM licensing terms. These agreements are often presented as boilerplate, heavily favoring Salesforce if you accept the default terms.
To protect your margins and maintain flexibility, you need to approach the deal strategically – much like any major vendor negotiation.
Below, we explain how Salesforce OEM licensing works, highlight common risks associated with standard agreements, and provide a negotiation playbook to help secure more favorable pricing and terms.
For a comprehensive overview, please read our Salesforce Platform and Custom App Licensing Strategy and Negotiation Guide.
What Are Salesforce ISV and OEM Agreements?
Salesforce offers two primary partner models for building on its platform: ISV (Independent Software Vendor) agreements and OEM (Original Equipment Manufacturer) agreements.
Both let you leverage Salesforce technology inside your software, but they serve different needs:
- ISV (Independent Software Vendor) Program: An ISV agreement (often called ISVforce) lets you develop apps that extend the Salesforce platform and sell them on the AppExchange marketplace. These apps typically target existing Salesforce customers to enhance their Salesforce org. In this model, the end-user often needs to have their own Salesforce licenses (or the app’s functionality is limited to Salesforce environments). Salesforce takes a revenue share (usually ~15%) from ISV app sales in exchange for listing on AppExchange and using the platform.
- OEM (Original Equipment Manufacturer) Program: An OEM agreement allows you to embed Salesforce’s platform services into your own product and resell it to your customers as a unified solution. Your product runs on Salesforce’s Lightning Platform behind the scenes, but your customers may not even know Salesforce is involved – they log into your application, which uses Salesforce tech under the hood. OEM licensing means your customers do not need their own Salesforce subscriptions; you essentially bundle Salesforce access with your software. This model is great for targeting users outside the Salesforce ecosystem. In exchange, Salesforce typically requires a higher revenue share (~25% by default) or equivalent fees. OEM partners must also abide by Salesforce’s rules (for example, ensuring your product doesn’t simply replicate core CRM functionality that competes with Salesforce’s main products). In short, ISV agreements are about building add-ons for Salesforce users, while OEM agreements are about building stand-alone products with Salesforce embedded.
How Salesforce Prices ISV/OEM Licensing
Salesforce OEM licensing deals are available in several
pricing models. Understanding these is key to structuring a cost-effective agreement:
- Per-User Licensing: You pay Salesforce a fixed fee for each end user of your product. For example, Salesforce might charge $20–$50 per user per month for an OEM platform license (exact rates vary). This model is straightforward, but it can become very expensive if you have a large number of users, as Salesforce’s fee scales linearly with your user count.
- Per-App or Capacity-Based Licensing: Instead of paying per named user, you might pay based on application instances or usage metrics. For instance, an OEM deal might charge a flat fee per customer organization or impose additional fees once certain data/transaction volumes are exceeded. This model can be useful if your app is used broadly by many users at each customer, or if measuring per-user is impractical. Essentially, it’s a form of site license or usage-tier pricing for the embedded Salesforce technology.
- Revenue Share Model: Salesforce often uses a royalty model for ISV/OEM agreements. They take a percentage cut of the revenue you earn from your product sales. Typically, ISV partners give Salesforce around 15% of net revenue, while OEM partners might owe about 25%. In this model, your costs scale with your sales – e.g. if you sell a $100k deal of your software, Salesforce would take $25k (25%) as their share. This aligns Salesforce’s earnings with your success, but significantly impacts your profit margins.
Margin Risk and Commitments: Each pricing model has implications for your profitability. A high per-user fee or a steep revenue share can erode your margins – for example, giving up 25% of every sale to Salesforce means your gross margin starts at 75% before accounting for your costs.
Moreover, Salesforce often pushes for minimum commitments or tiered revenue bands in OEM deals. That means you may be required to pay a minimum number of users or a minimum dollar amount annually, regardless of your actual sales volume. These commitments can become a major trap if customer adoption is slower than anticipated.
Be aware that the initial pricing proposals from Salesforce may be presented as standard “non-negotiable” tiers tied to your volume (for example, up to 500 users at one rate, 501–1000 users at a higher total fee, etc.). In reality, all of these pricing elements can be negotiated. The goal in negotiation is to align the cost structure with your business model so that Salesforce’s cut doesn’t choke your growth.
Read about Including Sandbox and Development Environments in Your Salesforce Deal.
Common Pitfalls in OEM Licensing Deals
Entering an OEM agreement without careful planning can lead to long-term headaches. Watch out for these common pitfalls before you sign:
- Overcommitting to Volume Too Early: A classic mistake is agreeing to aggressive license volumes or revenue guarantees up front (often to get a better rate), only to find out later that your end customers don’t adopt the product as fast as hoped. Overcommitting means you’re on the hook to Salesforce for fees on a large number of licenses that you aren’t reselling yet. This results in paying for unused licenses – so-called “shelfware” – which directly hits your bottom line. It’s safer to start with modest commitments and scale up as usage grows, rather than committing to a huge number just to meet Salesforce’s projections.
- Lack of Flexibility if Your Business Model Changes: Startups and software vendors often pivot – you might alter your pricing model, target a different customer segment, or add new functionality. Unfortunately, OEM contracts can be inflexible. If you signed up for per-user pricing but later need a usage-based model, or if you initially bundled Salesforce in one way but need to repackage it, the contract might not allow those changes easily. Similarly, some agreements lock you into a specific Salesforce edition or technology; if your product needs more (or fewer) Salesforce features later, you could be forced into a costly upgrade or find parts of your license going unused. In short, rigid terms can trap you in an agreement that no longer fits your business a year or two down the line.
- Restrictions on Packaging and Branding: When you embed Salesforce, you have to play by Salesforce’s rules on how its technology is used and presented. A typical OEM license restricts usage to your application only – your customers can’t repurpose the underlying Salesforce platform for anything outside of your product. There may also be rules regarding co-branding (e.g., displaying “Powered by Salesforce” in your UI or marketing materials) and the features you can utilize. For example, OEM solutions typically cannot expose core Salesforce CRM objects, such as Leads or Opportunities, directly to avoid competing with Salesforce’s products. If you’re not careful, these restrictions can limit your go-to-market approach. They might prevent you from offering certain features or integrating with other systems in ways you planned. Always understand the fine print regarding how you can utilize the Salesforce platform within your product, and negotiate for as much flexibility as possible to maintain control over your user experience and roadmap.
Negotiation Tactics for ISV/OEM Agreements
Salesforce’s initial OEM offer will likely reflect its playbook: maximize revenue, lock in a long-term commitment, and limit flexibility.
However, remember that this is a business negotiation – you have leverage, and you don’t need to accept the first draft. When negotiating Salesforce OEM licenses, come prepared with a clear strategy.
Here are key tactics to optimize the deal in your favor:
- Propose a Hybrid Pricing Model: Don’t assume you must choose between per-user, per-app, or revenue share – you can blend elements to craft a model that suits your product. For example, you might negotiate a lower per-user fee plus a small revenue share, or a capped revenue share that converts to a flat fee beyond a certain number of users. A hybrid approach can ensure you’re not overpaying under one model or another. The idea is to balance the risk between you and Salesforce. Suppose your user count or revenue is uncertain. In that case, splitting pricing methods (or introducing volume thresholds) can prevent a scenario where you’re paying too much during slow periods or as you scale up. Be creative and align the pricing structure with how you charge your customers.
- Demand Flexibility in License Counts: One of your strongest negotiation points is reducing the risk of shelfware. Push for terms that allow you to adjust license quantities and fees as needed. Ideally, include a provision to periodically true down the commitment – for instance, every year or quarter, you can reduce (or increase) the number of licenses based on actual usage without penalty. If Salesforce balks at true-down rights, at least negotiate a ramp-up structure (start lower and increase commitments only when certain adoption milestones are met). You can also seek the ability to reallocate licenses: if one of your end clients leaves, you should be able to use that license for another client. Flexibility in how you assign licenses (or convert them between users or customers) will ensure you’re paying only for active users. The key is to avoid a static block of licenses that you pay for, regardless of whether they are used.
- Leverage Competitive Alternatives: Salesforce needs to know that you have other options (even if you prefer Salesforce). In negotiations, subtly make it clear that you’re evaluating competitive platforms or in-house solutions. Whether it’s Microsoft’s Power Platform, an open-source CRM, or building on cloud infrastructure without Salesforce, have a Plan B and mention it. This doesn’t mean turning the meeting adversarial; rather, underscore that while Salesforce is a strong candidate, your company will go with the platform that offers the best overall value. If Salesforce believes there’s a real chance you could walk away, they’ll be more flexible on price and terms. Come with data: for instance, a cost comparison showing that if Salesforce’s terms aren’t improved, building on another stack or using another OEM partner is financially more viable. This competitive tension is your friend – use it to negotiate lower revenue share percentages, waive certain fees, or get extra support at no cost. Remember, Salesforce’s reps are salespeople too; if they need to win your business, they can seek approvals for exceptions and discounts.
- Secure Price Protections and Discounts at Scale: Another tactic in negotiation is to address not just today’s pricing, but the future pricing as you grow. Price protection means capping how much Salesforce can raise fees on you in later years. For example, negotiate that renewal price increases are capped at, say, 5% per year or tied to an inflation index, so you don’t get a surprise 20% hike after year one. Also look for volume discount guarantees: as your usage rises, your effective cost per user or percentage of revenue should decrease, not increase. You might negotiate tiered royalties (e.g., Salesforce gets 25% of revenue up to $1M, but only 20% on the portion above $1M, and 15% above $5M, etc.), or bulk user pricing (e.g., the per-user fee drops once you pass 1,000 users). This way, success leads to better margins for you. Ensure these volume-based discounts are built into the contract, so you don’t have to renegotiate from scratch when you hit a growth milestone. Finally, try to lock in any one-time discounts or concessions you get so that they apply for the full term of the agreement (or at least a few years), not just the first year.
Building Long-Term Flexibility Into Your Contract
A truly optimized Salesforce OEM agreement not only provides a favorable price now, but also keeps you flexible and protected in the long run. As you finalize contract terms, focus on these areas to preserve your freedom to operate and evolve:
- True-Down Clauses for Slow Periods: A “true-down” clause is your safety valve if adoption is slower than expected. This provision allows you to reduce your license commitment (and costs) at set intervals based on actual usage. For example, if you committed to 1,000 users but only sold 700, you could true-down to 700 for the next period so you’re not overpaying. If Salesforce resists an outright true-down, negotiate for the right to rebalance or credit unused licenses toward future periods or other products. The idea is to avoid being stuck with a fixed bill that doesn’t accurately reflect actual customer usage. True-down rights are especially important in multi-year OEM deals – they ensure you can course-correct and scale costs in line with reality, which is crucial for maintaining healthy unit economics over time.
- Clear Exit Provisions (Escape Hatch): While you hope to build long-term success on Salesforce’s platform, you should always have an exit strategy. Negotiate terms for how you can exit the OEM arrangement if needed. This could include the right to terminate for convenience after a certain term or with advance notice. Ensure the contract clearly outlines what happens upon termination; for instance, you may need a wind-down period to transition your customers off Salesforce. Ensure you retain ownership of your customer data and application IP, so you can migrate to another solution if necessary. Having an exit clause doesn’t mean you plan to use it, but it gives you leverage and peace of mind. It prevents Salesforce from having an unspoken lock-in on your business. Even including a clause that allows you to leave if Salesforce raises prices above an agreed threshold or if certain performance metrics aren’t met can protect you. The goal is to avoid a situation where you’re stuck on a platform that no longer suits you, with no contractual means of escape.
- Guard Against Forced Changes or Bundles: Over the lifespan of your OEM deal, Salesforce will evolve its platform and product offerings. You need to guard against being forced into costly changes. Negotiate language that protects you from mandatory upgrades or add-ons. For example, Salesforce might introduce a new required support package or decide that all OEM partners must move to a higher edition of the platform – unless your contract says otherwise, you could be compelled to comply (and pay more). To prevent this, specify that you have the right to stay on the originally agreed platform edition and features for the duration of the contract, or that any changes must be mutually agreed upon. Similarly, be aware of service bundling: Salesforce may offer to bundle services such as premium support, additional sandboxes, or Marketing Cloud licenses into your OEM deal. Unless those additions add value to your situation, keep them optional. Every extra component can increase costs or complexity. The best practice is to keep your OEM agreement focused on exactly what you need to run your product, with no surprises. By locking in a stable set of services and pricing, you ensure that two years down the line, you won’t be ambushed by new fees or requirements that Salesforce unilaterally imposes.
FAQ
What’s the difference between Salesforce ISV and OEM licensing?
ISV programs let you build apps for Salesforce’s AppExchange (primarily for existing Salesforce users). OEM agreements allow you to embed Salesforce technology into your product and resell it as a standalone solution to your customers, even if they aren’t Salesforce users.
How is Salesforce OEM licensing priced?
It can be priced per user, per app (or per customer/instance), or as a percentage of your product’s revenue. Salesforce often pushes for revenue share or sets license bundles with minimum commitments, which can eat into an ISV’s margins if not negotiated carefully.
What’s the biggest pitfall for ISVs signing OEM deals?
Overcommitting to large license volumes or revenue minimums that your end customers don’t end up using. This results in paying Salesforce for a lot of unused licenses (shelfware), which directly erodes your profitability.
Can OEM pricing be negotiated?
Yes. Nearly every term is negotiable if you have leverage. Successful ISVs push for volume-based discounts as they grow, hybrid pricing models, and flexibility in how they assign or reduce licenses over time. Don’t be afraid to challenge the initial offer – Salesforce will often come back with more favorable terms if pressed.
How do I protect my ISV margins in OEM deals?
Negotiate upfront for contractual safeguards. For example, secure true-down rights to drop unused licenses, cap any year-over-year price increases Salesforce can impose, and avoid bundled extras or mandatory add-ons that you don’t need. By building in these protections, you ensure Salesforce’s fees won’t unexpectedly increase and squeeze your margins as your business grows.
Read more about our Salesforce Contract Negotiation Service.
