Why Salesforce pushes multi-year deals so aggressively – and the enterprise dilemma of discounts vs. long-term risk.
Salesforce often urges customers into multi-year contracts (typically 3–5 year deals) by dangling enticing benefits upfront. The pitch is straightforward: commit to a longer term and you’ll get deeper discounts and predictable pricing. Read our full insider guide – Inside the Salesforce Sales Machine: Vendor Insights for Negotiators – Understanding Salesforce’s Sales Tactics.
For CIOs, CFOs, and IT procurement leaders, this “discount for commitment” scenario is tempting – who wouldn’t want lower per-user costs and budget certainty? Yet, alongside the short-term savings come significant long-term risks.
Once you’re locked into a multi-year agreement, you lose flexibility to adjust if your needs change or if better options arise. Enterprises face a tough balancing act: enjoy immediate cost benefits or maintain the freedom to adapt year by year.
This article pulls back the curtain on why Salesforce pushes multi-year deals, the hidden dangers of long-term commitments, and smart negotiation strategies to protect your interests.
Whether you’re nearing a high-stakes Salesforce renewal or planning a major expansion, understanding these dynamics will help you structure a deal that secures value without getting trapped by unforeseen pitfalls.
Read How to Negotiate Salesforce Contracts: Proven Strategies for Enterprises.
Why Salesforce Prefers Multi-Year Contracts
From Salesforce’s perspective, multi-year contracts are a strategic win.
There are several reasons Salesforce aggressively favors longer-term deals:
- Predictable Revenue: A multi-year contract guarantees Salesforce a steady, locked-in revenue stream for years. This predictability is gold for their financial planning and investor expectations. It de-risks their sales forecasts because they know you’re committed and unlikely to churn.
- Quota Attainment for Sales Reps: Account Executives (sales reps) are highly motivated to land multi-year deals. Often, the entire multi-year contract value counts toward their quota or commission. Closing a three or five-year deal can make a sales rep’s year (or multiple years), so they pull out all the stops to persuade you. The sales team may even have internal incentives or better commission rates for multi-year bookings, which can drive them to offer special concessions if you agree to a longer term.
- Bundling Power: With a longer timeframe, Salesforce can bundle in additional products or services as part of the deal. For example, they might include newer offerings (Slack, Tableau, extra Sandboxes, etc.) at a nominal cost or as “free” add-ons. This helps Salesforce expand its footprint in your organization – you’re effectively giving them more cross-sell opportunities locked in over the contract term. It’s a chance for them to introduce more Clouds and features into your stack, increasing your dependence on their ecosystem.
- Locks Out Competitors: A multi-year commitment is also a defensive play. Once you’ve signed up for several years, it becomes significantly harder (both practically and financially) to consider alternative platforms. Competitors know you’re tied up, so they’re less likely to target you with offers. Salesforce, in turn, reduces the risk of you switching to a rival by locking in your loyalty upfront.
In short, Salesforce’s multi-year pricing strategy is designed to maximize the lifetime value of the customer. They are willing to “pay” for that long-term lock-in by giving you discounts and perks, because the deal heavily favors their stability and growth. Understanding this vendor mindset helps you see why the sales pitch can be so persistent in advocating for multi-year agreements.
The “Discount for Commitment” Trade-Off
The primary carrot Salesforce offers for a long-term contract is a bigger discount. It’s framed as a classic trade-off: you commit to us for a longer period, and we’ll make it cheaper per year. In practical terms, an enterprise might see something like a 10–20% lower per-user price on a 3-year deal compared to a standard 1-year term. On paper, this can equate to significant savings over the contract duration. Salesforce often sweetens the offer with price protections, such as locking today’s pricing in for the next few years to guard against their routine annual price hikes.
However, these short-term savings come with long-term risk exposure. The deal looks great in year one: you’re a hero for slashing software costs and avoiding the dreaded price increase at the next renewal. But fast-forward a year or two, and the landscape may have shifted. Perhaps your company didn’t grow as expected, leaving you with excess licenses (while still paying that “discounted” rate on all of them). Or maybe Salesforce introduced a new product bundle or pricing model that would have suited you better – but you’re stuck with your pre-negotiated terms, unable to take advantage.
Salesforce’s sales teams are skilled at framing the multi-year deal as a no-brainer: “Why pay 5% more each year on a rolling annual contract when you could lock in a better rate for three years?” They’ll emphasize the total savings over the term and create a sense of urgency (often aligning the offer with quarter-end deadlines). It’s important to remember that the value of those discounts only materializes if your usage and needs stay as planned. A “great” price on something you don’t end up using is no great deal at all. In essence, the discount-for-commitment pitch is a calculated bet: you win if your long-term needs match the plan, but you lose if reality diverges from the rosy projections.
Risks of Multi-Year Salesforce Commitments
Signing a multi-year Salesforce contract means relinquishing some control and flexibility.
Here are the hidden risks and pitfalls that too often catch enterprises by surprise:
- Overcommitment and Shelfware: Salesforce will encourage you to buy for the future – extra licenses, more products, higher tiers – often to reach a higher discount bracket. The risk is that you commit to capacity that never gets fully adopted, resulting in shelfware (software you paid for but don’t use). For example, a company might lock in 1,000 CRM licenses for five years, only to find that the expected growth never materializes. If only 700 users are actually onboard, you’re paying for 300 unused licenses year after year. Those unused licenses erode your savings; the money wasted on shelfware can easily outweigh the initial discount. And unlike an annual contract, you can’t promptly shed those excess licenses next year – you’re stuck with them.
- Inflexibility to Change: A long-term contract significantly reduces your agility. If your business strategy shifts, if there’s an economic downturn, or if you need to pivot to a new tool, a multi-year deal becomes a tight cage. You typically cannot reduce your license counts or swap products mid-term without penalty (if at all). Many Salesforce multi-year agreements are non-cancelable and non-reducible, meaning you are obligated to the full term’s usage and spend. Early termination, if allowed, will incur hefty penalties or require payment of the entire contract. In fast-changing industries or uncertain times, this inflexibility can be dangerous – you may need to downsize or streamline costs, but your Salesforce spend is fixed and untouchable.
- Lost Negotiation Leverage: With an annual renewal cycle, you have a natural checkpoint each year to renegotiate pricing and terms based on current market conditions and your satisfaction. Multi-year contracts remove that yearly leverage point. Once you’re signed up for 3+ years, Salesforce knows you’re not going to walk away anytime soon. This can make them less motivated to respond to issues or requests in the interim. Suppose you want to add users or additional products mid-term. In that case, you might not get as aggressive a discount as you would during a competitive renewal negotiation – because the core of your business is already locked in. In essence, you’ve front-loaded your leverage to Day 1 of the multi-year deal, and you won’t have the same power to push for concessions until the term is nearly up.
- No Escape if Needs Drop: Over a multi-year span, usage can fluctuate as well as increase. If your needs decrease – for example, if you divest a business unit or adopt process efficiencies that require fewer Salesforce licenses – a long-term contract doesn’t allow you to right-size easily. You continue to pay for the original commitment even if you no longer need it. Without carefully negotiated clauses (which Salesforce doesn’t volunteer by default), you can’t renegotiate mid-term just because utilization fell. This is why many organizations find themselves stuck in a pay-for-what-we-thought-we’d-need scenario, bleeding budget on ghost users.
- Locked Out of Innovations or Alternatives: The tech world evolves quickly. Over a multi-year span, new competitors or solutions may emerge that are more cost-effective or better suited to specific parts of your business. Or Salesforce itself might overhaul its packaging and pricing – for instance, bundling features differently or introducing a new edition that would save you money. If you’re locked in, you likely can’t take advantage of these changes. You may watch others adopt a new CRM innovation or benefit from a pricing model change while you’re chained to your legacy contract. In short, a long commitment can leave you behind the curve, unable to pivot until it’s time to renew again.
None of these risks are theoretical – they happen all the time, especially when enterprises overestimate their needs or fail to incorporate safeguards. The longer and larger the contract, the more you must be aware that the cost of mistakes compounds over time. What started as a “strategic partnership” can become a costly cage if you’re not careful.
When a Multi-Year Deal Can Work
Multi-year contracts aren’t universally bad. In fact, under the right conditions, they can be mutually beneficial. Here are scenarios where a multi-year Salesforce deal might make sense and work in your favor:
- Stable or Predictable Growth: If your user counts and business operations are relatively steady (or steadily growing predictably), you can confidently forecast how many licenses and which products you’ll need in the coming years. In this case, the risk of overcommitting is low. For example, an enterprise that consistently experiences 5% headcount growth and has a clear expansion plan for its Salesforce usage can lock in a multi-year deal, knowing it will actually utilize what it’s paying for.
- High Adoption & Essential Platform: When Salesforce is already deeply embedded in your workflows and has high adoption across your teams, you know its value in your organization is solid. Suppose multiple Salesforce Clouds (Sales Cloud, Service Cloud, Marketing Cloud, etc.) are in heavy use and driving results. In that case, a longer commitment can simply formalize what’s already true – that you intend to stay on Salesforce for the foreseeable future. In such cases, predictable spend outweighs flexibility because you’re not realistically looking to switch platforms soon.
- Budget Certainty is Paramount: Some organizations prioritize cost predictability above all. For instance, if you’re a government agency or in a highly regulated industry, you might have multi-year budget appropriations that align well with a fixed software expense. Locking in a known cost for 3–5 years (with no surprise hikes) can be advantageous for long-term planning. The benefit of price protection – avoiding Salesforce’s typical annual price increases – can provide peace of mind when you absolutely need to eliminate financial uncertainty.
- Well-Negotiated Terms: A multi-year deal can work when it’s structured thoughtfully to include flexibility. If you manage to negotiate clauses that allow some adjustments (such as modest reductions or service swaps at certain intervals), you mitigate the downsides. In essence, the deal is multi-year in commitment but not entirely rigid in execution. Enterprises that secure these kinds of terms (though not easy to get) can enjoy the best of both worlds: long-term savings and enough agility to correct course if needed.
In summary, if you have high confidence in your Salesforce usage projections and the platform’s continued fit, a multi-year contract can lock in significant value.
The key is ensuring that your needs in year 3 (and year 5) truly align with your current needs – and structuring the agreement so that you’re protected even if things don’t go perfectly to plan.
Negotiation Strategies for Multi-Year Contracts
If a multi-year Salesforce contract is on the table, how you negotiate it will determine whether it becomes a strategic win or a regrettable misstep.
Here are proven negotiation strategies to structure a multi-year deal more favorably for your enterprise:
- Implement Ramp-Up Clauses: Don’t pay for all projected users or products from day one. Instead, negotiate a ramp clause that aligns with your actual adoption schedule. For example, commit to 1,000 users in year 1, 1,200 in year 2, and 1,500 in year 3 only if needed. This way, your spend grows only as your utilization grows. A ramp structure prevents front-loading the contract with licenses that you hope you’ll use later. Salesforce may still give you the multi-year discount on the premise of eventual growth, but you’re safeguarding against overbuying early.
- Include Exit or Re-opener Clauses: Push for flexibility triggers in the contract. One tactic is to negotiate a mid-term “true-down” or re-opener clause. For instance, at the end of year 1 or 2, if certain licenses or products are underutilized, you have the right to reduce those quantities or remove that product from the agreement without penalty. Alternatively, consider securing an early termination option for specific scenarios, such as mergers or major business downturns. (If Salesforce won’t allow a true termination for convenience, try for a penalty that lessens over time – e.g., a smaller fee if you cancel in year 3 rather than paying 100% of the remaining term.) The goal is to avoid a total lock-in; you need at least some escape hatches or adjustment levers if things change.
- Negotiate Discounts per Product Line: Be cautious of blanket bundle discounts. Salesforce might say, “If you buy these five products together on a multi-year term, we’ll give you 30% off the whole bundle.” That sounds good, but it can mask imbalance – you might be getting great discounts on core products and negligible deals on the add-ons (or vice versa). Instead, negotiate pricing for each component as much as possible. Know the list price and target discount for each product (e.g., Sales Cloud, Platform, Slack) and ensure each is discounted fairly. This way, if you decide later to drop one product or reduce its scope, you’re not forfeiting an umbrella discount on everything. Each piece of the deal stands on its own merit.
- Tie Commitments to Performance Milestones: If Salesforce is urging you to adopt a new product or significantly increase licenses as part of the multi-year deal, consider a “pilot-to-scale” approach in your terms. For example, agree to purchase 500 licenses of a new module now, and an additional 500 next year, only if the first wave meets the defined success criteria (e.g., 80% adoption or a specific ROI metric). These conditions require your full commitment to actual performance. It protects you from investing heavily in a hyped product that ultimately fails. Salesforce often wants the full commitment upfront; you can counter by structuring future expansion as earned – they still get the sale eventually if the product delivers value, and you get protection from paying for something that doesn’t work out.
- Cap Price Increases and Lock in Rates: A common pitfall in multi-year agreements is built-in price hikes (sometimes 5–7% annual uplifts baked in). Negotiate hard to cap any year-over-year increase – ideally, insist on flat pricing per unit for the entire term. If Salesforce absolutely requires an uplift, try to keep it minimal (e.g. max 3% per year or tied to a neutral index). Also seek price protections beyond the term: for instance, a cap on the price you’ll pay if you renew or expand after the contract ends. You don’t want a nasty surprise in year 4 where renewing costs dramatically more because you’ve lost leverage. Locking in pricing now, or at least putting a ceiling on it, ensures the multi-year deal truly delivers the cost predictability it promises.
- Time Your Negotiation with Salesforce’s Calendar: Leverage Salesforce’s own sales cycle to maximize your discount. Salesforce operates on a fiscal year that ends on January 31, and its sales teams scramble to meet quarterly and yearly targets. That means the best deals often surface at quarter-end, especially Q4. Plan your negotiation so that final approvals land in late January or the end of a quarter – you’ll find Salesforce far more flexible and generous when they’re under the gun to close the deal. Use this pressure ethically: make it clear that you have internal timelines too, but be prepared to walk away if the deal isn’t right. A well-timed negotiation can yield an extra 5-10% discount or additional benefits (such as extra sandboxes or support) that wouldn’t be offered during a low-pressure period. Just be careful: don’t let their deadline force you into signing something you’re not happy with. You can let a quarter-end pass if needed – Salesforce will come back. The key is to use their urgency, not be used by it.
By employing these strategies, you transform a multi-year contract from a potential minefield into a more balanced, controlled agreement. The overarching principle is to build flexibility into a rigid deal.
If Salesforce truly wants the long-term commitment, they should be willing to meet these terms that share the risk and reward more equitably. Remember, everything is negotiable if you have the resolve and a credible walk-away plan.
Alternative Approaches to Consider
You might decide that a standard 3-year all-in contract isn’t the right fit – and that’s perfectly reasonable.
There are alternative deal structures and approaches that can deliver value while minimizing risk:
- Hybrid Term Lengths: Who says all your Salesforce products must be on the same renewal schedule or term length? In negotiations, consider a hybrid model – for example, commit critical, stable services to a 3-year term, but keep more experimental or variable products on a 1-year term. Salesforce might push for everything bundled together, but you can often carve out exceptions. This way, you get long-term discounts on the core items you’re confident about, while preserving annual flexibility for areas where needs might change. Another hybrid approach is a “2+1” structure (two years firm + an optional third year at your discretion). While not standard, large customers have negotiated opt-out clauses or optional extension years. The hybrid approach is to avoid a monolithic commitment and instead tailor the contract length per component, aligning with the predictability of that particular piece of your business.
- Phased Rollouts: Instead of signing a massive contract covering a full enterprise rollout that spans years, structure the deal as a phased deployment. For instance, Phase 1 could cover Division A this year, Phase 2 could add Division B next year, and so on – with pricing and terms pre-negotiated for each phase. Salesforce will still want the whole pie eventually, but you are effectively staggering the commitments. The advantage is that you’re not paying for Phase 3 users in Year 1. Each phase can have a checkpoint to confirm things are on track before moving to the next. It also creates multiple negotiation events (one before each phase) rather than a single, comprehensive commitment. Phasing is especially useful if you’re not 100% certain on the timeline of adoption across global business units or if a project could be delayed – you don’t want to be stuck with licenses for a deployment that hasn’t happened yet.
- Pilot-to-Scale Agreements: If you’re eyeing new Salesforce products (say you want to try Field Service, or an Analytics module) but aren’t sure if they’ll deliver value, propose a pilot-to-scale contract. This might appear as a short-term initial purchase or a small volume purchase with an agreed-upon pathway to scale up if the pilot is successful. For example, do a 6-month or 1-year pilot for 100 users at a certain price, with a clause that allows you to expand to 1,000 users in year 2 at the same per-user rate if (and only if) you decide to go forward. Salesforce often prefers to sell big from the start, but they also fear losing a sale entirely – so they may entertain a structured pilot if it’s the only way forward. This approach protects you from long commitments on unproven solutions. If the pilot underperforms, you can exit with minimal pain; if it works well, you’ve pre-negotiated the terms to scale it without a fresh negotiation frenzy.
These alternative approaches require a bit more negotiation finesse – you’re asking Salesforce to deviate from their “usual” contract playbook. However, bringing these ideas to the table signals that you’re a savvy customer looking for a win-win. Salesforce may grumble, but if it means salvaging a deal, they often would rather get part of your business on your terms than lose everything.
The key is to align the structure with your actual deployment plan and risk tolerance, rather than trying to fit your plans into a one-size-fits-all contract.
Real-World Example Scenarios
Sometimes the best way to illustrate the impact of multi-year contract decisions is through examples.
Here are three scenario cases based on common experiences enterprises have had with Salesforce deals:
Case 1: Trapped in a 5-Year Shelfware Trap – A global manufacturing company jumped at a five-year Salesforce deal that promised a 25% discount compared to annual pricing. They eagerly committed to a comprehensive bundle (Sales Cloud, Service Cloud, and Platform licenses), projecting a need for 5,000 users as they planned to roll out Salesforce company-wide. Salesforce even threw in some extra subscriptions for a new analytics add-on. Two years in, reality struck: the company’s growth slowed, and certain divisions never fully adopted the new tools. On average, only about 70% of the licenses were being used, meaning roughly 30% were unused and considered pure shelfware. Due to the multi-year contract’s strict terms, they couldn’t drop those unused licenses and were required to pay for them annually. The much-celebrated 25% discount evaporated in value – in fact, the company calculated they ended up paying more over five years than if they had done smaller annual renewals and added licenses gradually. This case underscores how overcommitting can backfire. The lesson: a big discount on paper doesn’t help if you’re buying far more than you need. It’s extremely challenging to predict usage five years in advance, so a cautious approach (or built-in flexibility) is crucial to avoid this kind of costly lock-in.
Case 2: Staggered Contracts Yielding Savings – An enterprise services firm took a creative approach to its Salesforce renewal to balance savings and flexibility. Instead of signing one monolithic multi-year contract covering Sales Cloud, Marketing Cloud, and an expanding user base all at once, they staggered their commitments. They renewed their core Sales Cloud users on a 3-year term to secure a solid discount, but they kept Marketing Cloud on an annual renewal due to uncertain marketing needs. Additionally, they negotiated an option to add more Sales Cloud users in year 2 at the same discounted rate (if growth occurred, which it did). Over a three-year horizon, this strategy paid off: by not over-buying Marketing Cloud for all three years (they adjusted it year by year) and only scaling Sales Cloud when needed, they saved an estimated 18% compared to the cost of the “one-size” 3-year bundle Salesforce originally pitched. This example demonstrates that combining contract lengths and sequencing purchases can outperform a single, all-inclusive deal. The company enjoyed near the same discounts but avoided paying for capacity in areas that didn’t pan out, illustrating a smart renewal contract strategy in action.
Case 3: Mid-Term Flexibility Prevents Waste – A financial services company negotiated a large three-year Salesforce contract but, critically, insisted on a mid-term adjustment clause for under-used products. In their deal, they included a provision that after the first 12 months, they would jointly review license usage. If any product was less than 50% adopted, they could drop a portion of those licenses or reallocate that spend to other Salesforce products. This was a tough battle – the Salesforce rep had to get approval for this non-standard clause – but ultimately it was granted in exchange for the customer agreeing to expand the contract scope initially. The clause turned out to be a lifesaver. One of the add-on modules (a field service app) saw very low uptake. Thanks to the clause, at the end of year 1, the company removed that module from the contract and redirected the budget toward extra Sales Cloud licenses for a growing team, with no penalty. They avoided what would have been tens of thousands of dollars in shelfware over the remaining term. The takeaway from this case is that negotiating “escape valves” – even if you think you won’t need them – can dramatically reduce downside risk. Because they had anticipated the possibility of uneven adoption, the company preserved value in the deal and stayed aligned with actual usage.
FAQ – Salesforce Multi-Year Contracts
What’s the typical discount difference between 1-year and 3–5 year deals?
Multi-year deals typically come with notably larger discounts. While exact numbers vary, you may see an additional 10%–20% (or more) off on a 3-year contract compared to a single-year term for the same scope. For instance, if a one-year renewal offer is at a 10% discount off the list price, a three-year deal might be offered at 20–25% off. Salesforce essentially rewards the longer commitment with bigger upfront savings. Just be cautious: ensure that the multi-year discount is truly locked in for all years and not partially clawed back by conditions or price increases buried in the fine print.
Can I renegotiate mid-term if usage drops?
Generally, no, not without a pre-agreed clause. Once you sign a multi-year Salesforce contract, the quantities and prices are fixed for that term. If your usage drops or you realize you over-bought, Salesforce has no obligation to reduce your commitment. You are locked into the agreed numbers. That said, it’s not unheard of to approach Salesforce mid-term and plead your case if you’re really struggling – in rare cases they might offer a concession (for example, allow you to apply unused value to another product). But that is at their discretion and usually requires you to commit to something else in return. The safer approach is to negotiate flexibility upfront (like a true-down option or the ability to swap products) rather than hoping for renegotiation later. In short, assume that what you sign is what you pay, so plan accordingly.
How do I avoid paying for licenses I don’t use?
The best approach is through careful planning and a well-structured contract. Begin with a realistic assessment of your needs – don’t let Salesforce’s optimistic growth projections dictate your purchasing decision. If you’re unsure about adoption, consider phasing your license additions or using ramp-up clauses to add licenses over time, rather than all at once. Additionally, consider negotiating provisions such as annual adjustment rights or, at the very least, the flexibility to reassign unused licenses to alternative uses (for example, you may be able to convert some unused product licenses into credits for another product). Internally, ensure you’re monitoring usage; sometimes, shelfware occurs simply because no one is tracking that 200 licenses are sitting idle. If you catch it early (say, within the first year), you might use that as leverage to negotiate something (maybe extra support or a one-time credit) even if you can’t reduce the count. Bottom line: buy conservatively, expand as needed – it’s better to miss out on a small extra discount than to overspend on unused subscriptions.
Is a hybrid 1-year + 3-year model negotiable?
Absolutely, it’s negotiable – everything in a Salesforce deal is, if you have the leverage and creativity. Salesforce will typically propose a uniform term for simplicity (usually 3 years for an enterprise deal), but you can counter with a hybrid approach. For example, you might say: “We’ll do a 3-year commitment on these core licenses, but these newer products we want on a 1-year term to prove their value first.” This isn’t standard, and you can expect pushback (“Our policy is 3-year minimum on that product,” etc.), but customers have successfully done it. It helps if you explain the reasoning and tie it to a future opportunity: e.g., “If the pilot year goes well, we’ll gladly fold this into the multi-year at renewal.” Another hybrid tactic is to align different end dates so that not everything co-terminates, although Salesforce prefers co-term for administrative ease. While negotiating, highlight that you’re not asking to reduce the overall commitment, but to align the contract length with certainty. If the deal is important enough, Salesforce will work with you on structure – they’d rather have a partial multi-year than no deal at all.
Should smaller enterprises ever agree to multi-year terms?
For smaller organizations, the calculus can be different. Generally, smaller enterprises (with fewer users or tighter budgets) should be more cautious about multi-year contracts. The relative discount a small customer receives might not be as substantial as that of a Fortune 500 company, so the savings may be modest; however, the risk of being overcommitted remains very real. Smaller companies often experience more volatile changes – a startup or mid-market firm could double in size or hit a downturn in a short span, making it harder to predict needs 3 years out. That said, if a small enterprise is very stable and certain about its needs (and perhaps has limited IT procurement bandwidth to renegotiate every year), a 2-year deal or gentle 3-year deal could make sense, especially if Salesforce offers a compelling price lock. The key for a smaller player is to avoid being seduced by a slightly lower price if it comes with terms that could hobble the business later. Often, staying annual (one year at a time) is the safer route for a smaller company, as it provides maximum flexibility to adjust and evaluate value each year. If you do go multi-year as a small enterprise, keep it shorter (like 2 years) and negotiate outs, because you likely don’t have a large cushion to absorb a mistake. In essence: weigh the discount vs. the risk very carefully – flexibility is often more valuable for a growing business.
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