Salesforce is charging govt for licences no one uses

Avatar photo

Joseph Brookes

Salesforce is charging Australia’s disability insurance agency for user licences that the agency does not use, under contract costs that have quadrupled to more than $100 million and has been linked to the controversial Canberra lobbying firm Synergy 360.

On Monday, company executives confirmed it continues to charge the National Disability Insurance Agency (NDIA) for 12,500 licences, but could only say that a “significant portion” are being used.

“It’s a pretty good business model from your point of view, if people pay for stuff they don’t use,” said Julian Hill, chair of the Public Accounts and Audit Committee that is questioning Salesforce.

The software giant has been asked to appear before the committee because the contract it has with the NDIA for the licences was flagged in an initial investigation of contracts linked to former minister Stuart Robert and the Canberra consultancy Synergy 360, which was run by a former associate.

Executives said that it was up to the NDIA to ensure it utilises the licences it negotiated under its Salesforce contract, and through the several expansion contracts it has since entered.

The Salesforce executives defended the current over-estimation of user licences because it allowed the NDIA to “achieve economies of scale” during contract negotiations when licence fees are set, and because it would give the most users possible access to “incremental upgrades” to the platform as the scheme expands.

Despite being attracted to the “price certainty” of the US giant’s customer relationship management software during the 2020 tender, the contract to develop and access the CRM platform has increased four-fold since then, through an expansion in scope and a more than doubling of user licences.

The NDIA initially contracted Salesforce for 5000 user licences, but this was increased to 10,000 and then again to 12,500.

Salesforce executives on Monday said the NDIA had requested more licences so its “partner community” could access the platform, which Salesforce is also customising for additional professional service fees.

Executives were unable to provide a rough breakdown of how much each fee component is costing the NDIA but said the licence fees are a big part of it.

“One of the flexibilities at the Salesforce licencing model is that it can be rolled out to partner organisations … and in those circumstances, what we would see is that [partners] would also hold a licence,” Salesforce vice president, federal government, Brad Cook said.

The partners are accessing the Salesforce platform to assist in NDIS plan preparations and to use its marketing features, the executives said. The licences are effectively the same as the those used by actual NDIA staff, with the same capabilities and security features.

Executives could not answer questions on how the licence pricing structure works, however, including if any of the 12,500 licences are attracting different charges or what the marginal costs of adding users is for Salesforce.

The NDIA reported higher than expected staff growth last year, but its entire staff is around 13,700.

Nationals senator and committee member Matt Canavan said it was surprising that the agency had been “locked in” to a licence model for a platform that was likely to grow in users.

“It just seems strange to me they wouldn’t have tried to negotiate something a little bit more fixed-fee based, given it seemed a fairly bespoke contract for what they needed to do,” Senator Canavan said.

“Anyway, I would say you’ve done pretty well out of this because the upside presumably means quite lot more profit, I would have thought, for you [Salesforce]. But that’s at taxpayers expense.”

Salesforce was also asked to explain its meetings with former minister Stuart Robert in 2019 ahead of the tender that ultimately became a $100 million contract with the NDIA.

Executives took many of the questions on notice and has agreed to provide data on the expansion in licences and scope requirements.

Do you know more? Contact James Riley via Email.

Leave a Comment