Salesforce\u2019s decision to raise the price of its software products starting in August can be attributed to a combination of factors, including inflation and pressure to fuel revenue after a pause in price hikes during the pandemic period \u2014 issues that are affecting other major technology suppliers, analysts said.\n\n\u201cWe have seen a general rise in software prices coming out of the pandemic as inflation has put pressure on operating costs of technology vendors, and these costs still remain high,\u201d said Liz Herbert, principal analyst at Forrester.\n\nSoftware vendors generally put a halt on price hikes when Covid hit, but started increasing prices as the pandemic subsided, Herbert noted.\n\nFor example, Microsoft announced a price increase for its 365 suite in the range of 8%-20%, depending on the edition, in late 2021; SAP increased its maintenance pricing by up to 3.3% in late 2022; and Slack increased prices by 8%-9% around the same time. Meanwhile, other vendors increased prices without making public announcements. Oracle, for example, raised maintenance pricing by 8%, though it did not announce the increase publicly, Herbert noted.\n\n\u201cWe are also seeing some pricing changes anecdotally, for example, one client told us they were facing more than a 25% increase in their Citrix renewal, and another cited approximately a 10% increase in their Adobe deal related to a consumer price index (CPI) clause,\u201d Herbert said. \n\nSalesforce, according to a company blog post published on Tuesday, said that it would be increasing prices across Sales Cloud, Service Cloud, Marketing Cloud, Industries, and Tableau by an average of 9% from August, after seven years of no price hikes.\n\n\u201cThe new list prices will be Professional Edition $80 (up $5), Enterprise Edition $165 (up $15) and Unlimited Edition $330 (up $30). These editions will be priced comparably in other currencies,\u201d the company wrote in the post, adding that similar price increases will go into effect for Tableau, CRM Analytics, Marketing Cloud Engagement and Account Engagement offerings.\n\nRevenue pressure drives price hikes\n\nInvestor pressure to drive more revenue from products is a major reason for the price hikes, according to Herbert.\n\n\u201cWhen considering the general market conditions and the specific profit pressure that Salesforce is under, this price increase should not be too much of a surprise,\u201d Herbert said.\n\nAlthough strong user uptake of Tableau\u00a0business intelligence\u00a0and MuleSoft data automation and integration software fueled a surprising 14% year-over-year jump in revenue for Salesforce\u2019s fourth quarter, the company underwent several tumultuous months starting late last year, as \u00a0the company\u00a0cut around 10% of its workforce, shut numerous offices, and\u00a0saw co-CEO Bret Taylor\u00a0and\u00a0Slack CEO Stuart Butterfield\u00a0step away from the company.\n\nDuring the earnings call for the recent quarter, CEO Marc Benioff said that Salesforce needed to \u201cradically accelerate the transformation plan timeframe\u201d as the company entered the fourth quarter.\n\n\u201cWe needed to press the hyperspace button and bring the two-year goals forward quickly and exceed them,\u201d Benioff said during the call, according to a transcript from Seeking Alpha. Further, Benioff added that the company had put mechanisms in place to talk to investors and listen to their concerns before making changes in the company\u2019s go-to-market strategy.\n\nThe move to hike prices, according to Omdia\u2019s chief analyst Bradley Shimmin, will help the company maintain profit levels amid a maturing marketplace where the move to the cloud has already happened for most enterprises.\n\nAt the moment, though, cloud revenue for most cloud services providers, including Salesforce, is continuing to grow at a compound annual growth rate (CAGR) of 17%,\u00a0 according to IDC research vice president Alan Webber .\n\nMeanwhile, \u00a0new generative AI capabilities, such as Einstein GPT, likely played a very small to a negligible role in determining the change in pricing, several experts agreed.\n\nForrester's Herbert pointed out that in its latest AI Day event, Salesforce said that pricing for its generative AI services was still being worked out.\n\n\u201cGenAI pricing is likely to evolve over time as there are still many unknowns about costs, usage, competitive pricing pressure, and more,\u201d Herbert added.\n\nHow will customers deal with the Salesforce price hikes?\n\nThe change in pricing strategy will impact Salesforce\u2019s many enterprise customers almost immediately, and may force relatively smaller enterprises to look at other options, such as Zoho or Oracle, according to Shimmin.\n\nThe increase in prices comes at a time when companies are trying to manage costs in an uncertain macroeconomic environment.\n\n\u201cAs a result, customers will continue to evaluate the number of licenses that they hold for Salesforce applications to ensure they are getting optimal value from the number of licenses they have,\u201d Webber said.\n\nThe price increases may have less of an effect on larger customers. \u00a0Futurum Group\u2019s research director Keith Kirkpatrick said that customers will \u201cnot blink\u201d at the price hikes as \u201clarge customers are unlikely to see actual net price increases of 9%, given their scale\u201d.\n\nAdditionally, the change in pricing is not going to affect enterprise customers who are locked in three-to-five-year deals with Salesforce.\n\n\u201cReal pricing changes for these enterprises won't hit them until renewal time or unless they are adding a new cloud,\u201d Herbert said, adding that it was difficult to quote a final impact of the price change as Salesforce discounting has historically ranged very dramatically.