SaaS Model for Sales Compensation: Raving About Xactly Incent

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Posted by Rob Enderle Feb 7, 2008 9:51:25 AM

I'm a CODIE judge again this year, and that gives me the opportunity to see some impressive products. One that stood out was an offering called Xactly Incent, which is a software-as-a-service sales compensation tool.

This stood out for me because in one of my first high-tech jobs, I managed sales compensation for a good chunk of IBM. At the time, we largely did it on Lotus 1-2-3. A lot of companies still do this on spreadsheets. Our excuse in the '80s was that the only other choices were unacceptable: using a calculator and ledger system, or trying to get IT to create yet one more screwy mainframe-based utility that would be obsolete and probably not work by the time it was done. Now there is no excuse for not using a current-generation tool.

The Reason to Do Sales Compensation Right

If you've ever done sales compensation, you know what a pain in the hindquarters it is. You've also learned that if you do it poorly, you can sink the company. In my case, I watched as executive management changed the program unintentionally, which forced out our leading salespeople. That turned a profitable $750 million unit into one that was struggling to do $250 million and was drowning in red ink. It is funny how few people seem to remember that compensation actually sucks as a motivator but is incredibly effective as a de-motivator. (Reading up on Maslow helps.) Taking something as important to your bottom line and using a limited tool like a spreadsheet to manage it is asking for trouble because it is way too easy to make mistakes. Overpaying or underpaying a sales rep is simply asking for trouble.

In addition, salespeople tend to game their commission plans. If you don't have solid monitoring tools, you probably won't see the related trend before it is too late and you have to dig out from a big hole. One sales rep I knew actually bought products because at certain commission break points, he made enough profit to easily pay for the incremental hardware, which he likely resold on the gray market or shipped to a landfill. Either path clearly does not point to fiscal responsibility.

Why Xactly Incent Looked Good

Xactly Incent truly is based on a SaaS model and isn't just a hosted piece of traditional software. This means you pay for it as you use it, and you don't worry that much about software updates or patches because you aren't running the thing locally. With a SaaS offering for this class of product, you should be able to model future compensation changes and see what the impact is likely to be at different sales levels. This could help prevent situations where sales reps are personally buying products or commission plans move deals into the red for the company. Both happen way too often in my experience.

Because it is a service, regulatory requirements that affect its users, such as Sarbanes-Oxley compliance, are handled as part of the service. You don't have to buy updated products to address these concerns.

Wrapping Up

Other than getting a chance to look at this product as part of my CODIE efforts, I have no connection to this company. I've never met with its representatives. However, in looking at the offering, I was impressed that it appeared to address the concerns I had when I managed compensation programs. Were I still doing that, it would be on my short list. I'm suggesting that if your company manages compensation -- and odds are it does -- you should look at this offering as well.

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Feb 8, 2008 11:28 AM

Julien Dionne says:

Hi Rob,

Thanks for the post. I had a chuckle reading how you qualified sales compensation as a "pain in the hindquarters". Fortunately, new Sales Compensation Management tools can help with incentive management.

I write a blog specifically about technologies used in the space of sales performance management, where I think I hit a few topics you mentioned including the advantages of Sales Performance Management solutions, SaaS, a "review" of offerings similar to Xactly, how these tools help with Sarbanes-Oxley compliance (SAS 70 audits), etc. I think some of the information on my blog could be very interesting for you and your readers - the address is http://compensationexpert.blogspot.com/

Because of my current position as a consultant planning and implementing various variable compensation technology solutions, I can't contrast different applications together without getting in trouble; I will just say that my experience with Xactly has been very good so far.

To address Tim's comment, I'm sorry to hear that the implementation cycle took so long and that the information is not accurate. It is not unheard of that companies purchase some software package hoping that it will resolve all their problems, without looking at the bigger picture, and running into some problems like what you are describing.

These solutions are fairly complex and require some customization; that will take some dedicated resources on the business and technical sides of the company. The complexity of the task is often overlooked - it would be good to have someone on board with prior experience implementing the selected solution. If there is no one, then a team will need to be trained. Contracting an implementation partner with extensive experience implementing that particular solution could make the process much "smoother" and avoid the risks associated with any tech project (failure, delays, exceeding cost, etc). Once the application is launched, it still needs to be maintained; plans will change, territories will change, job functions will change, new employees will be hired, etc.

My point is that when the customization of any software solution has some issues, it is easy to blame that solution; however, in my experience, the solution is rarely the root cause of the problem.

Feb 12, 2008 12:47 PM

Erik Fike says:

Rob - great piece. I wanted to add some real world user experience to the blog - mostly in the form of praise for Xactly Incent.

Having experienced stellar growth in the size of our sales teams, we quickly outgrew our MS Excel-based version of a compensation "tool." The monthly activity of crediting and commissioning our sales people quickly became its own role. Our options were to continue using the error-prone and time-consuming Excel approach or to invest in a solution that not only reduced "over-payment" errors, but enabled us to think more strategically about sales performance and motivation. In fact, we estimated that just a couple of mistakes that resulted in over-compensation, would have easily paid for the investment in Xactly. This sold our CFO.

What used to take us 30 days to close a month in the Excel solution now takes us roughly 5 days in Xactly. This includes time to get feedback from the sales teams, finalize and produce a payment file.

Talk about increasing efficiency, accuracy and an overall reduction in hindquarter pain.

We have been using Xactly Incent for more than a year now. The finance department loves it, the sales management loves it and the individual sales contributors love it too. We have been able to accurately project monthly commission accrual figures, measure annual, quarterly and YTD quota attainment and performance by territory and rep. As a direct result, we have just implemented our first SPIF and Bonus plans to drive specific behavior in our sales team. We used Xactly's Modeling feature set to develop a comp plan for 2008 that helps motivate our reps to quickly get attainment up to avoid decelerators.

On top of the benefits weve seen as a result of the implementation of Xactly, the people we get to deal with at Xactly, whether in Sales, Support, Services or their Customer Success teams, are great. They are dedicated to our successful use and happiness and are always quick to respond.

Bottom line, its helping our bottom line and thats a good thing.

Feb 28, 2008 2:19 PM

Matt Tyre says:

Rob,

Sounds like you have a good understanding for sales compensation. This response is intended for the audience trying to find the answer to their sales compensation problems.

Sales compensation impacts many departments and is truly a headache for organizations. Companies looking at software solutions to manage sales compensation more effectively, like 90% of the market place still using excel are headed in the right direction.

When investing in this type of initiative, companies should anticipate internal resources need to be dedicated and drive the implementation and fulfillment of this type of project. A commitment like this is an initiative to create positive change for the entire company. In reality sales/revenue employ all the individuals in any organization. Software like this drives and motivates the desired behaviors in sales force. It also ensures that financially sales people are not being under or over paid. You would be astonished to know how many manual errors you see using excel, and how that ultimately impacts the bottom line. Woops I missed a formula, or a cell and I have just over paid my sales reps $40,000 last quarter.

Here are three key areas to look at in your company if you really want to move forward and implement sales compensation software.

1) Look at the quality of your sales transactional data. If this is difficult to track and manage now, than clean up this process internally before implementing a system like this.

2) Also ensure that you have the right sales compensation plans in place. You can have a great tool, but if the sales compensation plans or program is not effective, than a tool like this will not be the blame when sales performance falters and it could be misconstrued that way.

3) Lastly when deciding on which vendor to chose that offer sales compensation software check references and see how much experience they have directly with sales compensation, not just software. There are a few options are available, not only this company mentioned.

I work with a firm that has won the 2006 & 2007 Sales Compensation Program of the Year in North America for two of our clients. Both clients use a sales compensation tool called PlanIt Sales CompensationÂ®. Just one other choice in the market place.

Check out www.salesresourcegroup.ca

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