Mud season

Posted: March 22, 2007 in CRM

There is a dandy little market share war taking place right now in the compensation management sector.  Vendors are making claims to uniqueness and superiority and trashing each other in ways that we haven’t seen in a few years and it’s great sport.

Compensation management is one of the hotter areas of the front office today and though some might stick it into the gadget drawer with other sales effectiveness solutions, it’s important enough to take a look at.  Basically, compensation management is the latest in a long line of applications that have emerged to replace crude spreadsheet based applications over the years.  I have often said that if you want to figure out what application areas are under served and therefore in need of a solution, you need only look at what organizations are using spreadsheets for and that’s compensation management for sure.

Sales managers and many others have used spreadsheets to track closed deals and variable compensation for a long time.  Unfortunately, as compensation plans get more complex tracking them in a spreadsheet is not a lot better than using paper.  The reasons are simple; today sales representatives have lots of products to sell and smart managers place different incentives on them to reward efforts to move new or hard to sell products out the door.  There are also ubiquitous spiffs and additional incentives used to get short term improvements as well.  Often the only way to make sense of this is to have one spreadsheet per sales person—which causes havoc when it’s time to pay out.

Tracking all of that becomes a tricky maze and finance departments often invest people and weekends at the end of a reporting period trying to sort out what the managers and their sales people have done.  But that’s not the only pain point, on the flip side sales reps will be sales reps and most keep their own spreadsheets to track their earnings and play what-if games as in, ‘If I close that big deal, will I be able to get that bass boat?’ 

Some of the studies I have seen say that the average sales representative spends a couple of days each quarter tracking money earned and trying to shadow the accounting department’s tally, a big productivity drain, and when you combine it with the troubles in the finance department caused by figuring out commissions in the first place you see a market opportunity.

The contenders I am following most closely include Callidus, Centive, and Xactly, each has its strengths and I am not here to pick a winner.  In the elbowing for market share though, it seems like initially Callidus took aim at very large organizations, Centive primarily targeted the sales force, and Xactly went after the finance department.  What’s interesting though is the way each has observed where the sweet spot in the market is and how they have each begun iterating toward it with their focus and messaging. 

Callidus takes an Olympian view of the competition and tries to stay above the fray by focusing on its well known customer base and its financials which are pretty good and, since it is a public company, freely available.

Centive and Xactly offer on-demand solutions and there have been claims to uniqueness in that respect, though obviously that’s not quite the case.  Also, since there are more seats to sell if you aim at the sales force rather than the finance department we’ve seen messaging modifications as all companies try to make themselves relevant to the sales team—by helping them recover those two days per sales person per reporting period—as well as to the finance department.

For pure entertainment you have to like the 15 second clips shown on the Centive site.  In any other medium they would be commercials but the word doesn’t ring true when you don’t have to watch.  Centive creatively appropriates the theme of the Apple vs. PC commercials now running in which two actors pretend to be the respective computers discussing their work lives.  In this series one actor is the spreadsheet and the other is Centive’s Compel product.  In the latest ad, (http://www.centive.com/video/parodies.html) Centive even manages to borrow from an old Hertz commercial for the tag line, “Not eXactly.”

I have met with executives from each company and they are all good, smart people. To me, what’s interesting about this market is that it’s wide open, very few companies now have the kind of solution each company offers and each has a great opportunity to capture hearts and minds. 

Perhaps it is human nature to beat up on what you perceive to be your nearest competitor but I wonder how effective it is.  If the market really is a green field, it seems to me the best thing these companies could do is to find the spots where they can concentrate on winning share without the overhead of competing head-to-head.  In the early days of on-demand the competition was all about SFA and predictably only one of the earliest SFA vendors survived the competition. 

The market for on-demand solutions proved to be bigger than SFA and a second generation of on-demand CRM players now occupies many different niches and even the big players like salesforce.com, NetSuite, and RightNow overlap a lot less than you might think.

On the other hand, maybe a new market needs a little mud wrestling just to get people to pay attention.  It seems inefficient but as I said at the beginning, it’s great sport.

So, what did you think?

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