Posts Tagged ‘Xactly’

Video Chat with Chris Cabrera, CEO Xactly

Posted: June 8, 2012 in CRM

I sat down with Chris Cabrera, CEO of Xactly, at their user meeting in San Francisco last month.  This video is a wide ranging discussion on compensation management and related topics.

Shades of Tracy Kidder.  IBM announced it was buying Varicent, a sales compensation solution provider and Xactly! the SaaS compensation solution, welcomed the new competitor with pretty much the same logic that Data General used when IBM announced its mid-range systems.

According to Kidder’s book, “The Soul of a New Machine,” DG famously developed, but never ran, an ad that discussed how IBM had legitimized the mini-computer market with a headline that read in part, “The Bastards Say Welcome.”

But enough of the history, you had to be there.

Xactly is taking a decidedly different approach to IBM’s legitimization of the compensation market.  To call it a compensation solution is to miss about half of what it does with analytics and reporting and thus managing a company.  But check their website for details.

Xactly CEO, Chris Cabrera was upbeat and quite happy when we talked on Friday about the deal.  Among other things he said, “This is good for our space.  We’ve said for a long time that this data is valuable.  It represents a company’s family jewels,” because it contains information about what was sold, who sold it, what channel was involved and a lot more that a business can leverage.

I think Cabrera is right to be enthusiastic about the news.  First, having IBM in the market proselytizing about the importance of sales compensation, its data and analyzing it can only be good for everyone.  In fact, it looks to me like IBM might have the tougher row to hoe because Varicent is a traditional software company with all the costly implementation and maintenance issues that go with that category.

In contrast Xactly has a SaaS model which makes it light on the wallet for acquisition, deployment and maintenance.  Xactly also relies on more modern cloud technologies like Hadoop and NoSQL Big Data so the competition will be interesting.  If IBM aims Varicent at the enterprise market then I can see it being insulated from some of the challenges of competing with SaaS but even there and especially down market, I think Xactly will be tough competition.  We’re talking about old style applications and the new century.

At the end of the day the competitive issues will center on analytics and the information a company can glean from its sales compensation data.  IBM has a big salient in analytics and Xactlyhas one in compensation management.  Success for either company may come down to how customers frame the issue for themselves and how each vendor responds.  Let the selling begin.

You can gauge the success and financial health of almost any company by looking at revenues.  At least this is true in the short term.  Since revenue is a lagging indicator — with the exception of monthly recurring revenue (MRR) that subscription companies measure — it only tells you where you’ve been not where you are going.

We could very profitably spend our time discussing various other metrics that can also give us an incomplete picture of how well a company is doing.  For example, increases in MRR.  While tracking increases is valid though it is incomplete without churn and new bookings.  Nonetheless, when I started I was looking for something more macro, which is my tendency, and eventually it dawned on me that one of the better metrics of long-term viability and not simply revenue might be the size and growth characteristics of the partner community or ecosystem.

The ecosystem presents the possibility of multiplier effects that you see in the economy at large unless you are a Neoclassicist, but generally purchases drive other purchases in a virtuous circle that helps ensure the health of all in the ecosystem.

For another good but crude analogy think about baleen whales.  Strange to contemplate whales in a piece on the CRM industry but consider this.  Baleen whales are a whole class of very large animals that feed on some of the tiniest creatures in the sea, plankton.  Baleen is a structure in the mouth that acts as a filter that the animal uses to remove the little critters from a mouthful of seawater.  Since the whale depends on plankton, which might be at the bottom of many other food chains, you can infer a direct relationship between the health of the ecosystem at the lowest level by observing the largest predator.

At any rate, that’s my hypothesis and it brings me to the health of such companies as and many others.  But let’s just stay on Salesforce for this.  Salesforce has an estimated 30,000 company customers, more than 1.1 million installs, 3,000 partners and thousands of products in the AppExchange.  All are growing and in each case, because this is an ecosystem, each has found a way to make a living in Salesforce’s shadow.

The partners provide what Salesforce might not provide or might not wish to, or they provide specialized products and services that form stand-alone businesses. There are numerous examples.  Zuora provides a subscription billing and payments system, a business Salesforce has stayed out of.  Cloud9 provides an analytics driven sales forecasting solution that takes significant complexity and makes it simple for sales people.  Marketo and others provide marketing automation that generates leads — the lifeblood of any enterprise.  Xactly does sales compensation, another complex task that Salesforce has decided is not in its wheelhouse.  The list is long and it grows whenever the core offering grows and opens up new niches.

Yesterday, a couple of companies announced a merger that will add to the ecosystem.  Cloud Sherpas and GlobalOne joined up, retained the Cloud Sherpas name and raised an additional $20 million in funding.  The combo fits nicely into the ecosystem.  Cloud Sherpas was the Google Enterprise 2011 Partner of the Year and GlobalOne is a Salesforce platinum consulting partner.

Google products run a gamut from word processing to analytics to social networks to who knows what.  While Salesforce has been friendly to integration with Google Apps in the past some companies, especially large ones with complex requirements, have sought help in accomplishing it.  Having Google and Salesforce services under one roof seems to make sense for large customers with complex requirements.

To be sure, Cloud Sherpas is not the largest implementation partner in the ecosystem but the company’s exclusive orientation on cloud computing and its expertise in Google’s cloud applications should be appealing to many new and existing Salesforce customers.

Cloud Sherpas also bring experience in integrating cloud with conventional applications and you can certainly expect that the company’s customers will have an eclectic combination of conventional, cloud and legacy applications to deal with.  To me it’s fairly obvious that for cloud computing to continue to grow more integrations among all types of computing will be needed.

So, even if you don’t know much about software, I think it would still be evident that healthy companies like Salesforce or SugarCRM, with its large open source community or Microsoft and Sage, with their significant partner communities, are likely to endure simply because their ecosystems are so strong.

Companies like Cloud Sherpas need to think and choose wisely because many subsequent decisions hang on whose ecosystem you join.  The new funding suggests that other wise people have faith in this pairing.