Next month Xactly reaches its three-year anniversary, having debuted at Salesforce.com's Dreamforce 2005 event, where they introduced their on-demand Sales Compensation Management (SCM) product.
Xactly Incent brings automation and end-to-end visibility to the incentive sales compensation process, which, Cabrera says, "in nearly 90 percent of companies today is still managed by manual, spreadsheet-driven processes that breed errors and disputes, don't cost-effectively scale, can't easily accommodate plan changes and additions, and ultimately don't align sales behaviors with corporate goals to effectively drive profits."
But hey, other than that, they're great.
Cabrera says Xactly addresses this issue "in much the same manner that on-demand CRM brought automation, real-time visibility and efficiency to pre-sales processes." And Xactly is now heading for what Cabrera sees as a much larger market: on-demand Sales Performance Management. Forecast to reach $13.5 billion by 2010, the SPM market is an exciting opportunity for companies with a comprehensive suite of integrated, on-demand applications for driving overall sales performance.
FC: What is SPM, and how is it related to sales compensation management?
CC: In 2006, Gartner predicted that "a sales performance management market will coalesce around best-of-breed vendors largely originating from the sales incentive compensation management market." This is now happening.
Sales compensation management is the core foundation of any SPM product. Compensation management applications serve to consolidate, scrub and centralize critical post-sales data from systems such as ERP, order-management, pricing, inventory, product, accounts receivable and HR. This data is used to calculate commissions for the sales organization, or anyone with a variable component as part of their compensation.
But just as importantly, this data can then be used to model the impact of compensation-plan changes, and drive analytics that help companies determine their most profitable products, understand their commission’s exposure, determine the most productive territories, optimize the structure of their sales organizations, and much more.
FC: What is the relationship between SPM and CRM?
SPM and CRM are complementary. CRM deals with pre-sales data, or everything leading up to a sale to make sure that sale happens. SPM manages post-sales data, helping users best use this wealth of data to boost future sales and business performance.
Post-sales data is used to figure commissions, model plans, optimize pricing and territory coverage, and all the good things we just discussed. But post-sales data can also be married to pre-sales data to drive entirely new kinds of value for CRM users.
Here's a good example. Many of our customers are using Xactly Incent directly within their CRM applications, and allowing their reps to run "what if" scenarios by marrying live opportunity data from Salesforce CRM with compensation-plan data from Xactly Incent. Without ever leaving their CRM application, they can now see how much they stand to make on particular deals and how best to structure those deals for maximum commission payout. Under a strategic compensation program, what's best for the rep is what's best for the company.
FC: What's the compelling value proposition you offer to potential customers?
CC: The convergence of SPM and on-demand SaaS delivery has created a new, affordable way to improve sales effectiveness. We let companies automate and integrate strategic sales and finance business processes, and let individuals, from sales reps to top management, make better, more informed and timely decisions.
In the on-demand world, the customer holds all the cards and can kick an on-demand vendor out of the game at any time. Hence we're driven by the notion that each customer's business must be earned anew every day. Xactly's 94.4 percent customer-renewal rate is, we think, testament to our culture.
FC: How do companies benefit from implementing SPM?
CC: The whole idea behind SPM is optimizing the effectiveness of sales and driving profits. To this end, SPM does for post-sales processes what CRM does for pre-sales processes, it automates, provides visibility, and improves process efficiency across the board. Companies using SPM products can analyze and monitor key incentive metrics, management reports and dashboards. By using industry best practices, these companies can increase ROI by driving sales of the right products, uncovering potential in new territories and adapting compensation plans to match changing market conditions.
FC: What do you see as the most promising market opportunity over the next 18 months?
CC: Especially in the face of a potential global recession, the SPM and SaaS markets are both poised to see dramatic growth. Pairing the technologies together will especially deliver a one-two-punch meshing SaaS economic value with SPM business value.
Instead of being tied to an expensive, on-premise enterprise software infrastructure, SaaS means no upfront hardware and software costs, no worrying about costly ongoing software maintenance, and no vendor lock-in.
Even in the best of times, businesses need to invest in getting the most profit possible out of their front-line employees. SPM applications help align sales behaviors to corporate objectives, focusing reps on the most strategic sales, maximizing agility in the face of market change, and providing visibility into sales success drivers through comprehensive analytics. And along the way, they help to greatly reduce administrative time and costs, and support compliance efforts.
FC: For a business that succeeds in the SPM space over the next five years, what will it have done that its competitors didn't?
CC: There's a host of things that need to come together to ensure long-term success in this market. Just as the on-demand model has re-invigorated the enterprise software sector, it will prove essential to the success of modern SPM. On-demand SaaS will create and sustain the market through its cost-effectiveness, innate custom-centricity, and ability to deliver innovations into the hands of users without delay.
A successful vendor must remain attuned to how customer-centric the on-demand model is, and deliver on a clear commitment to customer success that ensures retention.
Completeness of product vision and breadth of product offerings will be equally important, both in attracting and keeping customers. These product offerings will have to not only integrate seamlessly with one another, but with a customer's end-to-end business processes and IT infrastructure, including both on-premise and on-demand applications. Thus openness and vendor neutrality are absolute requisites.
Finally, a successful player will need to create and nurture a rich partner ecosystem. Commitment to a completely open platform and integration with key applications is critical. You can't go it alone in this market -- you need to connect all the dots.
FC: What's your outlook for 2008?
CC: 2007 was a watershed year for SaaS in general, and on-demand SPM was not left out of the party. During the year, Xactly achieved triple-digit revenue growth, doubled its customer base, tripled its subscriber base, and completed its third round of financing to help fuel future growth.
Looking ahead, 2008 will be the year that SaaS becomes more savvy. By this I mean that on-demand products will become increasingly robust, with greater functionality, support for end-to-end business processes, and seamless user experiences across applications.
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