Get Connected, Or Else

In the news this week was a report of yet another business being investigated for back-dating stock options for executives. This company is not the first and surely won’t be the last to have the authenticity of its business data tested in a public forum. Each time it happens I am reminded of the importance of data accuracy and consistency, not to mention personal accountability.

In my experience, I’ve seen firsthand what happens when the various functional areas of a company are not on the same page. More than one product launch has been torpedoed because sales was selling a product that marketing had marketed but which was not quite completed according to the engineering team.

On a larger scale, businesses are sunk every day because members of the executive team are aware only of information from their particular business silos. Rather than being connected, data is treated as if it exists in a vacuum, removed from and not at all dependent upon data from other departments in the organization. Frequently, this issue leads to problems that effect a company’s balance sheet. Too often, the results are more serious, including jail time for certain individuals.

To avoid this, businesses need to take a close look at the process by which they share data across the organization. Take, for example, the critical issue of sales performance management. For many companies, there is no greater need than to ensure sales is meeting its goals and objectives. But what happens when sales data is disconnected from finance, and vice versa?

Consider the consequences of this vignette: At an executive management meeting, the vice president of sales shares data regarding the number of deals the company closed in a given quarter. Everyone is excited because the sales team met its number. That is until the CFO lets it be known that the cost of providing commissions to the sales representatives, combined with the cost of the programs implemented by marketing to drive sales activity, is greater than the total revenue created by the sale of the products. If sales, marketing and finance had been on the same page with respect to each group’s numbers, this situation could easily have been avoided.

The goal of sales performance management applications, like Xactly Incent, is to centralize key sales-related data in a common repository. When all data is in a common location, data analysis and reporting is easier and more effective. Until recently, there was no easy way to connect “islands of information” for sales performance management purposes. But that has changed with the availability of Xactly Connect, the world’s first on-demand incentive compensation management integration platform that connects any system to Xactly web services APIs, resulting in transparent integration to the user.

The point of the story is, when one business hand knows what the other is doing, the chances of success are much greater. Every employee, across departments, as well as business partners, can participate in a seamless business process that puts information in the hands of people when they need it most. The challenge is getting on the same page; the answer is to get connected.

Modeling Requirements: What to Look for and Why

Compensation modeling is an important component of the sales compensation profession, affecting everyone in the industry, from individual sales persons to CFOs. There are many schools of thought as to how to approach this problem. Historically, automated solutions have only provided a point solution for one aspect of the modeling challenge. Until today. Xactly Modeling provides a fully integrated and fully functional modeling environment to leverage all critical requirements for the finance and sales professionals.

What We Have Learned

Leveraging our extensive domain expertise, Xactly has identified several key capabilities to effectively automate sales compensation management modeling. These should be considered as requirements in any evaluation of an sales compensation management vendor. Any vendor not able to adequately support the requirements below will not be able to meet all of the day-to-day scenarios needed to safely test, validate, and promote your business strategies into daily practice.

• Plan Modeling
  
  • Micro level (per payee)
    
  • Macro level (for organization or channel)
• Forecast Expense Modeling
• Organizational Modeling
• Bi-directional Support
• Separate Sandboxes for Production and ModelingSaaS Multi-tenant Provider

What to Look for and Why

Requirement 1: Plan Modeling
This requirement stipulates that users be able to create or modify any plan element for modeling purposes. This includes the ability to create a full plan from scratch or model individual elements such as rates, quotas, SPIFs, and more. Actual production plans and ‘proposed’ plans should be supported. Plan changes impact compensation in a non-linear fashion. This is where all vendors have traditionally focused although not all vendors support both micro and macro modeling.

Ask These Questions:

• Does the vendor support easy manipulation of plan elements to model the needed compensation design?
• Do they support micro modeling? Per payee?
• Do they support macro modeling? Full organization reviewable in total?

Xactly can.

Requirement 2: Forecast Expense Modeling
This requirement stipulates that both production data and forecast data are available to use as data sources to produce commission expense forecasts. Forecast data enables the user to produce modeled expense forecasts for future periods, which is supported by some vendors.

Ask These Questions:

• Can my actual data be easily made available for modeling while not impacting my production processing?
• Can modeling be run independent of and concurrent to production in case I need to perform a live calculation?
• Is modeled data separate from production data? (See Requirement 6 for impact.)

Xactly supports forecast expense modeling in all of these ways.

Requirement 3: Organizational Modeling
This requirement stipulates that a modeling solution must support any organizational structure, current or forecasted, for use in modeling scenarios. Organizational modeling is the most common requirement missed by sales compensation management vendors. You need organizational modeling to view historical data or forecasted data against actual or proposed deployment strategies. As new partner channels, products, or support overlays are needed, organizational modeling provides an accurate picture as to what you can expect. Organizational changes impact compensation in a non-linear fashion.

If a vendor does not support full organizational modeling, they cannot support all of your daily needs for designing a successful strategy.

Organizational modeling allows you to:

• Use actual payees
• Test results against your actual organization
• Simultaneously test results against a new organization with:
  
  • Modified positions
    
  • Additional headcount
    
  • Reduced headcount
    
  • New team assignmentsAltered overlay or support assignments

Ask This Question:
Does the vendor support full organizational modeling for each point above?

Xactly supports organization modeling—fully.

Requirement 4: Separate Sandbox Environments
This requirement stipulates that the production environment must not be co-mingled with the modeling environment. The Xactly leadership learned over our tenure in the sales compensation management space that customers with only one production environment are reluctant to “play” with creative rule designs due to a fear of impacting actual results. This prevents the customers from being fully self-sufficient. Our sandbox approach means that you can experiment with the application as much as you want and not worry about deleting, changing or damaging anything. If by some chance you do, you have a secure source from which to restore your model back to any state. Our sandbox approach is the best way you can be fully confident in using an application; you can use it any way you want, every day, and not worry about making a mistake. You can’t do this if your modeling is co-mingled with your production environment.

A separate sandbox approach promotes:

• User adoption
• Ongoing user training
• No performance impact on production
• No co-mingling of actual data with modeled data
• Secure promotion of modified plans
• Archiving of approved plans, promotions or organizationsUnique access for alternate users that are restricted from accessing the live environment

Ask This Question:
Can your sales compensation management vendor support each of the above-mentioned scenarios?

Xactly can.

Requirement 5: Bi-Directional Data Support
This requirement stipulates that the production data can be easily sourced to a secure modeling environment. This is not a simple copy-and-paste (See Requirement 4). Bi-directional data movement allows users to quickly deploy modeling scenarios and promote approved changes back into production in a secure manner.

Ask This Question:
Does the vendor’s data model support these criteria for modeling?

• Bi-directional data movement
  
  • Aggregated objects
    
  • Individual objects (single rule, etc.)
• Role security on data movement
• Intuitive user interface for any business user
• Protection from performance impact

Xactly can support all of these criteria.

Requirement 6: SaaS Multi-tenant Provider
This requirement is at the core of the Xactly design philosophy. The requirement states that in order to fully leverage the highest ROI and lowest TCO, a full multi-tenant SaaS provider is preferred.

Ask This Question:
Does your vendor support both multi-tenant database and multi-tenant application SaaS as a delivery model?

Xactly can.

Why Multi-Tenant On-Demand Software is Good for the Customer

I was driving to work the other day when a radio ad caused me to do a double-take. The product pitchman was pushing an HD radio service. Having just updated the televisions in my house, I know that “HD” is a term typically used to describe picture – not audio – quality. Sure enough, a quick Internet search clued me into the fact that HD radio stands for “hybrid digital” radio, which has nothing at all to do with high-definition television.

On the one hand, I give credit to the HD radio product vendor for its innovative marketing technique. Certainly there is logic to leveraging a hot industry acronym as a means to drawing-in customers. On the other hand, I wonder what impact the tactic has on customers, who are persuaded to buy based on a misleading and misbranded pitch.

The experience reminds me of the on-demand software model. Legacy software vendors everywhere are telling anyone who will listen about their new “on-demand” strategy. Clearly, the term means different things to different people. Unfortunately, only one definition of on-demand software – one that includes a multi-tenant architecture – returns the value that customers expect when they choose to go on-demand.

Legacy software vendors prey on customer confusion regarding on-demand software. Like the HD radio vendor, traditional software companies have a lot to gain by tying themselves to a hot industry catch-phrase such as on-demand. Rather than continue to debate this issue, I think it’s more valuable to address the questions I hear most frequently from customers: “Why do I care whether your application is on-demand?” and “Why is a multi-tenant architecture good for me?”

Believe it or not, the answers are surprisingly straightforward. Customers should care whether or not a software application is on-demand because what is good for me, the vendor, is ultimately good for you. If we can support a single line of code and maintain only a single version of the software, we can focus our engineering talent on bringing new functionality and improvements to you. If we employ a true multi-tenant architecture, we can deploy seamless upgrades on a large scale whether we have 100 customers or 10,000 customers.

By contrast, legacy software vendors whose “on-demand” applications are lacking a multi-tenant architecture simply can not offer the same value to a customer. Just imagine what happens when the vendor has to upgrade 10,000 customers, all with unique application schemas. How many engineers does the vendor have to employ to manage that process? What do you, the customer, have to give up since these staff resources can not work on new features and enhancements? It only gets worse when the vendor has to make a data schema change in a future release.

Clearly there is an important distinction between on-demand software that is multi-tenant and that which is not, just as there is a difference between HD radio and HD television. That’s why my guidance to customers is, ask a vendor before you buy whether or not they have a multi-tenant application architecture.

Creating SaaS Partner Ecosystems

Xactly Corporation and RightNow Technologies have more in common than a great name, but who are we to disagree to the smart folks at CRMchump.com. Much more than a marriage of convenience, Xactly and RightNow share a singular vision of the software landscape as it relates to the needs of mid-sized businesses. That is, customers win when like-minded software companies work together.

It is for this reason that Xactly is expending considerable resources to expand the scope of its partner program. Xactly is the most tightly integrated sales compensation management solution with salesforce.com and has set its sights on creating a Software-as-a-Service (SaaS) partner ecosystem that enhances the value of customer investments in these solutions. For further information on Xactly partners and its Partner Program, visit the Partners section of the Xactly web site.

Xactly understands that customers are laser-focused on deploying on-demand solutions from adjacent and naturally synergistic application areas. That's why you see Xactly partnering with CRM vendors Oracle and RightNow in addition to salesforce.com. CRM and sales compensation management are two critical components of sales performance management and customers are insisting these solutions integrate seamlessly. Likewise, Xactly has partnered with on-demand talent management vendor SuccessFactors to unite the Xactly compensation management solution for sales staff with the SuccessFactors compensation system for the general employee population. Meanwhile, users of financial software appreciate Xactly's ability to interface with on-demand software leader Intacct, while other customers plan on leveraging Xactly's partnership with Expensewatch.com for expense management and Right90 for sales planning.

Establishing a SaaS partner ecosystem centered around sales performance management – Xactly's mission for its partner program - is not a cliché. Sales is the lifeblood of any company, and ensuring sales effectiveness is paramount to staying competitive. Unfortunately, business processes to automate sales performance management historically have been non-existent, broken, or islands of disconnected point solutions. Through its network of SaaS partner friends, Xactly intends to change all that.

Sales is the lifeblood of any company.

Why then have the business processes to automate sales – with the ultimate goal of increasing revenues and profits and improving sales productivity – historically been either non-existent, broken, or islands of disconnected point solutions? Shockingly, the answer lies in the fact that many companies historically have labored under the yoke of spreadsheets to manage the complexities of incentive sales compensation and sales performance. This archaic approach, fraught with errors and risk, is no longer acceptable or viable from either a sales or finance perspective. Additionally, spreadsheet-operated companies are finding themselves at a significant competitive disadvantage and risk of non-compliance with Sarbanes-Oxley and other regulatory standards.

During my previous selling career at an enterprise sales compensation management company, I was repeatedly forced to walk away from sales opportunities because mid-market companies simply could not afford the cost of an enterprise sales compensation management solution: large up-front software license fees, maintenance, hardware, and unpredictable implementation schedules.

That’s why I started Xactly Corporation, the leader in on-demand sales compensation management. Xactly is representative of a new breed of software companies who have chosen to pursue a 100% pure play, on-demand solution.

The biggest advantage of on-demand software might not be measured in terms of cost, but in terms of productivity. Enterprise systems are not only expensive, but they can take months – or even years – to install. That's simply not acceptable to today’s dynamic businesses that demand immediate results when they buy new software.

In contrast, on-demand software can usually be installed in a matter of days or weeks. That translates into less wasted time and energy - and the ability to focus on what really matters: customer satisfaction.

To be clear, I’m not signaling the death knell of enterprise software anytime soon. There will always be a place for enterprise software, but its primary customers will be large corporations that can afford to invest millions of dollars to deploy their systems. For mid-market companies that want the advantages of an enterprise system without needlessly sacrificing cash or productivity, the future is clearly on-demand.

But enough commentary from me. Please join me in voicing your opinion in On-Demand Compensation Management Blog.