Boundary Conditions

Someone very clever once wrote, “Human beings are naturally drawn to ‘boundary conditions’ “ – for example, where land meets water, where the earth touches the sky, where space meets time.

In other words, we like to congregate at these boundary conditions; stand on the edge of something and gaze over at something else.

Is that why beach houses are so expensive?

I feel as though the SaaS market is at one of these boundary conditions right now. As we see more and more companies choose on-demand solutions, the ‘old way’ of doing things is giving way to the ‘new way’ of doing them.

It’s not hard to see why this is so: when one considers the lower cost of entry, lower TCO, instantaneous upgrades, plus the freedom and flexibility that come with a subscription-based service model, the exploding popularity of SaaS makes perfect sense.

Evidence of the ‘SaaS explosion’ can be found all over the place. Recently, Penny Crossman wrote a terrific article describing the “almost-meteoric rise of SaaS on Wall Street”.

On the same day last week, Salesforce.com announced not only the acquisition of InStranet (to strengthen its service and support offerings), but also record earnings for their second quarter.

The SaaS market is spectacularly healthy and growing at a dizzying pace. According to IDC’s Worldwide Software On-Demand Forecast 2007-2011 the CAGR is forecast 32% among companies of all sizes, and another analyst (that I'm not able to mention by name) estimates that Software-as-a-Service will grow to a $19.3 billion industry by 2011. This means that SaaS – already a healthy $6 billion industry in 2006, will have more than tripled in size in less than five years.

If we, as an industry, have not already reached our tipping point, it seems to be rapidly approaching.

Won’t you join me at this boundary condition? Let’s gaze over at the old, on-premise world and be glad that we’ve claimed such a valuable piece of beachfront real estate.

Announcing the Launch of XACTLY REWARDS

I’m excited today to announce our newest product, Xactly Rewards.

Let me tell you a bit about it, because this launch has been getting a lot of wonderful attention in the media, and for good reason, I think.

In the past, I’ve spent time in the blog discussing the benefits of ‘non-cash rewards’, and I think it’s an incredibly powerful tool to use in order for companies to improve performance – perhaps even more so than using the good, old standby – cash.

In fact, a University of Chicago study found that NON-cash rewards boosted performance by an astounding 38.6%, compared to only a 14.6% boost using cash alone.

Why would non-cash rewards be so much more effective than cash at improving employee behavior and performance?

The allure of getting those new golf clubs, or a trip to Cancun, or Springsteen tickets, tends to be a stronger inducement than simply an impersonal amount of cash. Instant gratification can be very powerful, it seems.

Xactly Rewards harnesses that power.

This is the world’s first non-cash incentive application that is directly integrated into your CRM tool. Imagine designing a contest for your sales team, or devising a SPIF for your call center or tech support team, and being able to put it into place with virtually no effort?

Our team built this tool natively on Salesforce’s Force.com platform. We leveraged their infrastructure 100% (utilizing the AppEx code, Web Services and API), which allowed us to rapidly develop and deploy the tool on Salesforce’s AppExchange.

Best of all, companies will be able to test this tool out for themselves with no obligation and no cost. Come check it out – I invite you to TRY XACTLY REWARDS FOR FREE December 1, 2008.

Behavioral Science - Part II

I’m sure everyone has seen the coverage a major oil company received recently when they announced a quarterly profit of nearly $12 BILLION – the highest ever recorded in corporate history.

I’m a CEO, and my company is not a non-profit organization; which is to say, we’re all in the corporate world to make a profit. But twelve billion dollars a quarter is more than a little offensive to me.

The good news is that consumer backlash seems to have begun, and as a result prices at the pump have begun to fall. As a fan of behavioral science, I find these types of sociological tipping points very interesting indeed.

It has always seemed to me as though the demand for gasoline is relatively inelastic. In other words, demand and consumption of gasoline historically has not been materially affected by the price of gas; which is a pretty sweet position for big oil – no matter what ridiculous price they chose to throw at the American consumer, demand for gas wouldn’t fall.

That’s finally starting to change, and the falling prices are evidence of that (not to mention the plummeting sales of gas-guzzling SUVs) – oil companies have finally given consumers the incentive they needed to change their behavior.


Speaking of incenting to change behavior – hey, that’s one of my favorite topics! – let me relate a quick story.

Recently, I found myself on an Alaska Airlines flight, taking me from Here to There. After the flight attendant made the standard safety announcements, she launched into an elaborate spiel about an Alaska Airlines credit card offer. She talked it up in a big way, and clearly knew the program backward and forward. I was impressed – I’ve had sales reps who could’ve learned a thing or two from this young lady!

This got me curious, and upon de-planing at my destination, I made a point of going up to her; I wanted to know if the airline incented her to do this.


She confirmed that, indeed, Alaska Air paid her a small commission for every new credit card account that she managed to recruit from one of her flights.

I complimented her on a job well done and stepped off the plane with a small smile creeping across my face.

Clearly, more and more companies are realizing the power of this type of ‘behavioral science’ – incenting their people in order to elicit the desired behavior.

It does my heart good to see it.

Upcoming Business Finance Webinar: Leveraging the Power of On-Demand Analytics to Drive Finance and Sales Performance

This upcoming webinar expands on one of our previous posts:
The Power of Analytics


Utilize "Post-Sales" Data to Gain Key Business Insights

Register to learn more.

In this Webinar, Xactly’s Christopher Cabrera and IDC’s Henry Morris will discuss how post-sales analytics can provide new and strategic insight into an organization’s selling patterns, commission spend, product performance, sales rep and team performance, and sales plan effectiveness. They will examine how post-sales data – traditionally scattered across a variety of disparate systems including ERP/order entry, HR, Pricing and Product – can be now be integrated, modeled and analyzed with an eye towards enhancing business strategies, changing sales rep behaviors, and super-charging sales organizations.

Participants will take away:

* How aggregating data for on-demand analytics can be streamlined efficiently
* Best practices for driving financial and sales performance with analytics
* Best practices for modeling and analyzing post sales data to optimize finance and sales performance
* A view of finance and executive dashboards and custom analytic capabilities for sales performance analytics

Featured Speakers:
Christopher W. Cabrera, Founder & CEO - Xactly Corporation
Henry Morris, Senior Vice President Worldwide Software & Services Research — IDC

Date: September 18, 2008
Time: 1:00 p.m. EDT

Register to learn more.

SaaS - Not 'Xactly' a Risky Proposition

Recently, I flew to visit a potential customer – this prospect happens to be a good-sized bank, and as is often the case with financial institutions they are extremely cautious about everything having to do with risk and security.

As a matter of fact, an executive in attendance made a point of asking me if there are risks inherent in the SaaS architecture.

“It seems like one of the main advantages of your model is that it’s extremely low-risk; the initial investment is very small. Am I missing something, some catch?” he asked me.

I pointed out that, on the contrary, he had it right from the beginning – the real risk would come from getting locked into a long-term commitment to an on-premise vendor and having to do so *before* you know for sure if their solution will work the way you need it to (and the way THEY say it will).

A true SaaS solution gives the customer the ultimate amount of freedom and flexibility; companies have embraced the idea of a ‘try-n-buy’ – instituting a pilot program that allows the customer to dip its toe into the water before deciding if they want to get wet.

This freedom enjoyed by the customer forces us SaaS vendors to be nimble and requires us to focus relentlessly on customer service. However, it also comes with a built-in competitive advantage: customers can find budget for these projects so much more easily than with an on-premise solution.

Phil Wainewright, who writes a terrific blog for ZDNet, wrote the following in a recent post of his: “Certainly, the low-risk, pay-as-you-go model will give SaaS vendors a big competitive advantage if capex budgets are slashed…”

The title of that post is, “Eight reasons SaaS will surge in 2008”, and Wainewright goes on to quote Microsoft SaaS architecture expert Gianpaolo Carraro who compares the current SaaS revolution to the awakening companies had in the mid-90s around using an Intra-net as well as the Internet.

I like that word: “awakening”. That’s definitely what this feels like – companies are waking up to the possibilities in the SaaS world. I can almost smell the morning coffee brewing.

Business Intelligence Network (podcast) - Automate Sales Performance Management as Software as a Service

Karen Steele discusses Xactly's ability to automate sales performance management as software as a service.

Listen to the podcast here.

The Power of Analytics

In recent years, prices for raw metals and minerals have skyrocketed. Mining companies have fanned out to all corners of the globe, conferences have been convened to discuss the topic, and all the while prices continue to rise.

But did you know that right now, at this very moment, there are tens of billions of dollars worth of iron ore and other valuable metals and minerals just sitting on the floor of every ocean on earth? Scientists have known about manganese nodules for decades (as a matter of fact, geologist A.A. Archer estimated that the sea floors and abyssal plains of the ocean contain something like 500 BILLION TONS of untapped metal ore). Iron prices should be dirt cheap!

So what’s the problem? Why has this vast natural resource lain undisturbed for decades? The issue is that no one has been able to successfully come up with a way to mine it cost-effectively.

This got me thinking about the difficulties of different kinds of mining, specifically DATA mining.

For a long time, many companies have been talking about the ability to provide Analytics. And I will admit that there are some phenomenally cool, whiz-bang products out there in the business intelligence space. However, there has always been one inherent problem with this: Analytics are only as good as the data they’re analyzing.

Those whiz-bang B.I. solutions can only do their cool stuff once you have the underlying data.

Getting at that data traditionally has been harder than stripping iron ore out of a manganese nodule eighteen fathoms below. This is the dirty little secret around why more than HALF of all data warehouse projects fail.

You see, first a company needs to figure out where the data IS, and more importantly, how to get at it. This usually involves getting IT involved and purchasing an ETL tool to extract and cleanse the data.

Then comes the hard part: aggregating the data into one place which requires architecting the data schema and building a data mart or data warehouse. Then, a presentation or (BI) layer must be selected in order to view and analyze the data. Of course, you will need to do a lengthy requirements phase to talk about what you want to see, etc., reports will need to be built, multiple constituencies need to be involved. There are a lot of moving parts.

Lots of money has been spent just analyzing why these massive data warehousing projects fail – you can read just a small subset of some of the findings here and here.

What about analyzing your CRM data, you may ask? You could certainly do that, but what are you really analyzing? Pre-sales data entered by sales reps, complete with equal measures of sand-bagging on one side and pie-eyed optimism on the other.

No self-respecting CFO would run his or her business on such data. I’m talking about true POST-sales data – getting to this rich data is what will make Analytics truly sing.

What if a company could streamline this entire process and make it fantastically simple – giving you access to ALL your post-sales data without any intervention from IT, tedious consulting projects or ETL tools?

Well, don’t despair, Xactly to the rescue! But don’t just take my word for it…

If you speak to Henry Morris (SVP Worldwide Software & Services Research at leading research firm IDC) he’ll tell you: "I always thought business intelligence [BI] on demand would have difficulty taking off, since the application has to get its data from an outside source. But Xactly already has your data.“

As a byproduct of solving the variable compensation problem for companies, Xactly has pre-built a sophisticated data warehouse that contains every bit of this rich data. Not only that, but because of our fixed data schema (just one of the innumerable benefits of being a true on-demand company), every company can get access to this data.

We then layer a wonderful Analytics engine over the top of it, complete with all the tools you could ever need, and now you’ve got something companies have thrown millions of dollars at, usually ending in frustration and tears.

Let us tell you more about it – you’ll wonder where we’ve been all your life.

Now that we’ve got this problem licked, I’m off to tinker with some ideas on these manganese nodules. I may have a few tricks up my sleeve.