A number of earlier TEC articles and blog entries have analyzed the
nascent sales performance management (SPM) or enterprise incentives
management (EIM) software market, which has also been one of those
areas with a significant uptake of on-demand deployments.
Indeed, companies of all size increasingly use software packages for
sales compensation and other incentives management, to more accurately
and strategically model and forecast commissions and other
incentive-based costs and benefits, calculate commissions and bonus
earnings, and gain more real-time visibility into employees’
performance metrics.
Broadly speaking, SPM is an area of performance management focused on
incentive compensation calculation and management, quota planning,
territory management and performance analytics. As “pay for
performance” programs continue to grow in importance, incentive pay
remains one of the largest variable expenses for organizations. To
that end, SPM spans across many groups of individuals receiving
variable compensation such as sales force, management, employees,
distribution channel, etc.
Yet today most SPM processes and technologies remain used in a
standalone manner. Namely, corporate performance management
(CPM)/business performance management (BPM) solutions that are focused
on profitability are administered by the finance department, whereas
the human resource management system (HRMS) that focuses on employee
information is administered by the HR department. Also, the customer
relationship management (CRM) system that focuses on contacts and
leads is administered by the marketing staff, while sales reporting
and analytics tools that focus on revenue (top line) are administered
by the sales and support departments.
EIM/SPM represents the next generation of software category and best
practices for filling the wide gap between all these departments. Its
advent has prompted TEC to publish the pertinent Incentive and
Compensation Management (I&CM) Evaluation Center. As discussed in my
earlier series of articles entitled “Thou Shalt Motivate and Reward
Workforce Better,” current incentive compensation issues are largely
based on use of inadequate spreadsheets and in-house systems.
The idea of incentive compensation may seem very simple: pay “X” for
achieving “Y.” Yet in practice each company has its own specific
approach to compensation plans, managing approvals, resolving disputes
and paying out compensation earned. Spreadsheets, custom coding, and
simple commission calculation engines automate these processes to some
degree, but do not address the increasing sophistication and
complexity of many of today’s incentive plans and processes.
That inadequacy then translates into incorrect payments (many analysts
estimate that four to six percent of incentive compensation doled out
by businesses is wrong, according to CFO.com), delayed plan
development and payments, and increased ongoing administration and
maintenance burdens (whereby direct costs can exceed $1,500 per
commissioned employee, according to Aberdeen Group).
Other unfortunate consequences are the failure to keep up with
business strategies, the lack of adequate financial controls, and
insufficient modeling, reporting and analysis capabilities. In fact,
according to PricewaterhouseCoopers (PwC), 30 to 90 percent of all
spreadsheets suffer from at least one major user error.
In a nutshell, today’s manual and spreadsheet-based incentive
compensation calculation processes are slow, rigid, error prone and
thus plagued by overpayments and errors, whereby sales folks don’t
trust the system and create their own “shadow accounting.” These
recurring payment disputes consume significant time and effort
(besides costing internal trust and goodwill).
Furthermore, in addition to too much time and effort being wasted to
administer and maintain SPM processes, there are limited ad-hoc
reporting and analysis capabilities. This means that managers cannot
analyze the impact of proposed plans, cannot accurately forecast
incentive pay and revenues, and cannot keep “tight” links between
incentive pay, sales territories and quotas/business metrics.
Enter Varicent Software
This “green field” market opportunity has created a number of
relatively “young” vendors and solutions. The latest entry in TEC’s
I&CM Evaluation Center is Toronto, Ontario, Canada-based Varicent
Software. Since its founding in 2003, the company has been offering
its flagship product, Varicent SPM [evaluate this product].
The privately-held company has been on an ascending path since its
inception, with four consecutive years of triple-digit revenue growth.
In 2004 the company developed the first release of Varicent SPM and
signed its very first customer.
In 2005, Varicent SPM 2.0 was launched with a new quota planning
module, and the vendor recorded triple digit revenue growth. While
this might not be a big deal for a weakling company at the time,
Varicent currently has approximately 100 direct employees and a
growing partner network of global consulting firms and technology
partners.
To that end, 2006 seemed to be a banner year, marked with a consulting
partnership with Watson Wyatt and business performance management
(BPM) technology partnership with Applix (now part of IBM Cognos). In
the same year, Varicent launched Varicent SPM 3.0 as the first
complete SPM suite (in terms of its current functional footprint) and
introduced on-demand offering. Additionally, the company signed the
first Fortune 500 customer, Starwood Hotels and Resorts (NYSE: HOT),
and the first Fortune 200 customer, Waste Management (NYSE: WMI).
2007 was not a quiet year either, given the launch of Varicent SPM
4.0, the launch of the first mobility solution for the SPM market (in
a partnership with Vaultus), and integration with Salesforce.com CRM.
The company then also contracted its first overseas reseller, Tridant
Pty in Australia, expanded its management team, and landed the first
Fortune 100 customer.
Today, Varicent has approximately 100 customers ranging from mid-size
to Fortune 500 customers. Varicent SPM is a horizontal application,
sold and marketed primarily to organizations with about US$200 million
in annual revenues and up. Some smaller companies with complex
incentive compensation programs, global needs and other unique
business requirements might also be a good fit for Varicent.
Customers’ payee numbers typically range from several hundred to tens
of thousands.
While Varicent’s customers currently represent a variety of
industries, there is a concentration of customers in high-tech, health
care, insurance, financial services and a few other verticals. Some
other high-profile customers that use Varicent SPM for managing their
complex variable compensation programs across a variety of vertical
industries would be: KLA-Tencor (NASDAQ: KLAC), Rogers (TSX: RCI),
About.com (a New York Times company), AAA, Sonus Networks, Manpower,
American Century Investments and Pacific Blue Cross.
Varicent SPM – Surprisingly (or not) a Comprehensive Solution
Due to the financial background and focus of its founders (and of many
Varicent employees), the Varicent SPM suite aligns sales performance
with strategic objectives through its pay-for-performance footprint
that spans across sales, employees, managers and channels. The broad
EIM solution natively encompasses the following modules:
* Territory Management;
* Quota Planning;
* Incentive Compensation Management; and
* Performance Analytics.
This footprint is rare in the EIM market. Namely, even the presumptive
market leader (in terms of revenues and public trading visibility)
Callidus Software had to recently partner for the territory management
functionality.
In other words, Varicent SPM delivers technology that automates the
assignment of territories, the collection and approval of quotas, the
administration and calculation of incentive compensation plans, and
then examines sales performance and evaluates the effectiveness of
incentive programs.
From a strategic value aspect of revenue generation, integrating and
optimizing territories, quotas and incentive plans leads to more
effective market coverage and steady increases in sales. According to
Gartner, companies currently lose nearly 10 percent of total sales
through poor fiscal management of territories, quotas, incentive and
compensation plans.
Part II of this blog post will continue with Varicent’s most recent
developments, its product architecture and competitive positioning.
Your views, comments, opinions, etc. about Varicent and abut the
EIM/SPM category per se are welcome in the meantime.
We would also be interested in hearing about your experiences with
this nascent software category (if you are an existing user) or your
general interest in evaluating these solutions as prospective
customers.
nascent sales performance management (SPM) or enterprise incentives
management (EIM) software market, which has also been one of those
areas with a significant uptake of on-demand deployments.
Indeed, companies of all size increasingly use software packages for
sales compensation and other incentives management, to more accurately
and strategically model and forecast commissions and other
incentive-based costs and benefits, calculate commissions and bonus
earnings, and gain more real-time visibility into employees’
performance metrics.
Broadly speaking, SPM is an area of performance management focused on
incentive compensation calculation and management, quota planning,
territory management and performance analytics. As “pay for
performance” programs continue to grow in importance, incentive pay
remains one of the largest variable expenses for organizations. To
that end, SPM spans across many groups of individuals receiving
variable compensation such as sales force, management, employees,
distribution channel, etc.
Yet today most SPM processes and technologies remain used in a
standalone manner. Namely, corporate performance management
(CPM)/business performance management (BPM) solutions that are focused
on profitability are administered by the finance department, whereas
the human resource management system (HRMS) that focuses on employee
information is administered by the HR department. Also, the customer
relationship management (CRM) system that focuses on contacts and
leads is administered by the marketing staff, while sales reporting
and analytics tools that focus on revenue (top line) are administered
by the sales and support departments.
EIM/SPM represents the next generation of software category and best
practices for filling the wide gap between all these departments. Its
advent has prompted TEC to publish the pertinent Incentive and
Compensation Management (I&CM) Evaluation Center. As discussed in my
earlier series of articles entitled “Thou Shalt Motivate and Reward
Workforce Better,” current incentive compensation issues are largely
based on use of inadequate spreadsheets and in-house systems.
The idea of incentive compensation may seem very simple: pay “X” for
achieving “Y.” Yet in practice each company has its own specific
approach to compensation plans, managing approvals, resolving disputes
and paying out compensation earned. Spreadsheets, custom coding, and
simple commission calculation engines automate these processes to some
degree, but do not address the increasing sophistication and
complexity of many of today’s incentive plans and processes.
That inadequacy then translates into incorrect payments (many analysts
estimate that four to six percent of incentive compensation doled out
by businesses is wrong, according to CFO.com), delayed plan
development and payments, and increased ongoing administration and
maintenance burdens (whereby direct costs can exceed $1,500 per
commissioned employee, according to Aberdeen Group).
Other unfortunate consequences are the failure to keep up with
business strategies, the lack of adequate financial controls, and
insufficient modeling, reporting and analysis capabilities. In fact,
according to PricewaterhouseCoopers (PwC), 30 to 90 percent of all
spreadsheets suffer from at least one major user error.
In a nutshell, today’s manual and spreadsheet-based incentive
compensation calculation processes are slow, rigid, error prone and
thus plagued by overpayments and errors, whereby sales folks don’t
trust the system and create their own “shadow accounting.” These
recurring payment disputes consume significant time and effort
(besides costing internal trust and goodwill).
Furthermore, in addition to too much time and effort being wasted to
administer and maintain SPM processes, there are limited ad-hoc
reporting and analysis capabilities. This means that managers cannot
analyze the impact of proposed plans, cannot accurately forecast
incentive pay and revenues, and cannot keep “tight” links between
incentive pay, sales territories and quotas/business metrics.
Enter Varicent Software
This “green field” market opportunity has created a number of
relatively “young” vendors and solutions. The latest entry in TEC’s
I&CM Evaluation Center is Toronto, Ontario, Canada-based Varicent
Software. Since its founding in 2003, the company has been offering
its flagship product, Varicent SPM [evaluate this product].
The privately-held company has been on an ascending path since its
inception, with four consecutive years of triple-digit revenue growth.
In 2004 the company developed the first release of Varicent SPM and
signed its very first customer.
In 2005, Varicent SPM 2.0 was launched with a new quota planning
module, and the vendor recorded triple digit revenue growth. While
this might not be a big deal for a weakling company at the time,
Varicent currently has approximately 100 direct employees and a
growing partner network of global consulting firms and technology
partners.
To that end, 2006 seemed to be a banner year, marked with a consulting
partnership with Watson Wyatt and business performance management
(BPM) technology partnership with Applix (now part of IBM Cognos). In
the same year, Varicent launched Varicent SPM 3.0 as the first
complete SPM suite (in terms of its current functional footprint) and
introduced on-demand offering. Additionally, the company signed the
first Fortune 500 customer, Starwood Hotels and Resorts (NYSE: HOT),
and the first Fortune 200 customer, Waste Management (NYSE: WMI).
2007 was not a quiet year either, given the launch of Varicent SPM
4.0, the launch of the first mobility solution for the SPM market (in
a partnership with Vaultus), and integration with Salesforce.com CRM.
The company then also contracted its first overseas reseller, Tridant
Pty in Australia, expanded its management team, and landed the first
Fortune 100 customer.
Today, Varicent has approximately 100 customers ranging from mid-size
to Fortune 500 customers. Varicent SPM is a horizontal application,
sold and marketed primarily to organizations with about US$200 million
in annual revenues and up. Some smaller companies with complex
incentive compensation programs, global needs and other unique
business requirements might also be a good fit for Varicent.
Customers’ payee numbers typically range from several hundred to tens
of thousands.
While Varicent’s customers currently represent a variety of
industries, there is a concentration of customers in high-tech, health
care, insurance, financial services and a few other verticals. Some
other high-profile customers that use Varicent SPM for managing their
complex variable compensation programs across a variety of vertical
industries would be: KLA-Tencor (NASDAQ: KLAC), Rogers (TSX: RCI),
About.com (a New York Times company), AAA, Sonus Networks, Manpower,
American Century Investments and Pacific Blue Cross.
Varicent SPM – Surprisingly (or not) a Comprehensive Solution
Due to the financial background and focus of its founders (and of many
Varicent employees), the Varicent SPM suite aligns sales performance
with strategic objectives through its pay-for-performance footprint
that spans across sales, employees, managers and channels. The broad
EIM solution natively encompasses the following modules:
* Territory Management;
* Quota Planning;
* Incentive Compensation Management; and
* Performance Analytics.
This footprint is rare in the EIM market. Namely, even the presumptive
market leader (in terms of revenues and public trading visibility)
Callidus Software had to recently partner for the territory management
functionality.
In other words, Varicent SPM delivers technology that automates the
assignment of territories, the collection and approval of quotas, the
administration and calculation of incentive compensation plans, and
then examines sales performance and evaluates the effectiveness of
incentive programs.
From a strategic value aspect of revenue generation, integrating and
optimizing territories, quotas and incentive plans leads to more
effective market coverage and steady increases in sales. According to
Gartner, companies currently lose nearly 10 percent of total sales
through poor fiscal management of territories, quotas, incentive and
compensation plans.
Part II of this blog post will continue with Varicent’s most recent
developments, its product architecture and competitive positioning.
Your views, comments, opinions, etc. about Varicent and abut the
EIM/SPM category per se are welcome in the meantime.
We would also be interested in hearing about your experiences with
this nascent software category (if you are an existing user) or your
general interest in evaluating these solutions as prospective
customers.
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