August 4, 2006
By Colin Beasty, (former) Associate Editor, CRM Magazine

Sales Compensation is Back, Baby!

Salespeople can breathe a sigh of relief, for the days of tracking their compensation plans via an Excel spreadsheet could be coming to an end. For the first time in years, the sales compensation management market is experiencing growth, driven by an influx of on-demand applications and a drive by both SMBs and enterprises to replace outdated incentive solutions, according to a new report by Gartner. The market is experiencing renewed interest from companies looking to outfit their sales, HR, and accounting departments with new and improved tools to streamline the mind-numbing process of compensating sales forces. There is plenty of room for growth, with only five percent of large sales organizations currently using an incentive compensation management (ICM) solution, the report states. The vendor community itself has undergone significant changes in recent years and has become diverse, with the traditional high-end, best-of-breed providers, such as Callidus Software and Synygy, being supplemented by newer players, such as Xactly and Centive. This increase of ICM providers has also brought about an expansion of software models, according to Michael Dunne, research vice president at Gartner and author of the report, "MarketScope for Sales Incentive Compensation Management Software, 2006." Traditionally, sales compensation applications have been used by enterprises in certain verticals, most notably insurance and healthcare, but companies such as Xactly have "broken the ice with sales incentive solutions by introducing the on-demand model to the market," Dunne says. "The on-demand solutions are helping to bring sales incentive to the smaller companies." These best-of-breed vendors are also complemented by a dwindling number of enterprise suite providers, thanks in large part to Oracle's acquisition of Siebel in January 2006. While Oracle will continue to support Siebel's ICM solution, it also has its own offering, titled OIC, which is a part of the Oracle E-Business Suite. SAP is the other enterprise software player, though its solution is tailored for the insurance industry. Analytics and reporting functionality is another new trend within the ICM market that has come about within the last year. Numerous companies, such as Callidus and Centive, are starting to offer analytics or BI tools with their ICM offerings to allow end users to study the underlying trends and strategies of compensation plans. While vendors have done a great deal of work in this area, Dunne says its adoption by end users still isn't strong. "People aren't grasping this yet," he says. "This remains a long-term priority." The reason for this is representative of a greater trend, Dunne says. The use of analytics and ICM, or using ICM to drive sales forces or to get new products to market faster, would represent a strategic use of these tools for businesses. This is simply not yet the case. "The majority of companies implementing these solutions are doing it for the tactical reason of replacing old, disparate solutions," he says. Looking forward, the market should continue to experience "sustained growth" for the next few years, thanks to on-demand applications and "an increasing use of these tools to drive strategic business value," Dunne says. Related articles: Dangling the Carrot: Driving Your Sales Force to Profitablity

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