Market Leaders: Incentive Management

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The Market

Incentive management (IM) software, one of the rare markets bolstered by recession, continues to see increased adoption, with nimble vendors reporting record-breaking quarters. This trend will continue, according to analyst firm Gartner, which sees investments of IM (or, as Gartner calls the field, sales performance management) solutions growing 20 percent year over year from 2011 through 2014. While the market overall is prosperous, traditional on-premises vendors are losing ground to software-as-a-service (SaaS) providers. “SaaS continues to take the market by storm,” says Ray Wang, a partner with Altimeter Group. The IM space may have been fairly stable in the past year—a fact reflected in this year’s carbon copy of 2009’s leaderboard—but analysts predict shakeups down the road. China Martens, senior analyst at The 451 Group, says the market is “poised for some still-to-be-defined event or vendor move that’ll really ramp up user volumes.” 

The Leaders 

After Callidus Software handed over its 2008 crown in this category to SaaS-centric vendor Xactly last year, the company has rapidly embraced the subscription model. The Spring 2009 release of SaaS offering Monaco was followed by upgrades including Monaco Propel. Despite forward-thinking releases—as well as the acquisition of ActekSoft, a specialist in commission and compliance software, earlier this year—Callidus saw the lowest rating among the category leaders for customer satisfaction. Martens says this could be “a case of not-clear-enough positioning and perhaps overemphasis on SaaS to the potential detriment of its traditional on-premises user base.” 

Merced Systems entered the incentive management market in 2008, following the acquisition of Pratique Associates. The vendor has since proven its street cred, posting record sales in 2009 of nearly $50 million, and announcing over 600,000 licenses deployed worldwide. This success may be credited in part to the company’s embracing of Sales 2.0. Martens says that Merced has “allied [itself] with the movement that seeks to combine a mix of vendors who all provide apps in white-space areas not already fully addressed by [large] CRM players.” She adds it’s a smart move, as these are the areas where “deals are closing.” 

Synygy, one of the first vendors to compete in this arena, continues to weather shifting trends. Mark Smith, chief executive officer and executive vice president of research at Ventana Research, says, “Synygy is a consistent provider, focused on the largest of sales organizations.” To continue its reputation as a market mainstay, analysts say the vendor may do well to expand its breadth outside of its tight sales focus. Smith notes, “Incentives are now seen as important as part of not just HR or sales, but across call centers, field service, and even supply chain areas.”

Varicent Software is sitting pretty on our leaderboard, coming off a red-letter year in 2009. Last fall, the vendor not only notched a record-breaking year in revenue, but also netted $35 million in funding from FTV Capital. Jim Dickie, managing partner at CSO Insights, says that one of Varicent’s strengths is handling “very complex plans for very large companies.” Recently, however, Varicent has been making moves to break out of this mold and into the midmarket, announcing plans to use its FTV funding to increase penetration. While shifting customer focus can be problematic, Varicent’s best-in-category rating for company direction (4.1) proves the vendor is steering its ship with agility.

The Winner 

Xactly was one of the first to exclusively offer IM as a software-as-a-service solution. Half a decade later—and after gobbling up rival Centive—Xactly has established itself as the king of on-demand IM. Not a bad title to hold, all things considered: Gartner predicts that, by 2011, more than 60 percent of IM software projects will be hosted. Cutting-edge moves, such as the outreach to very small companies with Xactly’s Incent Express and innovations in processing non-commission-based rewards, make Xactly “a very hot company” according to Paul Greenberg, founder and president of consultancy The 56 Group (and this year’s Hall of Fame inductee; see page 25). Rebecca Wettemann, vice president of research at Nucleus Research, praises Xactly for “making its product very intuitive to use and report on.” If the vendor continues to push the market, we can expect the temperature to rise in 2011.  

One to Watch

Softscape, a provider of people management solutions, snagged our One to Watch title this year by keeping its finger on the pulse of the market. Leslie Ament, research director and managing partner at Hypatia Research, says that the Softscape Incentive Compensation Suite provides “modules that offer organizations an à la carte approach…making this an affordable solution for companies of all sizes”—a strategy that plays into the trend toward IM for small and large companies alike. Ventana Research’s Smith applauds Softscape’s ability to manage the full workforce, answering customer demand for solutions that apply beyond the sales force.

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