The 2009 Market Leaders - Incentive Management

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THE MARKET
Appearing as a category here for only the second time, 2009 has been a banner year for incentive management. This January, Xactly sent shockwaves through the market when the company revealed the purchase of its biggest rival, Centive. Callidus Software reached the 70,000-subscriber milestone, thereby underlining the market's software-as-a-service (SaaS) trend. One might assume that in an economic downturn-which can make "bonus" a four-letter word-incentive management software would be taking a hit, but analysts agree that just the opposite has occurred: Companies need these solutions more than ever, to make sure incentives are always worth the payout. Jim Dickie, managing partner at CSO Insights, says,"CSOs [must] justify the ROI for all the money they are spending on commissions...analytics is the only way to intelligently answer that question."


THE LEADERS
Callidus
, the grandfather of incentive management-and the inaugural winner of this category in 2008-was dethroned in this year's rankings by a younger, more-nimble vendor. That shouldn't be seen to reflect an immediate slip in overall quality. Callidus still has the lion's share of revenue, claiming four of the five top United States health insurance carriers and six of the 10 largest national banks as customers. This year, the vendor aggressively pushed a SaaS agenda following its release of TrueComp on-demand in 2006. China Martens, senior analyst at The 451 Group, says Callidus is focusing more on midmarket customers, and predicts a possible "head-on with Xactly."

In June 2008, Merced Systems, a provider of sales service performance management, announced its purchase of Pratique Associates, the United Kingdom-based specialty shop for incentive compensation management. In the past year, Merced worked to build out its incentive management solution, claiming a number of high-profile customers in its first months of availability in North America, and garnering a 3.6 score for customer satisfaction in this category. Martens says, "Merced [is] very keen to be seen as a worthy adversary to Callidus and Xactly/Centive." As Merced is still in its early days, 2010 will be a pivotal year for this company.

One of the original companies in the incentive management space, Synygy, claims nearly two decades of  xperience and is still one of the market's top vendors. "[Synygy] continues to advance its products and make them easy to use and available in SaaS form," says Mark Smith, the chief executive officer and executive vice president of research at Ventana Research. Still, Smith notes, the company is often "overlooked for [its] capabilities." Synygy has made that a thing of the past this year, announcing a full integration with Salesforce CRM and releasing a new version of Synygy Data-moves that helped make the first quarter of 2009 the best quarter in the company's 18-year history.

Securing a spot on the leaderboard for the second year in a row is Varicent Software, a company Smith calls "one of the largest growth providers in this segment." The relatively small Canada-based vendor focuses on the enterprise market, and analysts agree that its offerings are well suited to larger customers' needs. CSO Insight's Dickie says strong analytic capabilities allow Varicent to be "very good at managing complex incentive plans." Earning one of the category's highest ratings for reputation for customer satisfaction, it's clear that Varicent will have a strong hold in the higher end of the market for some time.


THE WINNER

In 2008, both Xactly and Centive earned spots on our leaderboard. This year, with the two vendors' capabilities combined through a bold acquisition in January 2009, Xactly has propelled itself to the top spot. The vendor, which Martens calls "highly ambitious," earned a 4.0 for company direction, the highest score in the category this year, and lured former Salesforce.com executive Steve Cakebread to become its chief financial and administrative officer this February. In addition to the Centive deal, Xactly made its formerly standalone incentive program Xactly Rewards available on Salesforce.com's AppExchange in August 2008, and released the Xactly Incent 4.5 in March 2009. "They have product, momentum, [and] a good relationship with Salesforce[.com]," says Denis Pombriant, founder and managing principal at Beagle Research. "They are becoming the team to beat." -Jessica Sebor 


One to Watch - Incentive Management

Founded in 2004, Makana Solutions gained a good deal of attention this year, with a comparatively inexpensive incentive management portfolio leading to a booming customer base. A young upstart named by Gartner as one of its "Cool Vendors," Makana launched its self-service sales compensation solution, Makana Motivator Pro, in November 2008 and has since gathered over 250 customers, largely through a Salesforce.com partnership. The 451 Group's Martens says the vendor could run into growth issues if it fails to become more attractive to larger, more-mature customers: "What if customers outgrow the suite?" she asks. "Can Makana move upmarket?" However, if Makana can adapt to bigger business, it may soon become a challenger the more-prominent vendors will have to pay attention to.


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