Incentives in an On-Demand World

The demand for automated incentive compensation has brought it into the on-demand world. Implementing a world-class enterprise incentive management (EIM) system is essential given today's fierce global competition, and as software-as-a-service (SaaS) gains momentum, more and more companies are looking for EIM in a SaaS model. The mission-critical, confidential nature of EIM differentiates it from other applications and requires specific SaaS capabilities. Organizations examining EIM applications with the goal of leveraging SaaS must evaluate prospective vendors on a number of counts. Starting with a best-of-breed EIM application is most important, followed by a careful scrutiny of the vendor's SaaS architecture model and other contracted provisions. The model should minimize privacy and security concerns; maintain or improve reliability; and ensure availability, scalability, and performance--all while effectively containing costs and accommodating application complexity. The ideal architecture helps accomplish these objectives via physically separated client databases, a shared infrastructure, and multiple application versioning. Value of SaaS for Supporting Effective EIM As the number of SaaS deployments expands worldwide, many analysts forecast a strong upward trend in outsourced applications. According to analyst firm Gartner, "By 2011, 25% of new business software will be delivered as SaaS (0.7 probability)." Economic pressures, information technology prioritizing, fierce competition, and a heightened emphasis on core competencies are all combining to make SaaS increasingly attractive--and it is effective for a rising number of business processes. The growing popularity of Web 2.0 collaboration and SaaS technology improvements make SaaS a sensible next step. According to software industry trend strategist Phil Wainewright, a new survey by the consultancy McKinsey & Co. "has found that the proportion of CIOs considering adopting SaaS applications in the coming year has gone from 38% a year ago to 61% now.... It's an indication of a sea-change in acceptance of SaaS over the past year." SaaS suits EIM for three important reasons:

• EIM systems management is usually outside an organization's core competencies. BusinessWeekOnline recently published a commentary on the myths of SaaS, indicating that "today's economic and competitive pressures make nearly any form of outsourcing fair game. Many companies now consider various I.T. functions and business applications commodities and not core competencies. This has made SaaS, essentially an outsourced application management business, more attractive today than [application service providers] and hosting services of the past."
• EIM does not require on-site deployment because it operates effectively outside a corporation's walls. SaaS efficiently manages well-defined tasks and business processes that can be performed externally and integrated into the enterprise. EIM fits this category.
• EIM's purpose is positively impacting the bottom line, not escalating costs. According to InformationWeek, "Software-as-a-service is starting to gain favor for several reasons: It's relatively easy and inexpensive to implement; it's flexible; it doesn't require as much infrastructure; and its costs are more predictable."

Application First, Delivery Method Second It would be a mistake to choose SaaS simply because of its popularity. Decision-makers should first examine vendors with EIM functionality, focusing on applications rather than the delivery model. By selecting the application prior to the delivery method, you're emphasizing the solution to the business problem. If the chosen vendor happens to offer SaaS, it is advisable to then evaluate the SaaS model in light of the remainder of this article. The Ideal SaaS Architecture Model for EIM EIM's unique characteristics--as a time-dependent, back-office system requiring high levels of application complexity--dictate specific SaaS capabilities. Privacy, security, functionality, and robustness are critical but tend to decline with decreasing application complexity. Data integrity must be safeguarded, and organizations require control over upgrade timing. The ideal model meets EIM's requirements through a physical separation of data between clients, a shared application infrastructure, and the availability of multiple application versions. Optimal Security, Availability, and Performance A multitenant/multiversion, separate database instance model provides the privacy and security benefits of a managed hosting service without the inherent costs, and the economies of a multitenant/single-version model without the vulnerabilities. Multiple clients share the infrastructure, multiple software versions may be available at once, and there is physical separation of data among clients. According to Gartner, with a multitenant/multiversion, separate database instance model, "the data is physically separated and there is the potential for improved data privacy." This model "offers the advantages of multitenant/multiversion, such as version control, but with added perceived data security." With no single point of failure, data privacy, security, and system availability are uncompromised. Gartner also notes that"[t]he upgrade process is more flexible because of the multiple-version support." Support for multiple software versions enables clients to upgrade at their convenience instead of the vendor's. Migration to an in-house implementation is also an option. Organizations should choose an EIM vendor that leverages SaaS technology proficiently; uses a scalable multitenant/multiversion, separate database instance model; and provides additional customer-centric features. The vendor accomplishing this while understanding clients' needs and valuing their trust is the one to consider. About the Author Jeffrey Saling is vice president of managed services for Callidus Software.

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