SaaS Products Take the Hassle Out of Calculating Salespeople's Pay

Surprisingly, many companies still use spreadsheets to calculate employee compensation, which can be error-prone. Also surprising is the handful of software companies that have automated the process in the cloud.

Payday had been a tense day for Celia Heywood, the vice president of sales solutions for Bank of America Merchant Services. Salespeople would complain to her when they felt they'd been shorted on their commissions, resulting in "hours of angry phone calls," she said.
Once Merchant Services switched to automated SaaS-delivered software, phone calls became more pleasant.
Merchant Services, which markets services to businesses that accept BofA payment cards, is one of a number of companies that have embraced sales performance management software that keeps track of compensation and incentive payments for employees, primarily sales people. The software handles the complexity of various compensation factors with fewer errors than spreadsheet applications and dramatically reduces the number of payment disputes.
Heywood was attending the CompCloud 2012 user conference in San Francisco. It was put on by Xactly, which delivers compensation and incentive management tools using a SaaS delivery model. One product, Xactly Incent, for enterprises, is hosted by Xactly using a private cloud. The other product, Xactly Express, for small and midsize businesses, is built on the platform and delivered by
Xactly aims to take the complexity out of managing compensation systems, which are dynamic, multifaceted and prone to error, said Christopher Cabrera, founder and CEO.
At a large company, one sales contract can involve paying commissions and incentives to several employees, each getting different compensation, while at the same time, multiple products in the order may have different incentives. Incentives can also change month to month as the company pushes some products over others. Manual compensation calculations using a spreadsheet program such as Microsoft Excel or a database management program such as Microsoft Access can easily cause mistakes, Cabrera said.
"If, God forbid, changes get made, and midway through the year the company changes the rate on some products, because of the manual nature of it, it becomes very error prone," he said.
A December 2011 report by Ventana Research revealed that 52 percent of sales organizations surveyed use desktop spreadsheets to calculate compensation, but that 49 percent said those spreadsheets make it difficult to manage sales efficiently. Sales force automation software helps, and its adoption rate has grown to 67 percent in 2011, from 42 percent in a similar survey in 2008. But these applications have their limitations.

"We do not believe they alone are sufficient to handle the growing complexity of sales operations or address sales performance management," Ventana wrote. Full disclosure: Xactly funded the report, but Ventana says it wrote and edited it independently from its sponsor.
The Xactly software tracks compensation for each employee on each of their closed sales. Administrators have their own dashboard to see the compensation of all the employees they manage while individual sales people can see only their own compensation. Another feature lets sales people see what their compensation would be on a pending deal as an incentive to close it, what one customer called the "Show me the money button."
Before he founded Xactly seven years ago, Cabrera worked at another sales performance management software company called Callidus, which at the time sold only on-premise software. It has since rebranded itself as CallidusCloud and sells both on-premise and cloud versions of its products. Two of its products are listed on Salesforce's AppExchange, said Rajendran Nair, director of marketing. The publicly traded Callidus rang up sales of $84 million in 2011; Xactly is private.

Because of the complexity of designing the software and deploying it, major software vendors don't offer sales performance management software of their own. Instead, companies such as Oracle, Microsoft and Salesforce partner with Xactly to sell its product to their customers.
"If they wanted to build an application like this, they would have," said Brian Frank, vice president of global operations at LinkedIn, another Xactly customer. Even though LinkedIn is free to individuals, the company sells commercial services to businesses such as recruitment firms.
Switching to Xactly from a manual process at LinkedIn made sales people more productive because they stopped doing their own tracking of what they thought they were owed, Frank said.
"They spent hours with their own spreadsheets and their own calculators because basically they didn't trust the company," he said. "Now, my sales people are happy."