Varicent Automates Sales Compensation Management

VentanaMonitor

Summary
Businesses have long struggled to manage compensation for their sales forces and to relate it fairly to sales performance. Up to now, most have used spreadsheets for the task, which often creates issues in validating and auditing the calculations. Sales, operations and finance groups all clamor for access to sales compensation and performance metrics. Now software providers such as Varicent are tackling the challenge. Ventana Research believes organizations should assess their activities in sales compensation and performance and determine whether dedicated software such as Varicent's Sales Performance Management (SPM) can help reduce time, risk and costs in managing this important process.

Assessment
With this note, Ventana Research initiates research coverage of Varicent Software. Varicent sells software to manage incentives, compensation and performance primarily for sales but also now for executive management. Its primary aim is to link sales, operations and finance through a common application. For many years variable compensation and incentives have been a carrot for urging salespeople to perform better, but many organizations have not applied information technology to manage and automate them efficiently and accurately. But in today's climate of accountability, finance organizations must ensure they manage incentive compensation accurately and have visibility into compensation payments, as well as ensuring that sales processes operate efficiently. Stand-alone spreadsheets cannot connect the sales process and incentives to the needs of sales operations to understand and optimize compensation plans.

Varicent's SPM product provides an enterprise software solution for modeling, calculating, analyzing and reporting on sales incentives. The Web-based software's interface, built for sales operations managers and analysts, also is easily utilized by finance. It facilitates importing of supporting data into a defined sales plan and compensation model that is the platform for further activities. Managers can use its plan wizard or manual definition to build sales plans. Through the calculation engine, variable pay can be processed individually or across groups. The SPM platform also enables sales forecasting and projected impacts on targets and quotas. In addition, it is simple to compare sales plans to relevant internal or external benchmarks. For organizations looking for new approaches and simplicity, Varicent provides a library of commission plan templates for immediate use or customization. Varicent has focused on using technology to simplify sales compensation and performance processes. SPM has a strong analytical foundation for handling calculations but also supports the particular needs of sales organizations, such as dealing with scenarios and multiple calendars that are being managed simultaneously. It works with existing single sign-on (SSO) procedures and, for global organizations, handles multiple currencies. In addition, Varicent has worked with sales force automation (SFA) vendors such as salesforce.com to integrate sales pipeline and account information for managing sales compensation. In Ventana Research's view, Varicent also differentiates itself by providing reusable calculations, management alerts and analytics for the sales process.

Market Impact
Simpler, more accurate methods to manage sales plans are long overdue. The market for such applications is heating up as organizations at last confront the challenges of stand-alone spreadsheets and the worrisome ease of making significant errors. With this application, which is easy to use and manage to support the sales process, Varicent has reduced the time to implement and deploy to six weeks or less for most customers. In the market for sales compensation management and supporting incentives at midsize and large companies, Varicent is competing primarily with Callidus, Centive, Synygy and Xactly. Of course, Microsoft Excel, long the tool of choice, remains for the moment hampered in this area because of its disconnected, single-user architecture. On the other end and focused on large-scale enterprise resource planning (ERP) and customer relationship management (CRM) suites, enterprise application suppliers Oracle and SAP have not been active in their focus on this specific area of the sales process or in significantly expanding the capabilities of their applications.

ecommendation
Organizations that want to move beyond the risks and limitations of spreadsheets for managing sales compensation should look at centralizing the management of sales performance. Linking sales, operations and finance together can help sales management focus on successful selling instead of debating the cell values and numbers in conflicting spreadsheets. Varicent's success in a short period of time with a number of validated customer accounts can give organizations confidence as to automating and improving their sales compensation and performance management processes. Organizations looking to improve the linkage between finance, operations and sales management and provide more accuracy and process improvement to sales compensation and performance should examine Varicent.

About Ventana Research
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2006 Ventana Research