Sales performance management market still a hot one 22 November, 2009 By Mark Cox

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Two statistics are of note here. First, the sales performance management (SPM) software market is growing at 45 percent annually according to research firm Ventana. And secondly, an effective SPM system will reduce error rate by about 5-8 percent according to research firm Gartner, reducing costs to the bottom line caused by sales overpayments, and by disputes.

"ERP and CRM have been around for a while, but understanding and driving sales behaviour is a real opportunity today," said Brian Hartlen VP Marketing at Varicent Software. "Where do you go to find out who sold what to who at what price and at what discount? There's no one good place to find and track real sales performance, and drill down into it, in these systems."

Varicent is a small Toronto-based software company that has enjoyed a very good year, recently capped by securing the second largest privately-funded IT funding deal for Q3 2009, behind only Facebook. This $35 million in funding will be used to accelerate their expansion by driving their 130 employee count to grow by 50 percent in the next year. They are embarking on a global expansion, opening offices in London and Hong Kong, and relying heavily on partners outside North America.

"The down market has been an opportunity for us," Hartlen said. "When things are sailing along nicely, changing the way peoples' commission checks are done is problematic. In a flat market, companies are more inclined to look at margins, to look at ways to drive behaviour."

Varicent fits right in in an SPM market where many smaller companies play. Hartlen said that three things, however, have led to their above-average success.

"We provide a business-owned application," he said. "Because business units own the application, that allows organizations to respond quicker."

"Secondly, because we have a flexible data model, you can do it the way you want."

"And thirdly, because we come out of performance management and BI tools, we have built into our product the ability to make changes to the model easier, as well as providing embedded reporting and modelling too."

"What all this does is allow companies to model the impact of change in a plan. That's usually the big disconnect between incentive plans and company strategy. But when a strategy changes, the incentive plans don't lag, with our software."

SPM is still largely a green fields opportunity, with over 90 percent of companies today still using home grown solutions and spreadsheets to manage sales performance.

"We don't think the market is mature," Hartlen said. "We think it has arrived. It is still only 7-10 percent penetrated. Most are doing spreadsheets and using homegrown systems. There are more people looking to find out how variable compensation is calculated, so there is a business need, which will also get the cost of back office down."

The early adopters were very large companies, Hartlen said. "But the market is quickly moving down. We have some customers with as low as 40-50 people, companies that have more complexity in their plans. The 100-2000 person segment is the fastest growing one right now."

The role of channel partners is also growing with this segment, Hartlen said.

"The channel is increasingly more important as the midmarket comes along. People want more solutions out of the box. We have partners selling into vertical segments of the market. And we also attract consultants like in CRM, where you sales effectiveness consulting people looking for a technology practise behind that."