Is it time to spend on sales performance management software?

Is it time to give up the spreadsheet? New sales performance management software is giving managers tools to better forecast sales.

Sales performance management software can be a tough sell at companies with precious few IT dollars, because many managers still believe a spreadsheet application can do the job of tracking compensation.

But some industry analysts are suggesting companies take another look at sales performance management software, now that new functionality is hitting the market that could help sales teams work faster and smarter.

 “Certainly, if you are a company with more than 100 salespeople, you really should start looking at this,’’ said Michael Dunne, a research vice president at Gartner Inc. in Stamford, Conn.

In recent weeks, companies such as Xactly Corp. and Callidus Software Inc., have announced plans to release upgraded versions of their compensation and sales performance management software that will offer new analytics and modeling tools. Xactly rolled out upgrades to both its enterprise-class Incent set of tools and Express, a scaled-down version aimed at smaller companies. Also, Callidus confirmed last week it will release a new version of its suite of compensation software and related tools later this month.

In addition, Foretuit, a startup company based in New York, released a beta version of a predictive analytics tool -- also called Foretuit -- that analyzes salespeople’s emails and calendars. Once this data is tapped, a manager can look at the sales process with more in-depth information. Foretuit, a cloud-based offering, will initially work with Salesforce.com.

With this data, “you can look at the sales pipeline and quickly determine what opportunities might be ripe,” said Michael Liebow, Foretuit’s founder and CEO.

Modeling, forecasting and sales performance metrics will become increasingly important as companies are pressured to leverage the sales data residing in a sales organization, noted Mark Smith, president and CEO of Ventana Research Inc., a research and consulting firm based in Pleasanton, Calif.

 

“You need to make [sales data] useful; you can’t just look at the numbers,” Smith said. “There’s an analytics and planning need to manage the outcome of sales processes.”

Once companies get beyond that 100-salesperson mark, it becomes increasingly difficult to forecast or manage the complexities of compensation plans in a strictly spreadsheet-based world.

Take the example of ArcSight LLC, a maker of security products that was acquired by Hewlett-Packard Co. last year. The company installed Xactly’s compensation management software about three years ago, in part because it had an incident of incorrectly compensating some salespeople in their favor, said Lars Nilsson, vice president of field operations. The mistake occurred because the company has a complex compensation plan that factors in regions and expertise, direct sales, channel sales and different compensation for sales engineers who assist in sales.

“When this thing happened, [ArcSight] realized this was enough,” Nilsson said.

Shortly thereafter, the company evaluated different sales performance management tools and selected Xactly in part because it works with Salesforce.com.

Compensation management has long been the heart of sales performance management, but some companies are now considering a sales lifecycle approach that calls for end-to-end management of the process, from the time people interview for sales slots to coaching and staff enrichment tools that help transfer best practices across a sales team.

“Companies are thinking about it,” said Gartner’s Dunne about the lifecycle management suites. “The more evolved, developed sales organizations are looking at ways to create world-class sales forces.”

The sales performance management software market has been growing in “fits and starts” for a decade, Dunne said. It was hit with a slump around 2005, recovered and then slowed considerably during the recent economic downturn. In the past year, Dunne has observed a boost and puts the market at around $320 million for 2010, up from around $300 million the previous year.

In today’s economic climate, it makes sense to evaluate tools that could help sales teams do more with less, analysts said. When the economy was booming, many companies hired salespeople, let them operate on a probation period and then would winnow down the group of new recruits to the top performers. These days, companies are unable to hire so broadly and must work harder to bring in the right salespeople from the start.

Even so, Ventana’s Smith said there are still roadblocks at many companies. In a sales performance management report it released earlier this year, the research firm found that only about one in four organizations with sales performance management tools are using them effectively enough to deliver true business benefits.

The majority of organizations are struggling with a number of problems. In some cases, sales performance data is too scattered. Other companies have yet to put in business processes to effectively use the tools.

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