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That was the title of an article released yesterday by Callidus software. Every time I hear about the potential savings resulting from a successful sales performance management implementation or about a measurable return on investment (ROI), my interest is piqued immediately. I’ve talked about ROI here, here, here and here.
This latest article asserts that telecommunication companies in the EMEA region (Europe, Middle East and Africa) are missing out on GBP2.15 Billion (3.11 Billion US Dollars). That’s a lot of money!
Callidus analysts came up with this number by looking at what the average carrier spends on sales cost (10% of the revenues). Since the average revenue of EMEA telcos is GBP432.73 billion, they each spend an average of approximately 43 billion is spent on sales. The article also says that an SPM solution can improve efficiency by 5% of the compensation spent. So 5% of 43 billion = GBP2.15 billion of potential savings.
But here is the problem. According to the article, 43 billion is spent on sales; not on compensation. And Callidus expects an improvement by 5% of the compensation spent; not on sales. So either the statistics are mislabeled and we are not comparing apples to apples, or I am confused.
Assuming that I’m confused or that Callidus really meant that 43 billion is spent on incentive compensation, and assuming that a 5% improvement is a lot, we can see that even a “small” 0.5% improvement of the compensation spent, still represents GBP215 million ($310M USD) savings!
You’re not confused. You would need the percentage comp cost of sales and a little more detail on the 5% to support the premise.
But I’m with you the 310 USD number sounds pretty good as well.
Kerek Taylor
Hey Julien,
Do you know this one: what happens when two lawyers, three PR-flacks and two marketing people write a press release?
I think you’ve just seen the result…
Since I caused the confusion, let me be the one to clear things up.
The release speaks about “sales costs,” “compensation spend” and money “spent on sales” interchangeably. We always meant “incentive compensation,” but we obviously weren’t clear enough and shouldn’t have used the terms synonymously. My bad and you’re right to call us on that.
What’s more important though is the bigger picture: companies need to understand that incentive compensation done right is absolutely mission critical and can yield very substantial savings. Depending on the size of company we’re talking about millions of $. This applies in particular to telecommunications, financial services and other verticals, where competition is fierce. Our objective was to show these huge proportions. And we wanted to highlight what it actually costs companies to ignore the issue or patch it up with Excel, a homegrown system or similar approaches.
No matter what SPM solution companies end up buying, the strategic value and the immense savings are what we wanted to call out.
I think we can probably agree on that, right?!
Hehe! Thanks for clearing this up. We can absolutely agree on the big picture.
I discussed the efficiency savings portion of the article, but as it points out, there are also significant revenue gains to be made as well.