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SaaS – Future or Buzz?

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Julien Dionne
on May 2, 2010
in Uncategorized
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I had a good conversation with Chris Cabrera, the CEO of Xactly Corporation, last week. We spent an hour talking about Software as a Service (SaaS) and why people should care. He is definitely one of the people most passionate about this topic that I know!

For those who don’t remember, I wrote an article called “Buy the Car, Rent the Car or Take the Bus” which explains the difference between on-premise, single-tenancy and multi-tenancy.

“Many people are confused about what SaaS is, and about the benefits of a pure SaaS solution” said Cabrera. “Many companies use the term incorrectly to be buzzword compliant. That’s too bad because some people start to believe it is only a marketing gimmick.” I asked him why people should actually care about if a solution is SaaS or not. Playing the devil’s advocate, it would seem like most potential customers would not care if a solution is really a SaaS solution versus hosted, or multi-tenancy versus single-tenancy.

Chris mentioned 6 reasons why potential customers should care:

  1. It is in the client’s interest for the vendor – their technology partner – to be around long term. On-premise solutions are not cost effective because they have so many technology stacks and versions of the software that need to be maintained and supported. With SaaS solutions, some of the savings are passed back to the client, and a significant portion of the revenues are reinvested into the infrastructure as well as in the development of new features.
  2. SaaS vendors can focus on improving a single software version, used by every customer. Every engineer is dedicated to improving a single source of code. This allows the vendor to release new features and improvements much more quickly than is typically feasible with an on-premise solution.
  3. Upgrading a SaaS solution usually happens ‘behind the scenes’. New SaaS software releases are tested extremely rigorously before being released. A quality problem would impact thousands of customers and hundreds of thousands of payees. On-premise solutions often transfer the quality ownership to the clients who must perform their own regression testing after an often labor intensive upgrade process.
  4. Non-SaaS solutions are not always scalable. For example, with 10, 100 or even 1000 customers, an on-premise solution might work. But the real test will be when a solution is used by thousands of customers – will a non-SaaS solution really be able to scale up? “Probably not” said Cabrera.
  5. SaaS vendors constantly measure and monitor their environment. They make a significant investment into that infrastructure to ensure an optimal performance for all of their customers.
  6. SaaS solutions are usually sold on a basis of $ per payee per month. Solutions such as Xactly Incent all of a sudden become cost effective for even small companies which can avoid a high upfront infrastructure and license cost.

Chris Cabrera is convinced of one thing: SaaS is the future. “On-premise solutions might still be appropriate for a very small share of the market, but SaaS is appropriate at least 98% of the time.” Looking at the market trends, I would say he’s right. Most vendors realized the benefits of SaaS and are rushing in that direction.

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Buy the Car, Rent the Car or Take the Bus

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admin
on July 29, 2009
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I found an interesting comment on LinkedIn from Chris Collins regarding the difference between On-Premise, On-Demand (Single-Tenant) and On-Demand (Multi-Tenant).  This is not the first time I hear or use the car rental versus car buying analogy, but I think it is well explained and I enjoyed the ‘bus’ example:

Here is one analogy that I use to demonstrate the concept of SaaS to non-technical audiences that always seems to get them understanding the basic idea. I tell them to imagine 2 cars and a bus.

BUY THE CAR: The first car they buy and pay for outright. They are responsible for all maintenance, insurance, gas. This is analagous to buying the hardware and traditionally licensing the software yourself in house. You as the buyer are very interested in the technology you are getting.

RENT THE CAR: The second car they rent by the month. You don’t own the car but you have some say over where the car goes and you are still somewhat interested in the technology. When you go the rental car parking lot, you have a choice of cars and your decision of which car to choose is somewhat based on technology. Also, one person rents one car. This is somewhat analagous to a traditional ASP model. The point is someone else might own it, but you are still interested in the technology underlying it.

TAKE THE BUS: The bus is multi-tenant. When the transmission (platform) is changed on the bus, every tenant is affected because they are riding on the same platform. BUT when you take the bus, unlike when you buy or rent a car, you are not as interested in the underlying technology but in what the bus can do for you. You are now looking primarily at the service aspect, what need can it fulfill for you? If you need to go to the mall and a bus arrives whose ticker says “Mall” on its route, then you take it for that reason, not because of the the transmission on the bus. You only pay for the cost to get to the mall, not by month or not the full cost of the bus.

However you can take the analogy a little further. If you are transporting precious cargo on the bus, you will of course want to make sure the bus is safe from hijackers while stopped and in transport just the same way customers still want to be sure their precious data is protected. If there is a particular transmission type that that is known to have holes in it and cargo sometimes falls out, the customer will want to know about that upfront.Then you risk losing the customer’s focus on the service and put it back on the technology. That is a very important concept.

Do you think this applies to a Sales Performance Management solution licensing model decision?

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SaaS – Future or Buzz?

Excentive Incentive Management Review

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admin
on February 24, 2009
in Vendor / SPM Solution Review and Info
. 2 Comments
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Here is my latest Incentive Compensation Management application review. This week I am reviewing a relatively unknown (in North America) solution called Excentive Incentive Management.  Excentive was incorporated in 2002. Since then, they have gained a lot of popularity in France and have signed major clients such as Canon, Orange, and Air France. Earlier this year, they raised 700,000 Euros ($880,000 US) to accelerate international growth, part of over $1 million raised in recent months to fuel global expansion.

They also assembled an additional team driven by 10 seasoned managers active in the globalization of companies such as SAP, Hyperion, and OutlookSoft. One of their key target markets is of course North America, so we may soon start seeing some Excentive implementations over here if they can overcome some major challenges ahead, namely convincing prospective clients that they have the capability to deliver and support their implementations in the US, and that they are financially stable.

What is particularly interesting about the Excentive solution is that it includes performance management modules in addition to the sales performance solution. It makes it easy to compensate employees based on MBO campaigns. It’s a very flexible solution which can be a good option for as few as 50 payees, to as many as 50,000 payees, and it can be deployed on-premise or hosted.  Excentive Incentive Management is deployed across industries, and some implementations can process as many as 2 million transactions daily.

From the “regular” employee perspective, the application mostly consists of a repository of reports. These reports can be configured and customized by an administrator, but standard reports exist for most common information such as commission statements and performance review results.

Employees can also see the details of their compensation plans and can easily find out which commission was paid and find out if any transactions are missing.

Managers have access to additional information such as their team’s performance, salaries, etc.

Managers can also consult their employee’s records containing information about their past performance such as commissions earned in previous periods.

In addition to reports, managers can edit some of their team’s information including new salary figures, bonus values, based on constraints configured by the administrators.

One of the biggest features for managers is to be able to provide rating for their employees’ performance and to reuse all that info in a salary review process or a stock option allocation exercise, which are also supported by Excentive.

Finally, let’s look at some of the configuration of the solution, from the administrator’s perspective.
“Campaigns”, or the performance management component, can be configured in a few clicks from the campaigns menu.

Bonus and commission rules can be configured easily in a 3-step process. First, the properties of the rule are setup which includes the name of the rule and the dates for which it is effective. The rules engine can thus access the quantitative data (eg. sales by product/territory/period , margins, etc) as well as the quantitative performance indicators (eg. team spirit, customer loyalty, etc). This allows the calculation of the incentive (commission) as well as the bonus. Rules can be used for the classic earnings calculations as well as for recommendations and simulations.

The criteria step consists of specifying the conditions which must be met for the commission to fire.
This formula can be typed in, or created by clicking on the functions and other information stored in the database.

The resulting calculation is configured in the same way as the condition.

The reports we have looked at so far were all numbers presented in a tabular format, but it’s also possible to integrate visual elements to dashboards and reports.

Excentive’s solution also includes integrated modules to perform more complex tasks:

  • Hierarchy Manager: combine different dimensions such as region/office/people into multiple hierarchies necessary for workflow and approval processes.
  • Pool Manager: create teams and delegate ‘people-to-team’ assignments to local managers.
  • Mobility Manager: spot team changes and transfer people between departments/managers. Manage partial, time and team depending compensations
  • Culture Manager associate people with language, currency, location
  • Environment Manager which is a secure and fast way to move an application change from a development environment towards a test or production environment

Overall, Excentive is a slick web based application which shows a lot of promise if they can inspire enough trust from prospective clients. Since all modules are integrated in one solution at no additional cost, Excentive could be a good play for clients looking for not only incentive compensation management, but the entire spectrum of salary and performance management. Now could be a good time to negotiate a favorable price from the vendor, given that they are aggressively trying to enter this North American market.

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2009 Sales Compensation Trends Survey

Published
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admin
on January 20, 2009
in Industry News
. 1 Comment
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I recently talked about a few salary and incentive compensation surveys, but here is another one from the Alexander Group that focuses on Sales Compensation.

The 2009 Sales Compensation Trends Survey found that 40.34% of the 180 participating companies use a desktop solution such as a spread sheet or data base and that 29% use a custom in-house solution to administer their sales compensation program. Outside solutions represent 27.27% of the respondents: Custom Purchase (9.66%), ERP/Data Base Component (5.68%), Dedicated Commercial Hosted Solution (5.68%), Dedicated Commercial Enterprise Package (4.55%), and Outsourced to a Third Party (1.7%). The remaining participants selected “Other” (3.41%).

The survey included many large companies like American Express, Microsoft, General Electric, DuPont, and Kraft Foods, but it also included many smaller companies with only 20 sales personnel (or more). I think that this is why 40% of the companies surveyed still use a spreadsheet / desktop solution.

What I think is particularly interesting is to compare the on-demand and on-premise solution usage; 5.68% of the companies used an on-demand solution, while 4.55% of the companies used an on-premise solution. In other words, only about 10% of the respondents use a dedicated commercial sales performance management solution. Over the next few years, I believe we will see many of the companies moving away from spreadsheets or custom solutions to move to a commercial application.

I’m also very curious about what “Other” solutions 3.41% of the respondents are using… hand-written incentive compensation statements? I’m assuming that these companies probably use some sort of application to manage this; maybe a payroll system or a talent management application with an incentive compensation module.

The survey also provides several other interesting results:

  • 3.0% was the average incentive payout increase in 2008.
  • 4.4% is the average incentive pay increase planned for 2009.
  • 5.6% is the expected median revenue growth for 2009; 6.0% occurred in 2008.
  • 30.72% will increase staff in 2009; 44.69% will not change staffing levels; 24.58% expect a decline.
  • 93.44% of the reporting companies will make changes to the 2009 sales compensation plan.
  • 53.30% made some type of mid-year change to their sales compensation plan design in 2008.
  • 78.14% of all companies use sales revenue as the primary performance measure.
  • 55.19% say correct goal setting is the toughest part of sales compensation.
  • 32.95% say the sales department is solely responsible for the sales compensation plan design.
  • 90.0% was the median of the average quota performance reported in 2008.
  • 45.39% of all companies made some mid-year quota changes during 2008.

I discussed how many organizations reacted to a recession by adjusting their sales compensation plans, but these results help back up this claim. About 50% of the respondents adjusted their compensation plan design and quota values during 2008, and more than 93% are planning to modify their plan for 2009!

As a side note, I recently contributed to the creation of OpenSymmetry’s Sales Performance Management survey, which will provide more insight about comp plan administration, SPM solutions, and challenges. Let me know if you would like to participate and I will let you know when it’s ready.

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On-Demand vs On-Premise vs Hosted SPM Solutions; pros and cons

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admin
on January 12, 2009
in Planning and Selection
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The problem with most on-demand versus on-premise SPM solution analysis is that they tend to be biased. The reason for that is that many the sources of those comparisons are the software vendors. A vendor with a SaaS solution will try to convince customers that SaaS is better than on-premise, and vice-versa.

So which model is most appropriate? The reality is that it varies on a case by case basis. A quick search for this comparison, at least in the CRM space, will display thousands of results which can be useful to make up y our mind.

On-Demand Pros

Convenience: The application can be accessed from anywhere… You can administer it from home, while on the road, etc. Your reps can also access their dashboards and performance from anywhere in the world.  It also means that the implementation team should be able to work remotely more easily, which will reduce the implementation expenses.
Worry-Free: No need to worry about the technical support of the application, applying patches, etc.
Focus on core business: No IT infrastructure to maintain in-house… you get to focus on what you do and not on keeping a system up and running.  You also don’t need to invest in expensive hardware.
Pricing Model: Avoiding a large up-front cost will allow to try an application without spending too much up-front. After a certain period of time it may be more expensive than purchasing a license, but looking at the total cost of ownership it may still be a viable option.

On-Demand Cons

Security: Valuable and usually very confidential business data resides with a third party company. SPM companies are making a big effort to keep this information “safe”, and that’s why most vendors are SAS 70 certified… but it’s still a valid concern for many companies.
Uptime: As discussed yesterday, uptime of SaaS solutions is usually pretty good, but one never knows when there can be a problem…  It’s happened to me more than once to work on an on-demand project where I was counting on a Friday night to finish up important implementation activities only to hit a maintenance window where the system was not available for a few hours.
Monthly cost: After a few years, the monthly cost of a SaaS solution may end up higher than it would have been by having purchased a license.
Flexibility: Can an on-demand really handle your compensation plans? Some will, some may not… but this is often a “gotcha”, particularly for companies with complex data integration requirements.

On-Premise Pros

Flexibility: On-premise solutions typically have an open databases, the technology stack is usually more flexible, and the configuration itself is usually also more flexible.
Hands-on control: Control over the maintenance windows, issue resolution, security, data, when patches are applied, etc.
Frequent upgrades: Application updates are frequent and automatic.
Disaster recovery: SaaS companies will have a process in place to keep your data safe and redundant systems may allow the system to keep running even if the primary service crashes.

On-Premise Cons

Upfront Cost: The upfront cost is high, but the total cost of ownership might be a different story, depending on current technological capacity and existing infrastructure.
Implementation time: It usually takes longer to implement an on-premise solution; not necessarily because they are on-premise, but mostly because many customers choosing the on-premise model have very complex requirements
IT expertise: On-premise systems require to have IT experts in-house.
Patches and upgrades: I mentioned automatic upgrades as a key benefit of an on-demand solution, so it should not be a surprise to find this here. However, what should be added is that most on-premise SPM vendors will only support their current and previous release. With major releases usually coming out every year, be ready to upgrade to a new version every 2 year!

Hosted:

On-demand is technically hosted, but many companies offer the option to buy a license as you would with an on-premise solution, but will host it for you. This is really identical to the on-demand model, except that the cost structure is different (upfront cost instead of an on-going monthly cost).  Not every vendor offer this option, but if they do, it could be worth considering if you are looking for the pros of an on-demand solution with the pricing model of an on-premise solution.

What are others doing?
Many people are using both types of solutions and as I mentioned, it’s a decision that must be made on a case by case basis. It looks like there is a trend towards adopting on-demand solutions. It should be no surprise that many vendors try to push their on-demand offerings since that in the long-term, it usually means more money for them.

Before making a decision about which of the SaaS or on-demand model is the right decision, THE big question is, can the on-demand solution handle your compensation plans, transaction volume and data integration requirements? If it can, the decision is really up to your cost break-even analysis and how you evaluate the other pros and cons of each model.

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Adoption of Software-as-a-Service in the Sales Performance Management (SPM) Industry

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admin
on January 11, 2009
in Industry News and Planning and Selection
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A question many of my clients wonder about is “should we get an on-demand Software-as-a-Service (SaaS) SPM solution, or an on-premise solution.” The popularity of SaaS solutions and of traditionally on-premise solution being offered on-demand surged last year. I will discuss the pros and cons of each model in more details in a separate post; for now I will focus on one of the biggest concern to adopt SaaS.

Availability and Control. Let’s define availability as the “up time” of the SPM application. In other words, high availability means that an application will be continuously operational for a long period of time. If the application is not available, no one can access it. What is the impact of such “down time”? If the outage is “only” affecting the sales reps that can no longer access their performance for a few hours, availability may not be such an issue. If you are in the implementation process, it is clear that an outage would paralyze the implementation efforts for that time (let’s hope that it’s not during deployment!). In the worst case, the outage could happen around the time the incentive compensation needs to be processed and submitted to payroll (ouch!).

Technology is not perfect, and we can expect it to fail once in a while. But what makes many companies think twice about adopting a mission critical SaaS solution is that they lose control any potential issues and over how quickly they can get resolved.

Let’s look at a recent example outside of Incentive Compensation. Last Tuesday, the web was buzzing with news about Salesforce.com being down. A network device failed, and the redundant systems did not kick in for some reason. This stopped all data from being processed in Japan, Europe, and North America. Why is this a big deal? Because SalesForce.com is considered to be the leader of the pack in the SaaS market. If SalesForce.com can be down, availability issues can (and will) happen to any SaaS vendor, no matter how much they brag about redundant systems, fail safes, power generators and secured data centers… But going back to the SalesForce.com example, “service disruption affected all areas from 20.39 to 21.17 GMT on 6 January… or only 38 minutes without service.

Some people have questioned whether such incidents could harm the adoption of SaaS. I think, maybe… but not for Sales Performance Management. I think that SaaS applications and their availability will only keep improving. And I think that as the SPM SaaS applications mature, it will become more and more difficult for even the most technologically capable companies to have the availability of their on-premise application competing with the availability of the on-demand applications.

So do I think SaaS applications is a good solution for everybody? Probably not. Is it an option worth at least considering?  I think so!

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