LeapComp - Sales Performance Management Blog

Varicent Software announced two weeks ago that it had raised $US 35 million in venture funding. Most of those following or working in the SPM industry should have heard this by now. But what does it mean for Varicent, for its competitors, and for the SPM market?

What it means for Varicent
According to this press release, Varicent has a few ideas of what to do with this money. It should be used to:

• Expand its international business, building on the successful launch of EMEA and APAC operations earlier in the year,
• Accelerate the development of new features and functionality in its SPM solution,
• Broaden its reach into new verticals, and
• Advance its mid-market penetration.

I talked about this before, but when selecting a sales performance management solution, one of the biggest concerns for the majority of my clients is the viability of the vendor. A vendor can have the best solution in the world, if they are not around to support it tomorrow, it’s money out of the window.

Since Varicent is a private company, financial details are closely guarded. However, we now know that they have 35 million dollars in their treasure chest, that they are backed by several respected VC companies, and also that investors (who do have access to Varicent’s financial data and forecasts) think that Varicent is a company worth investing in. This should in turn, instill some confidence in potential customers that they are a strong company and not a fly by night.

What it means for Varicent’s competitors and the SPM Market
A client asked me “So with Varicent raising so much money, their competitors must be in trouble now right?”. I don’t think that it spells trouble necessarily at this point, but it should be a wakeup call for many competitors to ramp up their R&D efforts and to sharpen up their pencils when it’s negotiation time. The other reason why this doesn’t necessarily spell doom for all other software suppliers is that Varicent’s revenue/profitability does not depend only on trying to steal market share from its competitors.

A 35 million dollar investment is a vote of confidence by investors that the SPM market will keep growing very quickly. The press release also mentioned that according to Ventana Research, the SPM market is growing at 45% annually and in the U.S. alone is predicted to exceed more than $8 billion in 2010. Research from Garner shows more modest figures: a 15% growth in 2006, 20% growth in 2007 and a total of $300 million in revenue captured by all vendors collectively worldwide. This being said, there is no doubt that SPM is a market which is still virtually untapped and that investors are hoping to see a market penetration similar to the CRM boom.  (That’s certainly what *I* am hoping!)

And with a market growing so quickly, I believe that there is room for several major players. Competition between vendors is good not only for the industry, but especially for the customers. This announcement is another signal that vendors should expect growth to resume… and it should be good news for everyone.

The next challenge for Varicent will now be to manage their growth very carefully.  Congratulations!