No More Spreadsheets

By Michelle V. Rafter

Businesses have long used spreadsheets to calculate sales commissions, even though the practice is rife with problems. Sales incentive management software can help.

Michael Schwartz had a problem with his salesforce. It wasn't that they weren't selling. It's what happened afterward.

Schwartz is sales operations vice president at Incentra Solutions in Boulder, Colo., a fast-growing provider of storage and IT services for mid-sized companies. In the past two years, Incentra acquired five smaller businesses and now has close to 120 sales representatives in multiple regional offices. At the month's end, when it was time to calculate and pay salespeople commissions, each region's finance department used a different process. It took too long, and back at corporate, Schwartz was in the dark as to whether the company's commission structure was really working. "It was difficult for us, without a consistent process, to review numbers in a lot of detail," he says.

Like many other companies, Incentra built its commission plans on spreadsheets. But as experiences there and elsewhere have shown, spreadsheets do a poor job of calculating complicated sales commissions. Salespeople even have a name for the problem: "Excel hell."

Earlier this year, Schwartz switched to something that's picking up steam as a spreadsheet alternative: sales incentive management software, which automates the job of creating and managing a company's reward system for meeting sales quotas and goals. Typical sales incentive software includes tools to devise, document, and allocate incentive plans and a Web-based portal that sales reps and sales managers use to track data and generate reports.

Appealing to small businesses

Sales incentive software has been around for a while, but vendors only recently introduced a low-cost software-as-a-service (SaaS) version that's affordable and appealing to small and mid-sized businesses. Costs range from $20 to $50 a month per person, according to analysts. That's more expensive than a spreadsheet, but the extra cost is worth it because it eliminates mistakes and accidental overpayments that routinely happen in spreadsheet-based commission plans, says Michael Dunne, a sales software analyst at Gartner, the Stamford, Conn., technology research and consulting firm. Also, because the software generates more detailed reports, companies can see whether their commission structure is motivating salespeople to sell the most profitable product mix, Dunne says.

That's important to a company like Incentra, which projects a big jump in revenue this year but is still working to get itself out of the red. To that end, Schwartz started rolling out a sales incentive software program from Callidus Software in mid-March and expected to have 85 percent of its salesforce up and running by April. If all goes well, Schwartz plans to use the software for other employees who receive commissions, including inside sales representatives, engineers, and corporate staff.

Besides Callidus, vendors that sell sales incentive management software to small and mid-size companies on an SaaS basis include:

• Xactly
• Incentive
• Makana Solutions

Although the software is winning fans, analysts estimate 90 percent of small and mid-sized businesses still rely on spreadsheets. Software vendors are working on a number of fronts to change that. Centive recently signed a deal with ADP for the payroll service bureau to market the software and host it for small and mid-sized business customers. Callidus, Centive, and Xactly have partnerships with Salesforce.com, the SaaS application platform. Xactly also offers an outsourced version of its SaaS software that the company manages on behalf of small-business clients for an additional monthly fee, says Karen Steele, Xactly marketing vice president.

Clean up your act

If a small business is considering making the switch, the most important thing they can do is clean up their data and document anything that's being done manually beforehand, because eventually it all has to fit into the new software. "No matter what (a vendor) offers on their side, it all comes down to how good your data is and how fast you can put it into the structure," Incentra's Schwartz says.

SIDEBAR: How to Get the Most from Sales Incentive Software

Analysts and other experts suggest that small and mid-sized businesses can ensure that they maximize the benefits from sales incentive software by doing some research first. This includes following this advice:

Look beyond the basics -- When evaluating vendors, look for add-ons that might be important at your particular company. For example, Incentra uses Salesforce.com, so any sales incentive software they chose had to be compatible with it, Schwartz says.

Take a long view of ROI -- Any software will cost more than a spreadsheet and vendors have different fee structures, so analyze the cost and return on your investment over a long period, such as three years. That way "everyone's on a level field," Schwartz says.

Get demos and feedback -- If you can't get a free trial, give the vendor's sales team specific scenarios or tasks to perform during a product demonstration, all the better to see how the software would function at your company, Schwartz suggests. Also, ask current customers how easy it is to customize the software they're using, how scalable it is and the kind of reports it can generate.