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A SaaS Start-up Cautionary Tale: The Makana Experience (Or: How You Can Create a Great Product and Still Hit the Wall)

Written By: Predrag Jakovljevic
Published On: July 2 2010

This article has gone through several twists: it was initially conceived as an examination of the Makana product line in early 2009. I changed tack upon Makana’s acquisition by Salary.com during the second half of that year. The latest plot turn in the Makana saga is a recent e-mail I received from a Salary.com representative, issuing a no-comment with respect to Makana, as Salary.com intends to exit the sales compensation business.

As for Makana, it has not exactly gone out of business per se, but has recently suspended operations as it seeks new investment.

The point, of course, is not only that the enterprise software industry is as volatile as a sus domestica on ice, but—more prosaically—that great products and a growing customer base are no guarantee of success for software-as-a-service (SaaS) startups.

Makana Solutions, vendor of incentive compensation management (ICM) SaaS software, was founded in 2004 in Lexington, Massachusetts (US). Its mission statement: to offer tools to help “attract and retain key employees, motivate groups to work together to achieve corporate goals, and enable executives to predict costs associated with the plans.

After three years of seed (or angel) investment, in mid-2007, Makana secured $3 million (USD) in “series A” financing (led by venture capitalists) from TD Capital Ventures, which then joined seed investor William J. Warner, founder of Avid Technology, Inc., and Wildfire Communications, Inc., in backing Makana Solutions with equity financing. The money was used for product development and launch, geared to under-served small to midsized businesses (SMBs).

By 2009, Makana had gained 200 customers and enough industry radar screenage to be singled out by Gartner as a “Cool Vendor,” for what that’s worth.

Ex-CEO Liz Cobb (who was also the founder and president of Makana Solutions), had founded two companies in the field already: the ViComp Management compensation consultancy in 1991; and Incentive Systems in 1997. Incentive Systems is now Centive (see On-demand Delivery Compels a Compensation Management Vendor).

Funny old world, isn’t it? It gets better: Makana’s direct competitor Xactly Corporation acquired Centive in January 2009—the open secret being that Xactly bought Centive in order to gradually discontinue it, poach its customers, and lower the overall cost per customer.

But back to Makana now: For her third venture, Cobb and the rest of the Makana team created an avant-garde solution that aimed to dramatically improve smaller companies’ chances of getting a handle on their sales incentives and pushing toward corporate goals, by equipping planners with better tools tailored to their needs.

 

A Convincing Value Proposition? Check.
Certainly, there was nothing wrong with Makana’s initial value proposition. In the words of Makana: “sales incentive compensation is an important vehicle for attracting and retaining key employees and for motivating groups to work together to achieve corporate goals.” [source]

Makana’s mission was thus to help organizations plan and measure the performance of the direct sales force, channel partners, and other employees with remuneration incentives. Organizational benefits: the achievement of strategic corporate objectives, and the ability to simply, cost-effectively, and efficiently compensate the individuals and teams who helped achieve those objectives. Put simply, Makana’s proposition was “easy-to-build plans that get results, and employees who know exactly what they must do to win.”

As far as market demand was concerned, Makana certainly felt it was on solid ground:

[Companies are] using incentive pay to reward individuals in all customer-facing roles, not just sales. With as many as 40 percent of employees qualifying for some degree of incentive pay, managing outcomes has become increasingly important and failures increasingly [if not prohibitively] expensive. Next to salaries, incentive pay is reportedly the second-largest line item for many companies, on average accounting for 10 percent of total revenue.

Based on data from Dun & Bradstreet, Makana estimated that 28 million people in the US alone “are being paid incentive compensation; that equates to 60,000 companies, or approximately half of all US businesses.” Annually, $500 billion (USD) is reportedly paid in incentives, and yet, it can be quite challenging to create cohesive, predictable, yet motivational plans.

Most companies still have very little visibility into the cost-effectiveness of their compartmentalized incentive programs, or the program’s overall impact on the organization, before they roll out a new plan.

In fact, as Liz Cobb put it back then, “effective sales compensation planning is critical to ensuring that sales activities support corporate strategy. Yet, surprisingly most companies do not have visibility into how their compensation plans work together.” [source]

Nor was Makana alone in its identification of this market need.

Then-competitor Centive noted that “sales compensation is the single most important factor influencing the performance of [every] sales team”—as well as the morale of that team. Since change is constant in almost every business, “the sales compensation plan is any organization's best tool for steering and course-correcting the sales team as market influences drive change in corporate goals.” [quotes sourced from now-defunct Web sites]

Certainly, it is understandable that devising, measuring (monitoring), and making changes to the "comp plan" often cause some level of unease. Centive added that “the key to managing change is to have a consistent and proven process for designing, modeling, deploying, and communicating new sales compensation plans.”

 

A Solid Product? Check.
The on-demand solution Makana Motivator was offered on a subscription basis for $1,795 (USD) per year, $495 (USD) per quarter, or $199 (USD) per month. The solution started at the plan design phase (rather than later in the compensation cycle), and aimed to help companies devise, model, build, and communicate sales compensation plans. As noted on the company’s Web site, “Makana” means “reward” in Hawaiian—a witty reference to Hawaii, which represents “the ultimate reward” or destination (in other words, a paid trip) in many sales incentive programs.

In mid-2007, Makana announced in a press release the general availability of Makana Motivator:

[Makana Motivator is] a subscription-based on-demand software that helps the people responsible for designing sales incentive programs design, model, and produce the final documents for plan participants. Targeted to small and mid-sized companies, it is the first solution with compensation plan modeling capabilities available for use [using historical and projected attainment figures] without a full implementation of a production sales compensation calculation and administration system.

One might add that the solution enabled all this, without the user getting bogged down by the details of individual orders and transactions.

In another press release, Makana described the way in which Motivator walked users through the following plan design processes:

  • designing compensation plans, with expert advice available throughout
  • incentive cost modeling, using quotas, rates, attainment, and staffing assumptions
  • verifying teamwork and alignment with strategy
  • getting management approval
  • producing documents in PDF format
  • getting digital employee sign-off on contracts

Makana assured its clients that all data was maintained at a secure off-site facility. The on-demand SaaS model (which also leveraged technologies like Adobe Flex and MySQL) enabled Makana Solutions to offer its product “at a reasonable cost,” and allowed customers “to implement sales planning and design without intensive vendor support or IT involvement.” [source]

In late 2007, the vendor announced the availability of Makana Motivator for salesforce.com’s AppExchange catalog. Built on the Force.com platform, Makana Motivator is still available for demonstration and deployment.

In March 2008, Makana announced via press release the availability of “new capabilities that enable subscribers to even more easily model incentive costs without the time-consuming and cost-prohibitive implementation of a compensation administration system.”

 

Product Challenges
In addition to the challenge of low brand recognition and the fledgling install base that comes with a start-up operation, Makana’s major challenge may have come from the much broader offerings of its competitors (i.e., Varicent, Xactly, and Callidus). They could have been forgiven for adopting the line that Makana was trying to make a virtue out of necessity, in the sense that it provided only a plan-design-modeling tool, with no compensation management and visibility functionality. On the other hand, these competitors all had/have the ability, to one degree or another, to enable customers to model and design plans.

Makana's strategy of focusing on modeling was valid, but only up to a point. Compare sales compensation modeling to car brands (and automotive capabilities): a Suzuki works for some, a Ford Taurus for others, and a BMW for yet others. Likewise, there are companies who prefer the guidance of pre-built compensation plans and models, and there are companies who need flexible systems that can be customized to their plans. The free-trial approach is perfect for this same type of company: those that need to take the first step to improving sales compensation.

Makana took the approach it did because its solution calculated results at the plan level rather than at the transaction level. You could refer to this as “macro plan modeling”—enabling users to forecast plan costs at the plan level (many enterprise incentive management [EIM] vendors do that too, but driven by transaction detail).

What Makana could not do was “micro plan modeling,” which examines the effect of plan design at the payee level. Arguably, with the macro-only approach, users can design plans that fit their budgets, but this may end up penalizing the top performers or over-rewarding the pack. The first best-practice step in sales performance management (SPM) begins with modeling sales compensation plans to ensure they reward the representatives and the company in equal measure.

To that end, Centive’s modeling approach enabled users to use existing or modeled transactions to run through the plans, because these clearly provide a better indicator of actual performance and therefore actual costs. Needless to say, plans should be adjusted mid-year if needed, with any changes communicated to the sales team.

The philosophy at Varicent, on the other hand, is to help companies tackle complex incentive compensation issues as well as modeling issues. Rather than taking the line that “one size fits most,” Varicent focuses on a solution that adapts to customers' problems. The vendor offers proofs of concept with companies’ actual data, as it finds this is the best way for companies to see the possibilities of ICM/SPM.

Without native sales transactional integration capability, it is difficult (though not impossible) to evaluate current plans and derive conclusions that will help design new plans. For example, it is difficult to discern whether the territories are balanced, whether quota attainment plot is along a standard bell curve, if there is a positive correlation between performance and commission earnings, if sales turnover is higher or lower than expected, and so on.

 

User Recommendations, Part 1: Making the Case for Automating Sales Compensation Plans
In the sales compensation annual cycle, there are four discernable cyclical phases: plan, automate, pay, and analyze. The plan design typically gets revisited every year for alignment with strategy, whereby sales administrators and executives have to “carefully model even the smallest design changes” (as noted by Bob Conlin in his excellent article Sales Compensation Best Practices: Modeling) made to sales plans to help them better predict the performance gains or losses for individual representatives, partners, and teams competing in the field. Additionally, Conlin states that “performance-oriented sales and finance executives often use models to test assumptions and forecast results.”

As reported in earlier Technology Evaluation Centers (TEC) articles about EIM (such as What Makes Incentives and Compensation So Tricky? and Are Sales Incentives Even In Tune with the Corporate Strategy?), performance-oriented sales and finance executives have quite a responsibility when it comes to designing and deploying sales compensation plans that will drive sales performance within their sales teams.

Generally speaking, good sales compensation plans will drive success by driving corporate strategy, motivating sales, promoting teamwork, attracting and retaining top performers, and so on. However, achieving good plans is not a small feat.

Especially for companies with complex sales models, multiple individuals with varied responsibilities contribute to closing each sale. A now-defunct Makana Web page stated that “compensation designers must not only define unique plans for each role, they must also ensure that individual plans drive people to meet corporate objectives…. Sales comp planning gets very complex, very quickly” owing to the multiple variables introduced above, such as product mix, market segments, etc.

When companies reward multiple roles (such as salespeople, telemarketers, lead-generating staff, agents, professional-service representatives, post-sales or support personnel, etc.), it is common for different individuals to work in “departmental silos” with different plans. The degree to which these plans work together varies from company to company. In Makana’s words: “unintended plan consequences include failure to contribute to a company's overall objectives and, worse, drops in revenue due to misalignment of sales incentives, unexpected payouts, and attrition of top performers.” [source]

Thus, there is a consensus amongst both the providers and users of SPM or EIM software that designing and modeling sales compensation plans are key elements of effective sales compensation plans, which drive successful strategy and sales behavior or motivation, promote teamwork, attract and retain top performers, and so on. In fact, the difference between good and poor compensation plans might mean the difference between motivated and disgruntled employees (and a costly sales turnover as a result)—or even the difference between profits and losses.

At minimum, as Conlin says in Designing New Sales Compensations Plans, it is important to know the company goals for the year. For example, “will the focus be on revenue, profit, new product introduction, new customer acquisition? The key objective in plan design is to ensure your plans align sales with corporate goals.” In fact, if the compensation plans are not in tune with the strategy, the company could, for instance, be pushing its sales team to be cash collectors, or “farmers,” when they should be new account “hunters” (see also The Reinvention of Software Vendors and End-user Value). Misaligned compensation plans can also discourage sales employees from working as a team, or create other unintended consequences.

The sales compensation planning process certainly requires a team effort that should ideally involve input from sales operations, the finance department, top executives, administration, legal, and the human resources (HR) and information technology (IT) departments. All these constituencies have to be involved in the plan design, alignment, and organizational management phases. During these stages, the planning team has to understand the corporate goals well; identify job roles; assign territories; establish measures, attainment goals, and rates; and benchmark pay structures.

According to Makana:

Designing effective plans can take between one and five months each year. The design effort includes defining individual roles and plans, analyzing historical data, establishing the incentive-pay strategy, performing “what if” modeling to balance the likelihood of achieving desired outcomes against the cost of doing so. Even a company with only $50 million (USD) annual revenue might well need 5 to 20 different incentive plans. [source]

Finally, “once key stakeholders agree on the plan elements” (in other words, approve the plan), the designer might spend “countless additional hours drafting and generating the plan documents” and communicating the plan’s terms and conditions to individual employees. These are legal contracts that can be used in a court of law in the event of a compensation dispute. As a result, tremendous effort is attached to drafting terms and conditions and explaining the details of the plan attainment goals and calculations. Plans, in Conlin’s view, should demonstrate to the sales team the “science that went into designing and testing the plans so that the representatives understand that the plans are realistic, fair, and attainable.”

These plans, as described by Makana in a now-defunct Web page, are then reviewed by numerous stakeholders, each of which may make comments that the plan designer must keep track of and eventually incorporate into the revised document. After committee review (i.e., management, human resources, legal, and finance), the documents are copied, and a personal goal sheet may be attached. Then more time is spent answering questions and following up to gather signed copies.

At that point, each rep's acceptance of his or her plan document is maintained in electronic or hard-copy records.

As Makana Solutions’ then-CEO Elizabeth Cobb explained in a 2007 press release, “most companies lack good tools for planning, instead relying on spreadsheet-based systems to develop, model, and test incentive pay plans.” The press release further stated that

[b]ecause most companies rely on spreadsheets or other homegrown systems for sales compensation management, designing, documenting, and implementing plans are time-consuming and error-prone activities. Moreover, it is often difficult for compensation designers to visualize the big picture and to predict the total costs associated with the plan.

In other words, power users may be able to build unwieldy plans using this approach, but newbie or sporadic planners are likely to fail thanks to the complexity of the endeavor.

 

User Recommendations, Part 2: What You Should Look For in an Automated Compensation Planning Solution
The appropriate solution should, according to Makana, “free [sales management and compensation designers] from the mundane aspects of plan creation, modeling,” and sign-off, “while leading [them] to create the best possible plans.” The solution should also include a wealth of best-practice tips, a flexible planning and documentation system, and a zero-training graphical user interface (GUI) that lets designers create the plans they believe will truly motivate participants. A graphical interface should present role-based incentives in such a way that executives can easily make the connection between strategy and an individual employee’s motivation.

Makana data sheets and Salesforce.com offer further insight as to what a SPM solution ought to offer. A solution that delivers “a panoramic view of incentive compensation across all job roles and pinpoints the relationship between individual performance and rewards” will go a long way toward helping organizations “avoid revenue drops” (due to misalignment of sales incentives), “eliminate unexpected payouts, and hold on to top performers.” Ideally, the solution vendor should also offer a free trial whereby the users can try plan design and modeling before buying. Only after the proof of concept should they then attempt upstream and downstream integrations (e.g., to process sales transactions captured in upstream systems).

Given that most available EIM or SPM packages today start from the plan rollout and commission calculation stages, all too often automation is implemented only after (less than optimal) compensation plans are approved. The natural question is then whether automation should not begin at the planning stage (rather than after the fact), and be able to seamlessly move between planners and administrators. Simply put, enterprises should not have to implement incentive calculations before they can plan or model them, and they should not need to re-implement everything (plans, commission rates, etc.) time and again either.

That said, the vast majority of current EIM or SPM systems have to be implemented by the vendor before the user can create models, because they offer enterprise class solutions for calculating pay and not really for designing incentive plans.

A smart SPM or EIM package should provide modeling capabilities without detailed compensation calculation implementation by letting the users play with percentages of attainment to calculate costs rather than forcing the user to create a sandbox of historical sales transactions that would have to add up to the attainment levels. Planners should be able to use historical data to create “what-if” cost scenarios and test plan outcomes, as mentioned above.

Looking again at the phases of sales compensation cycle, an effective SPM or EIM software solution should help during the planning stage with defining job roles, creating plans, and modeling costs using attainment history. During the rollout stage, they should help with creating plan documents, gaining program approval, and communicating to individuals.

The idea behind an automated compensation planning solution, as detailed in Makana’s Sales Comp Planning to Payment On Demand, is to enable users to get off to a fast start by using built-in templates and sample plans and policies to quickly create solid plans. The solution should help users construct plan components easily, adding details as they move through the process. As for designing plans that work, users should be able to follow step-by-step guides that help them ensure nothing is overlooked, and learn from best practices and tips to build their skills and confidence. They should also be able to get graphical feedback at every design stage and to compare multiple plans side by side.

Users should also be empowered to model costs and results as they go, and be able to view costs by plan element, job role, and company. And users who want to create ‘what-if’ scenarios to test plan outcomes based on organizational structures, staffing levels, quotas, and performance, should be able to “include both direct and overlay compensation costs” and “use historical information as a basis for projections and comparisons.”

As for automating plan documents, they will typically have to generate individual Microsoft Word or Adobe PDF documents including “quotas, territories, personal earning curves, and more,” and “enter definitions and decisions as [users] build and reuse the documents across all job roles.” Additionally, they have to be able to “store comments from sales, finance, HR and legal departments” in one central location. The solution has to be simple enough that changes can be audited and documented, toward generating final, legal contracts for employees to sign.

When it comes to the subsequent SPM and EIM cycle phases, as I said in Enter Enterprise Incentive Management and Incentive Compensation Management, there are a number of commercially available software solutions for the “calculate” phase (i.e., inputting sales transactions, maintaining organization, calculating commissions, managing adjustments and chargebacks, etc.).

While the market for EIM or SPM applications is still widely non-penetrated, which gives all providers a number of “green field” opportunities, lightweight modeling solutions in a do-it-yourself (DIY) manner like Makana Motivator are certainly refreshing and “bar-setting.” The smaller companies that spend too much time building sales compensation plans by endlessly cutting and pasting Microsoft Excel spreadsheets and Word files, and that struggle with tracking and documenting input from the sales, finance, legal, and HR departments, should check out how EIM solutions can help them ensure their plans will drive the right sales behavior.

Existing compensation calculation customers should check out on-demand product and services as a potential value add-on, while prodding SaaS vendors’ experiences with integrating to upstream and downstream compensation solutions for the reasons of monitoring and adjusting plans (based on real-life sales transactions and market conditions). Some customers with complex environments will have to consult with these vendors about managing tricky and layered compensation simulations; custom territory definitions; multi-tiered sales channels; non-standard management roll-ups; managing business units on different calendars or pay periods, etc.

Generally speaking, it goes without saying that prospective customers should vigorously demand references for contesting EIM or SPM vendors that are of their size and in their industry. Also, the selected vendors have to demonstrate integration project skills, and that they offer training and support for knowledge transfer to the user enterprise’s staff. All aspiring providers should be tested for their ability to handle the most complex and relevant compensation plans), possibly by using mock-up data from a prospective user’s systems—preferably with data that closely resemble reality.

 

Compensation Management: Thoughts from around the Web
Bob Conlin has offered some excellent thoughts on compensation management solutions. From his Sales Compensation Best Practices: Modeling:

During the modeling phase, results should be analyzed at both the macro level (i.e., what are the total compensation costs associated with this modeled plan?), and at the micro level (i.e., how will this plan affect the earnings for a particular sales team member?). Good sales plans should result in attainment that follows a standard bell curve, with the majority of reps grouped near 100 percent quota attainment. However, bell curves do not reveal details, and designers need to make sure that new plans will not negatively impact the top performers or unfairly reward poor performers…

After the "right" sales compensation plans are implemented, sales and finance executives should actively monitor actual attainment and commission costs and compare them to their modeled plans. Modeled versus actual analysis, in terms of both costs and revenue, helps ensure that companies are in a position to quickly react should unforeseen influences affect results. In fact, best-practice sales compensation management calls for executives to run new models periodically during the year to reflect market influences that may not have been initially factored in.

And From Conlin’s Designing New Sales Compensation Plans:

Sales compensation plan design is a science; there is no art to the process. Sales plans based on gut feel or what “worked at my last company” are likely to result in missed revenue, commission budget overruns, and/or costly sales rep turnover. To create quality plans that optimize sales performance, morale, and effectiveness, [enterprises should] follow a repeatable and structured approach to the design of new compensation plans…

Conlin goes on to say that it is critical to define all sales roles by answering several questions:

What roles are required to achieve corporate sales goals? What is the prominence of each role in the customer's buying process? Which roles need hunters and which need farmers? Roles like territory representative, account manager, channel manager and telesales representative are distinct and finite; each requires its own compensation plan.

Another way to look at it is to determine “the appropriate ratio of fixed to variable (at-risk) pay for each role.” Then, based on market data, plan administrators have to “establish the pay range for each role and identify the target salary, commissions, bonuses, and other incentives needed to be competitive in the market.”

As for building the sales compensation plans, Conlin notes that this involves “a combination of measures, mechanics, and policies” that should clearly set out the factors for “crediting, adjustments, liabilities, windfalls, etc.” There should be “set individual- and/or team-based measures as appropriate for each role. These measures should align with corporate sales goals related to margin, profitability, new customer acquisition, new product introductions, etc.”

Since every plan works best when it is simple and easy to understand, “a plan with more than three or four measures may be too complex to be effective, and may even indicate the need to define yet another sales role.” As for how the measures will be used in calculating commissions, Conlin further asserts that one should determine whether the plan rates will be flat, ramped, or variable; whether to implement performance thresholds or multipliers; and whether commission accelerators should be applied as quota attainment increases.

Thereafter, the planners should model costs by exploring scenarios and by comparing them using attainment history. They should model plans “to evaluate the impact at both the macro (plan cost) level and the micro (individual earnings) level” and to ensure that “plans fit within the budget parameters and adequately reward the top performers.”

As Conlin recaps, “quality plan design, coupled with efficient automation and frequent communication” should “help your company attract, retain, and motivate the best sales people” while also providing “the best path to optimizing sales effectiveness and performance with a balanced ratio of revenue and cost.”

A 2007 Aberdeen Group research report titled Sales Compensation Management: Coin-operated Productivity underscored the strategic importance of effective sales compensation planning:

Research reveals that companies are pressured by increasingly complex sales compensation plans, developed out of the need to increase market share and sales productivity. Sales management wants the sales force to sell in line with corporate objectives, but the sales force wants to sell where they gain the biggest impact to their commission checks. The resulting compensation plans present challenges to the sales force in predicting their commissions and understanding their pay statements.

The Aberdeen Group research also demonstrated the following:

The top 20 percent of aggregate performance scorers have a compensation plan design initiative in place, demonstrating that top performers recognize the strategic importance of automating the sales comp planning process. In fact, Aberdeen identifies streamlining compensation plan design as one of three recommended “steps to success.”

The report further states that “best-in-class organizations have implemented organizational processes that support compensation management technology adoption, and fully 90 percent have improved plan alignment with strategic goals, year over year.” Finally, the report notes “that compensation plans should be optimized for organizations’ business drivers, and 80 percent of best-in-class organizations strive to align performance targets with business goals.”

“To drive greater revenue growth from sales,” says Michael Dunn, Vice President of Research at Gartner, “enterprises must adopt competencies that better integrate and coordinate territory, quota and compensation management processes. These activities are interrelated and establish the framework of responsibilities, expectations and indicators for sales success that should guide direct and indirect (channel) sales forces. Gartner believes that the realm of SPM—and by extension, EIM—should consist “of four fundamental components that address a combination of operational and analytic concerns in sales management” as follows (as listed in a Gartner report [registration required]):

  1. Territory management, to answer the “What’s my role?” and “To whom do I sell?” questions.
  2. Quota management, to answer the “What do I need to sell, and how much?” question.
  3. Sales ICM, to answer the “How am I going to be rewarded?” question.
  4. Monitoring and analysis, to answer the “What’s going on?” and “What to expect?” questions.

The Gartner report goes on to say that SPM as a concept should

help organizations to systematically refine planning for sales targets, allocate opportunities equitably, enhance communications regarding expectations and rewards to all involved parties, and more effectively encourage desired sales behaviors. This concept should also improve visibility into progress with sales efforts and flexibility in adjusting to changing market conditions to produce a more-informed, dynamic, and focused enterprise.

 

Final Thoughts on Makana
So why did Makana end up hitting the wall? By way of an explanation, I should say that Makana is far from being an isolated case. I might as well have included it in my recent blog post To SaaS or Not, Is That a Question? – SaaSy Discussions (Part IIc):

The recent merger of Xactly and Centive might best illustrate how difficult it is for startup SaaS vendors to reach profitability. Namely, both on-demand incentive and compensation management (I&CM) software providers respectively had great products, good partner ecosystems, and growing install bases, but neither was profitable yet. Investors and venture capitalists (VCs) can be patient only if a SaaS company grows with an acceptable CAC (customer acquisition cost) ratio. For example, an unacceptable CAC of less than 0.5 would mean that it takes over two years to recuperate the cost of acquiring a new customer. The VCs in Centive’s case might have likely decided to jump ship (and salvage their investment) for fear that the vendor would never reach the break-even point.

The fact that Salary.com is giving up on the compensation business might indicate that this market's days are numbered as far as the standalone, best-of-breed focus is concerned. Indeed, market leader Callidus Software (the only publicly traded vendor in this space) is going through tough times and layoffs, and only Xactly and Varicent remain as the other major players in the market.

If Makana does manage a return from the grave to resume development, a natural path would certainly be for Makana to eventually deliver compensation calculation engines and visibility portal-based solutions, so that modeled plans can be carefully monitored and tweaked along the way when results do not meet expectations.

And as for Makana’s former CEO Liz Cobb? She’s now at Xactly, in charge of the Xactly Incent Express entry-level product, written on salesforce.com's Force.com platform.

 
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