Enterprise Incentive Management Leader Responds to Market Demands

Callidus Software Responds to Market Demands

San Jose, California (US)-based Callidus Software, founded in 1996 and publicly traded since 2003 on the NASDAQ under the symbol "CALD," is an enterprise incentive management (EIM) provider that benefits from the market dynamics detailed in Thou Shalt Motivate and Reward Workforce Better. The company has several US offices, namely in New York, New York; Austin, Texas; Chicago, Illinois; and Atlanta, Georgia, as well as in London (UK) and Sydney (Australia), with an estimated 330 employees worldwide. Callidus (taken from the Latin word meaning "expert") receives nearly $70 million (USD) in revenue and services over 110 global user corporations across multiple industries. Such industries include retail banking (22 percent of the install base), insurance (21 percent of the install base), manufacturing/high-tech and life sciences (23 percent of the install base), retail/distribution (12 percent of the customer base) and telecommunications (the remaining 22 percent of customers). While its products can serve the pay-for-performance program needs of virtually all companies, Callidus has focused principally on the above six key market segments, which were also described in Sizing the EIM Opportunity.

Part One of the series Enterprise Incentive Management Leader Responds to the Market Demands

In addition to selling directly, Callidus actively promotes and maintains strategic relationships with systems integration (SI) partners, management consulting firms, independent software vendors (ISVs) and technology platform providers. These relationships are formed to provide customer referrals and co-marketing opportunities with the aim of expanding the potential customer base. As well, these relationships leverage the vendor's primary business model by outsourcing integration and configuration services and allowing it to expand and focus on software license sales. To that end, Callidus has established alliances with Accenture and IBM on both a national and a global basis, whereby each provides systems integration, implementation, and configuration services. The vendor has further strengthened its relationship with IBM from a technology perspective by optimizing its products on platforms such as IBM WebSphere, DB/2, and AIX.

Besides working with global business partners, Callidus also maintains relationships with smaller and more specialized companies such as Compensation Technologies and Iconixx Corporation. These relationships provide the company with new business referral bases, compensation consulting, and augmentation of its professional services, including the implementation of Callidus products. Although all of these strategic relationships have been built on solid foundations over the past few years, they are non-exclusive, and either party may enter into similar relationships with other parties.

Callidus Software's global partnerships and alliances continue to grow in number, and today include some of the world's best-known SIs, consulting and technology groups, and software solution providers. Other firms that form the company's partner base: Actuate Corporation (for enterprise reporting applications), The Alexander Group, Atos Origin, Axis Group (a consulting firm in the field of business intelligence [BI]), BEA Systems, CelFocus, Hexaware Technologies (a provider of information technology [IT] and business process outsourcing [BPO] services), Hewlett-Packard (HP), Informatica Corporation, Oracle, Saama Technologies (a consulting and SI firm that provides actionable BI for enterprises and outsourcing services for software product companies), SAP, and Sopra Group, among others.

Ten of the thirty Dow Industrial companies have thus far chosen EIM from Callidus, whereby the vendor's partner programs hope to ensure successful implementation and faster payback for these companies as well as for all of Callidus Software's 112 customers. The consulting services firms and SIs mentioned above work with Callidus to add strategic value to sales performance management and provide integration, evaluation, strategic outsourcing, and hosting services. On the other hand, ISVs and technology platform providers integrate Callidus Software solutions with applications and platforms to maximize customer benefit and help build revenue.

The EIM Market

The market for EIM products is in its early stages and is rapidly evolving, and many of Callidus' direct and potential competitors have significantly greater financial, technical, marketing, service, and other resources. Many of these companies, such as Oracle (including former Siebel Systems and PeopleSoft), SAP, Synygy, Practique Associates (in Europe), and others also have a larger installed base of users, longer operating histories, and greater name recognition. However, Callidus is the EIM vendor of choice for some of the largest companies in the world (as indicated above, 10 of the 30 Dow Jones companies rely on Callidus). For example, five of the top ten US banks (US Bank, Wachovia, Morgan Stanley, Bank of America, Washington Mutual), three of the largest seven US property and casualty (PC) insurance companies (AIG, Aetna, Allstate, United Health Group, Allianz Group), and four of the five largest telecommunications companies (Telstra, Vodafone, AT&T, Sprint, Bell, Verizon) all use Callidus' products. In addition, seven of the twenty-five Fortune 1000 high-tech companies use Callidus, such as Amgen, Genentech, Apple, BEA Systems, HP, Konica Minolta, and Novell. Finally, over 450,000 salespeople, brokers, and channel representatives are paid regularly using Callidus Software's TrueComp Enterprise suite today. Other notable customers and partners include 7-Eleven, CUNA Mutual, Philips Medical Systems, Sprint Nextel, Sun Microsystems, and Time Warner Corporation.

The principal competitive factors affecting the EIM market are industry-specific domain expertise; scalability and flexibility of solutions; superior customer service; and functionality of solutions. Callidus believes that it can compete effectively with the traditional enterprise resource planning (ERP), sales force automation (SFA), and customer relationship management (CRM) companies due to its established market leadership, domain expertise, rules-based application software, and scalable software architecture. On the one hand, a potential benefit of leveraging an ERP/CRM/SFA solution is that a user company may be acquiring an incentive tool that is already integrated with its back- and front-office solutions, as opposed to going through a third party best-of-breed EIM player. This might save both time and money in implementation and rollout costs, and has the added advantage of offering management and executives a 360-degree view of their sales operations (they can supposedly track a lead all the way through to its close and then figure out who gets paid).

However, full-fledged EIM systems are generally not part of these vendors' core product offerings. Many of these companies with broader product offerings' scope might offer some sort of sales compensation tool within their overall product suite instead. Callidus will likely have developed the domain expertise necessary to meet the dynamic requirements of today's complex pay-for-performance programs more fully. In general, the incentive management solutions from ERP and CRM vendors fall somewhere between homegrown tools and the best-of-breed EIM solutions in terms of functionality, and are capable of handling moderately complex sales plans and sales forces. Such solutions have found a strong customer base among companies that do not have major compensation deposits via bank accounts or requirements for a full-fledged industry-oriented EIM tool.

Callidus also believes that it can compete effectively with the fellow best-of-breed EIM system vendors. Specifically, while each of the pure-play EIM system vendors has domain knowledge of the EIM market, Callidus claims to have developed the superior scalability demanded by the telecommunications, retail banking, and insurance markets. Additionally, it has created substantial product differentiation by adding features into its products that are specific to each of the target markets. The company's industry knowledge comes from over 100 successful implementations among global enterprises in banking, insurance, telecommunications, life sciences, and manufacturing.

As illustrations of its solution's scalability, 31 of its customers have over 10,000 payees and 15 customers have in excess of 25,000 payees, totaling over 1,450,000 payees currently served by Callidus. As for transaction volumes, 24 of its customers process over 1 million transactions per month, and 3 customers process over 10 million. As for the biggest compensation payouts, 9 customers are reportedly paying over $200 million (USD) per year, and the largest customer—$3 billion (USD) per year. Thus far, all of Callidus' customers have paid $25 billion (USD) to their sales force and channels. One can reasonably expect much more in the future.

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