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On Demand Delivery Compels a Compensation Management Vendor

Written By: Predrag Jakovljevic
Published On: May 7 2007

Amid many of the intriguing trends in enterprise applications in 2006, one of the most prominent was the "point of no return" awareness and increased adoption of the on demand, or software as a service (SaaS), business and deployment models (see Software as a Service Is Gaining Ground). What's more, 2006 was also the year of increased awareness and growth for the still new enterprise incentive management (EIM)-incentive compensation management (ICM) software category (see Sizing the Enterprise Incentive Management Opportunity—And the Challenges Ahead).

It is interesting to note that EIM and related compensation and performance management applications have not only been amenable to multi-tenanted and subscription-based, on demand deployment modes, but they also feature the on demand functionality that, at the very least, matches the capabilities of on-premise counterparts (see Software as a Service's Functional Catch-up). Such applications are arguably parts of the human capital management (HCM) category (see Thou Shalt Manage Human Capital Better), but they are also closely affiliated with both the financial management and accounting systems, as well as customer relationship management (CRM) systems. Possibly the best example of this concept is the case of one vendor that recently decided to become solely a SaaS provider once spinning off its renowned, traditional EIM offering.

Centive Genesis

Centive, a Burlington, Massachusetts (US)-based and privately held company, was originally founded as Incentive Systems, Inc. in 1997. The company was an early entrant in both the EIM and the on demand sales compensation software arenas. In 1999, Incentive Systems shipped its flagship product, INCENTIVE, which closely coincided with the emergence of the new enterprise application category EIM-ICM. Soon after, most industry analysts adopted this new software category name, issued reports determining its market size, and began promoting EIM-ICM as a critical component of any company's success strategy.

From its early days, Centive has been recognized for its vision of bringing automation, financial controls, accuracy, and full audit capability to the incentive compensation process—all with the idea of helping user companies drive their performance and revenues. Centive's EIM and Sales Performance Management (SPM) solutions have since been empowering user companies to motivate and align employees, partners, and channels with corporate goals, thereby driving increased performance, revenue, and profitability.

For the past decade, automation of ICM has been, and continues to be, the vendor's core competency. This vision, combined with the vendor's attention to meeting market requirements, has resulted in the success Centive enjoys today in terms of industry magazines' awards and accolades, customer satisfaction, and financial stability. To that end, in 2001, Incentive Systems received the first EIM product award from the Customer Interaction Solutions magazine, while in 2002, the company was named in the prestigious Upside Hot 100 company list.

In mid-2002, Incentive Systems launched Centive/EIM (subsequently renamed CompCentral)—possibly the industry's first EIM platform to be deployed on a true Internet-based architecture. The solution featured Java 2 Enterprise Edition (J2EE) and thin client-based, n-tier (multi-tier) architecture (to learn more, please see Architecture Evolution: From Mainframes to Service-oriented Architecture). As part of this launch, the company then changed its brand from Incentive Systems to Centive.

In 2004, Centive completed what is still the largest deployment of a commercial EIM system at AIG Sun America, with more than 78,000 commissionable payees (largely independent insurance agents). CompCentral is a sophisticated and flexible EIM solution with an installed base that includes about 30 of the Fortune 100 companies, such as Computer Associates (CA) and Liberty Mutual.

Also in 2004, in recognition of the need for automated sales compensation management in the mid-market and of the growth of the SaaS delivery model, Centive began development of a brand new sales compensation system. This system was designed to meet the budget and functional requirements of the mid-market, which the vendor considers as those companies with 50 to1,500 sales associates. This new, more affordable, subscription-based, on demand, and multi-tenant solution, Centive Compel, was launched as generally available (GA) in May of 2005.

Like its on-premise counterpart product, Centive Compel allows user organizations to leverage sales compensation as a strategic tool to drive sales performance while providing the financial controls needed to meet compliance initiatives. Although not as scalable and "infinitely configurable" as CompCentral, Centive Compel offers a wide range of features—an affordable subscription pricing model, a best-practice compensation plan framework, good Web-services-based integration capabilities, full audit tracking, and the reporting and analysis capability needed to drive sales performance—all while meeting compliance requirements for the US Sarbanes-Oxley Act (SOX) regulations.

As examples of how the solution helps with SOX compliance (see Important Sarbanes-Oxley Act Mandates and What They Mean for Supply Chain Management), the product will provide accurate commission and bonus calculations; invoke repeatable, programmable workflow and process controls; maintain a full audit record of any and all changes to plans, configurable structures (that is, territories, quotas, and organization hierarchies) and plan documents, as well as management and payee approvals; provide full reporting on transactions and results; and maintain a "temporal" data model to support plan versioning over time—all within a secure environment hosted at a tier one, SAS 70 Type II-compliant hosting center.

Compel is not merely a tool to calculate sales commissions. It is also a business performance solution that should motivate sales representatives, and provide sales and finance executives with near real-time access to key performance indicator (KPI) data and analysis to help them steer their organizations toward optimal performance levels. This can be achieved by the ability of financial executives to build actual sales plans, to change these plans as needed, to create organization structures with roll ups, and to handle commission splits, special incentives, prior period adjustments, etc.

The product requires far less training than on-premise EIM products do, and can be fully deployed in less than sixty days, often ensuring a smoother implementation and more rapid return on investment (ROI). Compel subscription terms extend for one, two, or three years, whereas pricing is per seat, with discounts offered for prepay, volume, and multiyear subscriptions.

The GA product launch came after the Compel beta program launch in the fourth quarter of 2004. This was soon after Centive had reportedly witnessed an overwhelming response from small and midsized organizations seeking a comprehensive, yet easier-to-implement solution to automate sales compensation management. Compel's GA also followed the successful completion of the beta program in April 2005 and the announcement of Centive's alliance with Computer Sciences Corporation (CSC) to provide application hosting services. New customer acquisition advanced significantly under the Centive Compel Early Adopter program, which initially included customers in a range of vertical markets, including technology, telecommunications, manufacturing, and life sciences.

Divesting the On-premise Offering in Favour of a "Compelling" SaaS Solution

Since 2005 or so, Centive has gradually decided to focus solely on the SaaS market opportunity. To that end, in September 2006, the vendor announced that Berggruen Holdings, a private investment firm with over $1 billion (USD) worth of assets, together with a seasoned enterprise software executive team, had acquired the CompCentral business unit and turned it into the newly formed Incentive Technology Corporation (ITC). The acquisition of the CompCentral business included the intellectual property related to the CompCentral application, as well as a dozen or so Centive sales, services, and engineering resources assigned to that business unit. ITC then pledged to further develop and market the CompCentral application and to continue to provide existing customers with the highest level of customer care.

The strategic decision to sell the CompCentral business unit came as a result of Centive's great initial success and market momentum with its on demand sales compensation management system, Centive Compel, since to date, more sales representatives subscribe to Compel than any other equivalent, competitive system. With the sale of the CompCentral business unit, Centive has since been focusing on maintaining its leadership position in the on demand, sales compensation market, and on expanding its solution set to include other high-value, on demand solutions.

While CompCentral has provided Centive with a strong financial position to support the development of its on-demand business, the sale of CompCentral also provided its thirty or so legacy customers with the focus and care they deserve, and which they should now receive from ITC. The infusion of cash from the CompCentral sale will likely be used toward growing the company and exploring buy or build scenarios to expand Centive's on demand solution suite, growing the partner channels globally, and increasing sales and marketing staff.

Centive is a privately held, venture-backed company that has received funding from a few well-respected venture capitalists (VCs), such as Polaris Venture Partners, Venture Strategy Partners, and Key Venture Partners. The company has been quite conservative in its spending, has consistently met its financial goals, and remains financially stable. Prior to the CompCentral sale, the $10 million (USD) investment in mid-2005 has been used to drive further innovation and adoption of Centive's solutions. Led by the most recent investor, Key Ventures Partners, and joined by existing Centive investors, Polaris Venture Partners and Venture Strategy Partners, this round of funding demonstrated confidence in Centive's long-term strategy following several strong quarters of continued corporate, customer, and technology growth.

This is part one of the series On Demand Delivery Compels a Compensation Management Vendor. In the next part of this series, a more in-depth look will be taken of Centive's product suite.

 
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