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The Challenges of SAP Relationship and User Recommendations

Written By: Predrag Jakovljevic
Published On: December 14 2006

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SAPFriend, Foe, or Both?

In mid-2006, San Jose, California (US)-based Callidus Software announced that its TrueComp version 5.1.3 software application had achieved Certified for NetWeaver status from SAPgood news for the over 30 percent of the companys customers that run SAP enterprise resource planning (ERP) and customer relationship management (CRM) systems. With the integration provided between TrueComp and the SAP NetWeaver platform, customers should benefit from a reduction in total cost of ownership (TCO) by being able to further leverage their existing investments in SAP and Callidus solutions via a common infrastructure. To achieve Certified for NetWeaver status from SAP, vendors must ensure their applications interface seamlessly with the SAP NetWeaver platform, and this integration is tested and certified by the SAP Integration & Certification Center. The SAP NetWeaver platform is the technology foundation that powers not only mySAP business applications and SAP xApps composite applications, but also Callidus's TrueComp solution and other partner solutions, as well as custom-built applications (see Multipurpose SAP NetWeaver).

Last part of the series Enterprise Incentive Management Leader Responds to Market Demands.

Soon after certification, in September of 2006 Callidus and SAP signed a cooperative development agreement under which terms that the two vendors will promote and market Callidus Software's TrueComp and TrueInformation products in the US and Canada (the market that comprises more than 85 percent of the world sales enterprise incentive management [EIM] market, according to Gartner, a technology research and consulting center). The alliance grants Callidus the right to access SAP NetWeaver technology, standards, and technical resources for facilitating knowledge transfers. It also allows SAPs sales force to refer Callidus to SAPs client base as one option for EIM software, and to undertake joint sales calls where appropriate. SAP and Callidus will jointly pursue prospects, but deals will be closed by Callidus. Callidus will also be responsible for delivering help desk support and maintenance services. In addition, Callidus Software announced that its TrueComp and TrueInformation software products achieved Powered by SAP NetWeaver status, meaning their applications can run seamlessly on the SAP NetWeaver platform, resulting in more potential sales opportunities.

As SAP NetWeaver provides the best way to integrate a medley of systems running either SAP or non-SAP software, Callidus is hoping that this certification and agreement will minimize objections from the information technology (IT) departments of companies already using SAP. In other words, although SAP's compensation management software may not be as good as Callidus's, if a user company has already spent a large amount of money, time, and effort to install SAP, adding Calliduss module (which, strange as it may sound, is likely to be cheaper than SAPs) is a viable option. Callidus believes that its value proposition will be reinforced in terms of its functional EIM solutions smooth integration with SAPs other enterprise applications.

At the very least, Callidus should benefit from the additional visibility and exposure to opportunities from North American user organizations interested in both SAP NetWeaver and EIM. However, the onus will be mainly on Callidus to generate a sustainable, significant revenue stream from the relationship. Specifically, it will require substantial investments in marketing (education programs, sales promotions, and marketing campaigns and events) to steadily create traction within SAPs sales force, customers, and prospects. As well, Callidus will largely be responsible for product development (such as porting to NetWeaver, product enhancements, and integration). Given SAPs large organization, and its many partners, and partner products (including its own EIM product), only time will tell how motivated the giant will be to actively promote the alliance.

For more information on Callidus and its offerings see: Enterprise Incentive Management Leader Responds to the Market Demands. The Enterprise Incentive Management Flagship Offering. Enterprise Incentive Management Leaders Challenges and Response.

Challenges

EIM companies similar to Callidus face the threat of many potential customers having already made a substantial investment in other third party or internally developed software designed to model, administer, analyze, and report on pay-for-performance programs. These companies may be reluctant to abandon those investments in favor of other software. In addition, the IT departments of potential customers may resist purchasing the EIM software solutions for a variety of other reasons, one of which is the potential displacement of their historical role in creating and running software, and another being the concern that packaged software products are not sufficiently customizable for their enterprises. Furthermore, given the trend towards extending performance and compensation management beyond sales forces, there is the threat from leading vendors in this area, notably Authoria (that recently acquired Advanced Information Management [AIM], a provider of compensation management systems), SuccessFactors, Halogen Software, Workscape (including recently acquired Performaworks), Perks.com, Kenexa, and, again, ERP giants SAP, Oracle, and Lawson Software.

User Recommendations

Large, established enterprises in the above market segments should evaluate and consider Callidus. This is especially true of companies with more than 500 employees on complex incentive compensation plans (for example, those managing changes affecting closed [or future] periods; changes effective mid-period; tricky credit calculations; custom territory definitions; non-standard management roll ups; business units on different calendars or pay periods, etc.) and if they are subject to regulatory compliance and scrutiny.

Existing Callidus customers should consider the vendors recently released products and services (including the on-demand versions) as potential value add-ons. Customers that also have the older SAP software portfolio and that are interested in more modern NetWeaver and mySAP Business Suite applications should investigate the potential benefits of replacing legacy interfaces with the prepackaged integrations that Callidus will release in the near future. SAP and Callidus customers already on the NetWeaver stack should have a more direct opportunity to avail themselves of EIM functionality such as plan creation, administration, reporting, and dispute resolution capabilities or analytics, although they should keep an eye on the products maturity and early adopters references.

Generally speaking, no automatic decisions should be made on the selection of add-on modules favoring incumbent ERP, CRM, sales force automation (SFA), or human capital management (HCM) providers. Rather, choices should be based on a defendable list of EIM requirements for each user enterprise that every competing vendor has to demonstrate. ERP providers are offering much deeper EIM functionality than ever before and should be given a serious look by both current and prospective customers, bearing in mind that some best-of-breed EIM vendors might still excel in their horizontal and vertical niches. Companies need to determine how complex their territories are, how much overlay is involved, how much double compensation exists, and so on, and choose a vendor based on that information.

In addition to the traditional on-premise perpetual license model, a host of providers offer per-module, per-employee, or per-month fees that can minimize up-front costs (and deployment times) and scale as needed. Customers should explore how such services integrate with their internal systems and with other outsourced services they may rely on. When it comes to sales incentive tools, there is always a high degree of integration required to such systems as SFA, ERP, HR/payroll, etc. Preference should be given to vendors and system integrators with the flexibility to add data sources and targets, efficient use of system resources, automatic system deployment and maintenance, secure application and data access, and the ability to leverage in-house technologies and expertise. Shared services, increasingly in a hosted mode, might be an especially effective strategy for businesses that vigorously pursue merger and acquisition opportunities.

It goes without saying that prospective customers should demand references from all EIM vendors under consideration with regards to their customer size and industry. Selected vendors should be willing to demonstrate their skills and offer training and support for knowledge transfer to staff at major system integration firms. EIM providers should be tested on their handling of the most complex compensation plans, possibly by using mock-up data (that closely resembles reality) from a prospective users systems. For general recommendations, see Enter Enterprise Incentive Management and Incentive Compensation Management.

 
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