Shades of Tracy Kidder. IBM announced it was buying Varicent, a sales compensation solution provider and Xactly! the SaaS compensation solution, welcomed the new competitor with pretty much the same logic that Data General used when IBM announced its mid-range systems.
According to Kidder’s book, “The Soul of a New Machine,” DG famously developed, but never ran, an ad that discussed how IBM had legitimized the mini-computer market with a headline that read in part, “The Bastards Say Welcome.”
But enough of the history, you had to be there.
Xactly is taking a decidedly different approach to IBM’s legitimization of the compensation market. To call it a compensation solution is to miss about half of what it does with analytics and reporting and thus managing a company. But check their website for details.
Xactly CEO, Chris Cabrera was upbeat and quite happy when we talked on Friday about the deal. Among other things he said, “This is good for our space. We’ve said for a long time that this data is valuable. It represents a company’s family jewels,” because it contains information about what was sold, who sold it, what channel was involved and a lot more that a business can leverage.
I think Cabrera is right to be enthusiastic about the news. First, having IBM in the market proselytizing about the importance of sales compensation, its data and analyzing it can only be good for everyone. In fact, it looks to me like IBM might have the tougher row to hoe because Varicent is a traditional software company with all the costly implementation and maintenance issues that go with that category.
In contrast Xactly has a SaaS model which makes it light on the wallet for acquisition, deployment and maintenance. Xactly also relies on more modern cloud technologies like Hadoop and NoSQL Big Data so the competition will be interesting. If IBM aims Varicent at the enterprise market then I can see it being insulated from some of the challenges of competing with SaaS but even there and especially down market, I think Xactly will be tough competition. We’re talking about old style applications and the new century.
At the end of the day the competitive issues will center on analytics and the information a company can glean from its sales compensation data. IBM has a big salient in analytics and Xactlyhas one in compensation management. Success for either company may come down to how customers frame the issue for themselves and how each vendor responds. Let the selling begin.