A Profit-Maximizing, Science-based Foundation—Precision Price Segmentation

Precision Price Segmentation harnesses the power of variable price response by identifying, classifying, and organizing all customer, product, and order attributes that correlate with price sensitivity in a given market. To date, Zilliant's Precision Price Segmentation has catalogued over fifty customer, product, and order attributes that commonly drive price response for B2B companies. It is typical, though, that only about half a dozen of these attributes prove meaningful for any given deployment. For example, a company may learn that the combination of circumstances related to the end-customer's industry; the product's end-use; the product's category, group, and stock-keeping unit (SKU); order size; competitive intensity; and product mix are what drive price in their industry. Even with just five or six attributes, the combinations of their values can yield a massive (and therefore precise) number of unique price segments.

Two factors promote precision within Precision Price Segmentation. For one, while many companies already consider deal attributes when making pricing decisions, they typically do so in an arbitrary, qualitative fashion. For example, different orders may be eligible for different discounts depending upon whether the order is "small," "medium," or "large" according to subjective order size buckets. In contrast, Precision Price Segmentation quantifies and categorizes order breakpoints based on statistics that reflect the actual differences in market price response. Furthermore, Precision Price Segmentation augments these attributes with previously unconsidered attributes also proven to influence price outcomes, thereby increasing the overall precision and impact.

Given that each attribute may have up to several hundred discrete values (or even more, as in cases where the product attributes are characterized at the SKU level), the number of resultant precision price segments is usually in the thousands, or even tens of thousands, as shown in table 1. While the number of resultant actionable price segments may seem daunting, it certainly points out how "off the market" (imprecise) companies can be in their existing "broad brush" price policies and negotiation guidelines.

User Company Type	Qualitative Segment Considerations (pre-Zilliant)	Zilliant Precision Segmentation� Attributes	Approximate Number of Actionable Pricing Segments
High-tech distributor	estimate of annual spend	annual spend, manufacturer's rebate, margin category, product segment	6,000
Industrial manufacturer	pricing group, job size, project type	pricing group, job size, project type, dominant product class, channel, market size, inventory	30,000
Food distributor	customer spend zone	customer spend zone, cuisine type, region type	300,000
Construction equipment provider	product-dealer	country, product-dealer, competitive region	9,000
Medical devices manufacturer	contract volume, product type	contract volume, product type, wallet share, customer type, product bundle	120,000

How One Vendor Parlays Price Variation into Profit Improvement Opportunities

In narrowing down the key elements of its solution, Zilliant points out three main challenges that manufacturing and distributing customers face on the road to pricing excellence. These challenges can be parlayed into data-driven pricing management opportunities for such B2B environments:

1. The typical business environment of B2B companies creates massive customer-product-price combinations. The large numbers, coupled with dynamic and complex customer relationships, products, promotions, discounting practices, and channels, proliferate price rules and exceptions. When all pricing rules and policies are considered, the typical manufacturer has dozens of thousands of prices, while the typical distributor has even hundreds of thousands. The upside to this complexity, however, is that by definition, net prices are already differentiated (determined deal-by-deal) and are largely opaque (that is, not published to the market). In B2B environments with exception-based pricing, a smart and informed company can easily adopt a more sophisticated approach to price differentiation based on price segmentation to maximize margins.

2. Paralleling the product and price complexity and the number of combinations is the complexity of transactional processes and systems. The typical scenario usually includes a combination of standard transactions processed in multiple enterprise resource planning (ERP) and order management systems combined with a large number of ad hoc exceptions executed through spreadsheets, manual system overrides, and post-transaction credits and debits. The plethora of data that is produced is inconsistent, dirty, and complicated, and thus obscures segment-specific price responses. In many cases, the data makes it hard just to determine whether individual deals are profitable or not. Specifically, it is common for net prices to reflect as many as half a dozen inputs, including several manual and discretionary variables. On top of that, most manufacturing and distribution enterprise applications were designed and implemented with the "from the shop out and inside out" mindset rather than the "from the customer in and outside in" one. Meaning, these applications favor the old-time equation of product cost plus profit margin equals customer price, instead of allowing the customer and the market to determine prices. As a result, getting the right price, and determining whether or not the company made money after the fact (by calculating and tracking the net realized price and margin at the product level), are well beyond the vast majority of manufacturing and distribution companies' means. There again, on the positive side, firms that can effectively measure and analyze segment-specific price response and profitability should be able to leverage this insight to a competitive advantage.

3. Final prices are heavily influenced by the negotiation process, unlike the "take it or leave it" pricing common in B2C industries. The term negotiated prices here refers to variable price outcomes that result from discretionary decisions made by salespeople on discounts and other financial terms. Many of these companies have tenured salespeople who negotiate based more on habit and relationships than on verified market information and customer value. The good news here though, is that with better information and specific, actionable guidance, such behaviors can be modified, producing higher price points regardless of a salesperson's experience or preexisting bias. In other words, improving deal-level sales decision making should also considerably increase profit margins.

Zilliant contends that there is a better way to price—a more analytical (scientific) and automated approach that it calls data-driven price management. This approach reportedly not only helps sales professionals to recognize and take advantage of opportunities that will improve margins (and likewise for marketing and pricing operations), but it also makes the pricing process more streamlined and efficient. Companies that have adopted a data-driven price management approach have not only improved gross margins, but they have also increased pricing agility and control.

With their greater use of enterprise resource planning (ERP), customer relationship management (CRM), and order management solutions in recent years, enterprises have amassed an enormous amount of transactional pricing data. This data can now be processed and combined using the latest innovations in pricing science to reveal where and how to improve price management. The science-based insights synthesized from this data, when paired with analytical, optimization, and process automation software, generates more accurate, effective pricing policies and guidance to increase revenues and profits.

To that end, Zilliant's offering, Zilliant Precision Pricing Suite (ZPPS), is a broad solution for price segmentation, analysis, setting (including price optimization), and execution. ZPPS identifies the four steps to establishing a strategic pricing process:

1. price segmentation—understanding what factors affect price response, and using these criteria to filter, benchmark, and set optimized pricing with precise, transaction-level granularity

2. sensing (analysis)—the process of measuring and comparing how price response and margin performance varies across a company's customers, products, and programs

3. setting—the process of establishing list and target prices, discounts, promotions, negotiating guidance, and other policies

4. enforcing—the method a company uses to implement its pricing policies, guidelines, or targets inside of transactional processes and across sales channels

Every company, knowingly or not, goes through these steps when setting and negotiating pricing, although most companies do not do it as effectively as they could because they rely on rudimentary methods or flawed techniques.

Zilliant's roots and initial focus have long been on the sales decision-support side (price analysis and planning, optimization, and negotiations). Over the last two years, the vendor has added several applications on the operations side of the sales process that include price list administration, deal execution, and policy enforcement. As the segmentation model is based on measurable, deal-specific attributes, it can be applied to these operational activities as well, improving decisions and margins at every turn. This characteristic is what makes price segmentation the foundation for effective, data-driven price management, and is why all ZPPS applications have been designed and built with Precision Price Segmentation as their scientific foundation.

What if Companies Could Use Science to Align Prices to Market and Maximize Margins

Almost all companies need to manage pricing and margins with the same precision and control that they use to manage manufacturing and procurement costs. While there are numerous pricing-related, statistical techniques and process models in the public domain and in academia, getting such systems to work in the real world is no small feat. Areas where this is especially true are the airline, hotel, retail, and business-to-business (B2B) markets. This opportunity has spawned a small group of successful price management vendors that have developed "proprietary" science tailored to the unique data types and selling dynamics found in different segments of B2B and business-to-consumer (B2C) industries.

Enter Zilliant

Zilliant, an Austin, Texas (US)-based provider of data-driven price management software, is enabling its B2B manufacturing, distribution, high tech, and industrial service customers to better exploit their enterprise data in order to improve price analysis, setting, and execution. Greater price differentiation and price optimization have reportedly helped some of Zilliant's customers significantly increase profits (by 10 percent and more). The idea behind Zilliant Precision Pricing Suite (ZPPS) is to combine proprietary price segmentation and optimization science with relatively easy-to-use software applications to help business people determine and negotiate the best pricing possible for each and every sales transaction.

While the product offering will be delved into deeper later on, for now it suffices to say that ZPPS was designed to address the pricing challenges of complex, discretionary selling environments common in B2B environments, especially manufacturing and wholesale distribution. To that end, the vendor's proprietary, patent-pending pricing science extracts maximum insight from complex data, whereby ZPPS applications apply the resulting insights to inform and streamline all price analysis, setting, and execution activities. Via a data-driven approach to price analytics, optimization, price list management, quoting, negotiation, and enforcement, the product suite enables B2B companies to identify and optimize opportunities to tighten control of discounts, markups, and other financial terms, thereby improving overall margins. The approach embodied in ZPPS also fits well in B2B service industries and B2C upstream channels (so-called B2B2C environments), where the pricing dynamics are similar to those of manufacturers and distributors.

Founded in 1999, Zilliant is a privately held company, and has thus far attracted about $42 million (USD) in venture capital. The company's investors include Panorama Capital, Austin Ventures, Cardinal Ventures, and Trellis Partners. To be fair, the first few years following the company's inception were marked by soul-searching in the dot-com era. Yet since 2003, the company has been on quite an upslope. It brought in a new chief executive officer (CEO), Greg Peters (former CEO of portal and content management vendor Vignette), and the vendor's once 30 employees has grown to over 130, in addition to the more than 30 offshore contractors.

Where Pricing and Science Meet

During the last 2 years, revenue and bookings both grew in excess of 400 percent year over year. Zilliant attributes its strong momentum to two favorable trends: increasing market demand for pricing software and the company's apparent ability to lift profit margins for B2B companies. The vendor has also been pleased with the recent, favorable coverage in leading business, academic, and consulting circles that highlight how analytical math and science capabilities have become competitive necessities, as firms seek to optimize business processes and decision making. Namely, in recent months, BusinessWeek, Harvard Business Review, and McKinsey & Co. have all published articles on this trend, citing examples of how innovative companies are marrying sophisticated analytical techniques with their enterprise data to realize untapped, significant opportunities for competitive and market advantages.
While the intersection of pricing operations and sales negotiations with math, science, and data is a new concept for many, it forms the core of Zilliant's value proposition. The vendor aims to help B2B companies improve aspects of pricing, namely, price segmentation, analysis, setting (optimization), and deal execution. Zilliant's offerings provide the marketing, sales, and price operations with the quantitative insights and guidance companies need to achieve the best pricing possible on every deal. To that end, Zilliant's applications leverage proprietary pricing science to provide two to three times more margin uplift than approaches not based on science. Some competitors may still claim that price segmentation and optimization (see Know Thy Market Segment's Price Response) are unnecessary or are too advanced for B2B companies. These vendors promote basic analytic price setting approaches as sufficient to reveal most price improvement opportunities. Yet this approach only serves to differentiate Zilliant's offerings.

A significant percentage of Zilliant's employees hold advanced degrees in mathematics, economics, or other decision sciences. The company employs a dozen advanced degree pricing scientists, several pricing architects and price consultants, and other experienced personnel throughout the design, development, and delivery departments—over 500 years of pricing domain experience in total. These scientists and domain experts have developed proprietary models, algorithms, and price segmentation techniques that synthesize the massive amounts of data within enterprise resource planning (ERP), customer relationship management (CRM), order management, and other transaction systems into a variety of formats to enable better pricing decisions.

RapidResponse Resolution Engine

RapidResponse Resolution Engine gives manufacturers proactive management capabilities that allow key personnel within various departments and across the extended supply chain, both locally and internationally, to drive effective resolutions to continually changing situations. In other words, instead of producing optimized answers for a utopian and static world, the engine produces a series of alternate action plans for a real and dynamic world.

Iterative modeling capabilities enable team members to propose and detail a number of potential action alternatives that quickly and accurately simulate their entire MRP runs. The embedded algorithms are based on concepts, methods, and definitions contained in APICS studies, such as lean manufacturing and the Theory of Constraints (see Reflections on Lean Philosophy and the Theory of Constraints). In the future, capabilities might extend to the Du Pont profitability model and the generic supply chain operations reference (SCOR) model by the Supply Chain Council, which communicates SCM best practice benchmarks across companies.

The engine’s publishing capabilities enable participants and external suppliers to instantly share suggestions (collaborate) with other group members in real time over the Web. Moreover, multiple security and authorization level controls allow businesses to specify which users may access specific information. Varying combinations of potential responses to changes, such as doubling shifts in a factory, changing engineering specifications, procuring from a different supplier, buying a new machine to increase production capacity, or many others can be instantly modeled and shared online, enabling group participants to merge independent action options and determine which choice is best. Task flows that outline steps for specific activities can be customized to meet the user company’s needs and facilitate the resolution process.

3. Live Scorecard

Live Scorecard enables manufacturers to holistically compare alternative what-if action plans based on real-time information. By scoring proposed action plans against predetermined, real-world corporate performance metrics and key performance indicators (KPIs), Live Scorecard aims at ensuring that any chosen course of action conforms to both day-to-day and long-term overall business objectives and best practices. As the action team assesses the impact of change and explores optional alternative solutions, it should be driven by a balanced scorecard view of business operations.
The scorecard presents operational results “scored” by corporate goals and objectives, where the objectives of business units, departments, and the entire enterprise are aligned. Often, varied disciplines within an enterprise (for example, asset liability management, profitability management, budgeting, forecasting, strategic planning, etc.) are performed separately and inefficiently despite the many similarities among them. The suboptimization of one process inevitably comes at the expense of others, such as the all-too-common scenario of a plant manager chasing higher utilization and efficiency, only to flood the warehouse with unneeded inventory levels.

This problem generally occurs because management does not have a comprehensive overview of the company, while department heads remain accountable only for their departmental strategy—they are not aware of other departments’ data and issues, which might influence their decisions. Thus, a scorecard is an effective tool to ensure management focuses on key business issues in the world of rapid business change and endless global competition.

With Kinaxis RapidResponse, the impact of change is continuously made known to the action team through a live scorecard view. Consequently, costs of the alternatives and their impact on the customer are explored, analyzed, and assessed, and the results can be immediately shared within the action team. The action team stays focused on key corporate and customer objectives as it drives toward a goal-driven optimized solution. To that end, Live Scorecard drives best practices optimization, where trade-offs in costs, margin, customer satisfaction, and other key business issues must be balanced to realize business success. It provides immediate shared comparative results to simulation scenarios so that the team can understand the implications of change, such as a configuration change on a particular customer order and its implications for inventory, production, capacity, margin, etc.

More Enhancements

“Response management” as a software category has come from Kinaxis’s need to make the market aware that its offerings are much more than glorified event management applications, since SCEM has long been seen as providing merely passive visibility and alerts.

Kinaxis RapidResponse 7 introduced Live Scorecard and enhanced financial and engineering change analysis in late 2003, and at the end of 2005, Kinaxis RapidResponse 8 shifted from a client-server architecture to a Web services approach, using .NET on the back-end server and Java for clients. The release also boosted performance, partly by increasing the amount of data that the software can crunch to 128 gigabytes, which is crucial for the high volume of items, transactions, and simulations within most complex discrete manufacturing networks. It also featured customer-enabled setup, enhanced alerting (with links to scorecards), as well as partner product integrations, such as reporting and analytics from Cognos.

In mid-2006, Kinaxis introduced the RapidResponse Glass Pipeline as a standard feature of its on-demand Kinaxis RapidResponse service. Seeing that outsourcing was becoming a growing trend, Kinaxis realized that adoption of a software as a service (SaaS) solution to solve supply chain challenges could be a natural extension of a brand owner or contract manufacturer’s outsourcing activities—an extension that offers many compelling operational benefits.

The Value Proposition of Kinaxis RapidResponse

To put it into perspective, Kinaxis RapidResponse is the umpteenth improvement of the former webPLAN, a Microsoft Windows NT-based groupware suite for manufacturing planners that was introduced back in 1995. The solution would extract data from the host MRP-ERP system, and then quickly regenerate the changed materials plans. The intent was to allow a planner to create or simulate a new plan, and share it with other planners, managers, customers, and suppliers before implementing the it. A slew of additional modules that have since been added to this core tool have supported the expanded decision structure and audience (i.e., multiple planners, multisite master production scheduling [MPS], and capacity requirements planning [CRP]) needed to approve and act on a new production schedule in an informed manner.

The next step for Kinaxis was to build a new type of multi-enterprise manufacturing and fulfillment solution that would knit together the abundant existing information from disparate transactional sources, and then quickly drive better short-term manufacturing decisions and actions. Ideally, users could start with an “as planned” single version of the truth, continually update this version of the truth with real-time data feeds, and finally drive a collaborative decision-making process across the action team.
This is where Kinaxis RapidResponse comes in—not to replace planning, forecasting, or execution systems, but rather to leverage these systems. Namely, a Web-based adaptive response management solution may be a more appropriate approach because these solutions can leverage data from the existing transactional systems, provide real-time analysis of events, and suggest courses of action. In addition, these solutions can provide role-based views of supply chain information to the extended supply chain members across multiple sites, anywhere in the world, and through any browser.

In the early 2000s, Kinaxis announced its intent to deliver its solution on the Microsoft .NET Framework. The initial extensible markup language (XML) Web services developed using Microsoft Visual Studio .NET provided an XML interface to Kinaxis RapidResponse Server. This XML interface–enabled server is the underlying platform that provides real-time adaptive planning and trading partner collaboration over the Internet, shared by thousands of employees and trading partners. The XML interface has since been offered as a component of Kinaxis RapidResponse Server, which leverages the capabilities of the Microsoft BizTalk Server and SQL Server to provide business-to-business (B2B) transaction services and XML event services for real-time distributed collaboration. Other enhancements included a simple object access protocol (SOAP)–compliant XML interface for open access to the platform from both .NET and Java 2 Enterprise Edition (J2EE)–based applications.

The basic concept of Kinaxis’s value proposition comes down to the following tenets: 1) powerful, fast, and continuous analytics in the background; 2) the ability to perform multiple what-if scenarios; and 3) the linking of these scenarios to a Microsoft Excel-like user interface (UI), given that this is the most common data analytics tool. To deliver this, RapidResponse leverages the following three key technologies that enable manufacturers to abridge the dreaded and inevitable reality-gap situation, and respond swiftly to today's problems:
1. Active Spreadsheets with AlwaysOn Analytics

Active Spreadsheets provide Web-based global access to live data feeds from ERP, demand planning, SCP, warehouse management system (WMS), product lifecycle management (PLM), and other enterprise applications. The Active Spreadsheets technology presents enterprise data in a “walk-up-and-use-it” familiar interface, which significantly reduces the initial learning curve. The spreadsheets provide role-based, user-friendly screens with synchronized data feeds. These data feeds are extracted from ERP data and tools designed to enable action teams, including schedulers, planners, buyers, customer service representatives (CSRs), managers, suppliers, and so on.

Active Spreadsheets is automatically and continuously populated with up-to-the-second live enterprise data feeds. When data comes from multiple sources, say from different parts of the business in house or from supply chain partners, the system automatically and “quietly” (behind the scenes) consolidates this information in one place, thereby ensuring a single version of the truth. Even if several users are working with Active Spreadsheets, each user maintains the same single version of the truth via the same view, and even when the data is in the midst of changing, since a change in any cell is almost instantly affected across the spreadsheets of other participants. Such instantaneous updates align action teams around a consistent, continuously updated view of the impact that changes in supply and demand will have on their operations in a familiar, intuitive spreadsheet view.

A Response Management Pioneer Offers Its Solution

Existing mainstream enterprise systems are not meeting the market need for dynamic supply network flexibility. Namely, enterprise resource planning (ERP) and advanced planning and scheduling (APS)-supply chain partnership (SCP) systems are not geared for high-value, operations-level business trade-offs that require educated human intervention. Spreadsheets are used frequently, but they lack the required scalability, become quickly dated, and result in unreliable multiple versions of the truth. Business intelligence (BI) tools are not real-time in nature; they are structured for after-the-fact insight rather than for making execution decisions. Thus, some businesses have turned to a new software category dubbed “response management” to extend the capabilities of the above traditional technologies.

For more background on the evolution of this new area of supply chain management (SCM), please see previous parts of this series—Who Could Object to Faster, More Responsive Supply Chains?, Multi-enterprise Responsiveness—Can It Ever Be Achieved?, and A Possible Remedy for Non-responsive Supply Chains.

Enter Kinaxis—a Response Management Pioneer

This brings us to a vendor that has changed its name a few times while refining its value proposition along the way, but which has certainly not departed from its roots and core competencies. Ottawa (Canada)-based, privately held Kinaxis Inc. today delivers both on-demand and on-premise response management software and services for visibility and coordination to help businesses drive swift responses to the constant changes taking place across global supply chains and fulfillment networks, with the goal of improving customer service and operational performance.

Founded in 1984 as Cadence Computer Corporation, the vendor was renamed Webplan Inc. in 1995. Then, in 2005, the company changed its name again to Kinaxis (a combination of “kinetic energy” and “global axis”). Throughout the years and multiple name changes, the company’s solutions have evolved from memory-resident, multisite production optimization capabilities (i.e., fast-acting manufacturing resource planning [MRP]) into a value proposition of Web-based, collaborative risk trade-off and response, and performance management within a distributed supply chain.

In addition, the innovative product architecture is able to mine information from existing back-office systems (and even spreadsheets or flat files, if necessary) as a basis for multiple what-if scenarios. This connectivity is in response to Kinaxis’s many customers having standardized ERP systems from such established providers as SAP, Oracle, or Baan, to name a few.
Despite Kinaxis’s earlier financial and brand recognition struggles (owing to the market’s infatuation with i2 Technologies’ and Manugistics’ demand planning and optimization APS-SCP solutions), Kinaxis has successfully grown its customer base. Recently, the vendor posted a whopping 300 percent quarter over quarter growth, equating to more than 50,000 users at about 60 major corporate customers, with its solutions in use at over 400 Fortune 500 locations worldwide. This includes the following recently announced customers: Elcoteq, John Deere, Microsoft, Nikon, and Qualcomm. Such global leaders are operating in an increasingly distributed environment and live in a world of constant changes in demand, supply, and product mix.

The company’s better-known Kinaxis RapidResponse combines multi-enterprise visibility, collaborative what-if analysis, and on-the-fly decision support to enable frontline manufacturing and cross-enterprise fulfillment teams to take quick and effective action when faced with the inevitable constant changes mentioned above. This means decision makers are able to make the trade-offs and compromises necessary to respond to unexpected events in increasingly erratic global supply and fulfillment networks. Manufacturers value the ability to analyze alternative response actions before making a decision on a major trade-off; by proactively modeling and scoring different response alternatives, a well-understood and optimal action can be communicated to the supplier or contract manufacturer.

Kinaxis’s customers’ revenues range from $100 million to $30 billion (USD), and they offer products ranging from simple consumer goods to diverse defense systems. Kinaxis RapidResponse has been used in fulfillment and operations management amid thousands of user communities within certain supply networks.

Although its customer base now spans many vertical industries (electronics, aerospace, industrial equipment, automotive, and consumer durable goods), Kinaxis can claim a dominant position among electronic manufacturing service (EMS) leaders. Namely, Kinaxis RapidResponse is in use at many of the world's leading global brand owners (such as Casio, Honeywell, Qualcomm, Raytheon, and Toshiba) and at eight of the top 10 EMS providers.

Comparing Software Comparison Sites

A few online tools make it easy to compare criteria about software, side-by-side. Of course, you probably expect that I think TEC provides the mother of all evaluation tools for comparisons (true). But this is about some of the other guys. Two sites I like, which I recently came across might be useful to you if you’re scanning the horizon for high-level comparison info. The first is Opteros’s EOS Directory and the second is ITerating. Both approach the issue in different, complementary directions to TEC’s. Here’s a bit of what’s interesting about their approaches and why I think they can offer valuable supplementary information.

The EOS Directory is, as the name implies, a directory of enterprise open source products much more so than a full-on comparison tool. Nevertheless it’s a pretty smart directory. It features high-level comparison information. It lists software in a few general categories and alongside the listings, provides four types of software/project comparison criteria.

The first criterion is the Optaros rating, geared toward open source software projects. The Optaros four-star rating system purports to show how well-suited an open source project is for the enterprise. It appears to be based on at least four considerations: the project’s functionality, maturity, community, and a progress trend, which I believe are necessary paths into research on open source solutions. Plus, as I said previously, this information nicely supplements what TEC’s open source evals cover (feature comparisons or analyses of service characteristics).

Most EOS Directory ratings are indicated through lime-colored pie symbols, which are easy to understand. For example, the more green in the pie, the more apt a project’s functionality is to include what a midsize or large enterprise might need. The more lime in the community, the more active and numerous it is (and so I’d believe a safer choice in terms of future development). The trend indicator is interesting because it represents an expectation of how the project will progress in importance and improvement for the given criteria.

Say you’re not sure which open source content management system to spend time researching, at a glance the EOS Directory informs you that Alfresco provides a pretty decent and mature feature-set, has an active community, bright future, and as an added bonus, 23 user votes determined a user rating of three out of four stars (the linked user forum might show why people felt that way). My sole criticism about these ratings is that there doesn’t seem to be a way to figure out how the ratings were derived for the project–I’m not sure if the criteria are determined by the open source project, by Optaros staff, or some combination. Then again, I suppose asking that question means I’m looking for something that’s probably outside the scope of how the directory is intended to be used.

What about ITerating? I’m fascinated by this site because a few years ago I was imagining what a wiki-based evaluation system might be like. I was surprised that one didn’t already exist. Something wiki-esque could provide insight from vendors, analysts, consultants, users, and developers alike. There was an open source project called WikiLens, which enables its users to rate things like movies or music. I played around with those scripts for a short time, curious to see what it would be like to adapt to user-based software comparison and analysis. Now, there is ITerating, which is doing quite an impressive job wikifying a software comparison methodology.

ITerating lists a fairly extensive directory of software types. You can add features and group them in higher-level categories of functionality, which appear to support a few different sorts of ratings. The ratings are summarized with a weighted average of bars, stars, and values. ITerating adds something of a meta-rating system too, letting you vote on whether you think a review is useful or not. An important feature is that users add the functions/criteria on which to rate software, meaning a potentially wide group of people could be contributing their knowledge to the comparison.

There is a lot to like in the ITerating wiki. It opens up a comparison process to a wide and possibly unexpected audience. This could be a strength, helping visitors gain a variety of data but it could also prove a weakness. I’d love to see ITerating provide more background about the perspectives of each set of user ratings. Perhaps delineate and weight user scores based on whether the users are vendors, consultants, analysts, developers, clients, etc. I think this would help mitigate bias issues that could otherwise arise.

ITerating offers quick comparisons but sometimes doesn’t seem to have fully articulated feature-sets for making the comparison. It also doesn’t seem to allow you to do custom analyses based on the importance of your most valued criteria. Not knowing how complete the data is for a particular type of software makes it a bit difficult to truly depend on the site for an entire selection process (though mileage may vary based on the software you’re considering). Perhaps this is a growing pain for the young site–I’ll be curious to see how it evolves. This criticism may also be unfair in the sense that ITerating is a “directory and review” site, which it accomplishes without wading deep into the complexity of individual analyses or selection guidance.

How One On Demand Vendor Addresses Its Unique Challenges and Competition

Developments detailed in the first three parts of this series lead us to the inevitable challenges that Centive faces. To recap, Centive is now focused solely on the software-as-a-service (SaaS) business model in the enterprise incentive management (EIM) and on demand sales compensation software market. Centive's SaaS approach has attracted substantial attention from the sales and finance departments of many organizations, and has helped renew interest in the largely untapped, small and midsized company EIM market, thereby offering significant growth opportunities. As one of the first entrants in the multi-tenant, on demand EIM market, Centive has established market visibility by winning new clients—thereby earning references and demonstrating value.

For more information on Centive, please see On Demand Delivery Compels a Compensation Management Vendor, The Compelling Capabilities of One Compensation Management Vendor's Solution, and On Demand Compensation Management Partnerships for Spiffed-up Success.

Despite the vendor's current success, much more needs to be done down the track to enable the growth that will sustain Centive's business and its ambitious plans for future product development. To that end, the vendor is committed to building a much larger sales team, whereby sales territories will be based on geography as well as a user's company size and vertical market. Centive also aims to form a more aggressive reseller and referral partnership program to leverage relationships with more customer relationship management (CRM) practice leaders.

In addition, Centive plans to form strategic alliances with players from various industries. Such companies include human resources (HR) compensation design experts (Mercer, The Alexander Group Inc. [AGI], etc.); complementary software or service vendors (ADP Employease, Ceridian, etc.); and other vendors of influence (SAP, NetSuite, etc.). But before moving ahead with this plan, Centive needs to conduct a thorough soul-searching exercise to decide whether to build, buy, or partner for some of the needed functionality. This needed functionality includes sales forecasting and scheduling, HR and payroll, advanced financial tools, etc. This is because any user company's financial data is incomplete without its sales compensation plan, and vice versa.

Centive is in the peculiar position of potentially having competition from vendors in both the upper and lower ends of the market. Namely, Centive may come into a competitive situation with such providers as Callidus Software, Incentive Technology Corporation (ITC), Synygy, or Practique Associates. These companies feature infinite scalability and functional "bells and whistles" (non-essential features) in terms of quote management and agency management, for example (see What Makes Incentives and Compensation So Tricky?), and prospective users might opt for any one of these EIM providers over Centive.

Some of these vendors have also recently espoused hosted offerings and certified (even profit-sharing) partnerships with SAP (see The Flagship Enterprise Incentive Management Offering and The Challenges of SAP Relationship and User Recommendations). Although these hosted offerings are not pure SaaS solutions, they might be attractive enough to some companies, especially if prospective users are given the option to switch to the on-premise mode should that be required in the future. This is not an option with Centive Compel. Having said that, Compel has been selected over these traditional on-premise EIM providers by several large companies, such as IKON, McKesson, Insight (Software Spectrum), and Choicepoint, to name just a few.
More Fierce Competition from Below? Xactly!

On the other hand, Centive might have even more fierce competition from the bottom end of the market, given that the vendor's win rate has been well over 80 percent in environments with over 100 user seats, but only slightly over 50 percent in setups with fewer than 50 seats.

Given these numbers, it is not hard to imagine a ferocious counter value proposition coming from the likes of Xactly Corporation, Varicent, NetSuite, and QCommission CellarStone. In addition, one should not forget the potential competition from SAP's and Oracle's native compensation capabilities, or from Excel-based, in-house systems. While Centive will boast its superiority in plan modeling and interactive dashboard capabilities (and in its SaaS offering against some of those players), lower cost and rapid setup seem to be these competitors' responses that "strike a chord" (win over) with many prospective customers.

Particularly competitive with Centive in terms of offerings is Xactly Corporation (www.xactlycorp.com). Xactly also delivers automated on demand sales compensation applications, called Xactly Incent. Like Compel, this suite allows companies to design, implement, manage, and audit optimized incentive programs easily and affordably, and with solid, real-time visibility via the Web, as well as comprehensive data management and analytics capabilities.

Founded in the early 2000s by a former Callidus Software executive, Xactly was the first company solely focused on delivering a full, on demand, multi-tenant, sales compensation management solution in a SAS 70 Type II certified environment. The vendor is also a featured Salesforce.com AppXchange partner. But with the divestiture of the CompCentral business unit in September 2006, Centive too is now solely focused on the SaaS business model.

Most recently, in December 2006, Xactly and Intacct Corporation, the provider of on demand financial applications, announced a strategic sales and marketing partnership to help drive customer adoption and market awareness for their respective on demand sales compensation and financial management applications. The companies pledged to go to market with this partnership via a series of collaborative lead-sharing and lead-generation initiatives. These initiatives kicked off in early 2007, though as of April 2007, there were no announcements of joint customers.

Should this partnership prove fruitful, Intacct customers will be able to use the Xactly Data Management application module to facilitate deployment and integration of Xactly Incent within their Intacct applications. This is because the module allows for deeper integration with key disparate data sources such as enterprise resource planning (ERP), CRM, and HR applications, as well as a multitude of other data sources. The module provides a number of pre-built connectors, via the Incent Connect module delivered in partnerships with Pervasive Software and Informatica, to many industry leading applications. Such applications include those by Salesforce.com, SAP, PeopleSoft, Oracle, Siebel, Microsoft Dynamics GP, Microsoft Dynamics CRM, Sage SalesLogix, among others.
Like Compel, Xactly Incent is also used by sales and finance executives, compensation analysts, sales operations, and sales professionals. Its rule-based, service-oriented architecture (SOA) enables customers to quickly build many types of compensation plans and to manage incentive compensation with limited, initial investments and lower costs of ownership. When Xactly Incent is used alongside Intacct's on demand financial, supply chain, project management, and business intelligence (BI) suite, finance executives should be able to gain a real-time, comprehensive view of the customer. Intacct's financial management system supports multiple business units, each with its own account structure, business processes, currencies, taxes, and regulatory requirements.

Centive's Express Response

As indicated earlier on, the pricing for Compel is a fixed subscription fee schedule based on a tiered pricing model that is inclusive of all maintenance, customer service, support, upgrades, and updates. In addition, there is a one-time professional services (deployment) fee, which includes training. Logically, Compel does not require any hardware or software to run the system, nor does it require ongoing maintenance by the user's information technology (IT) department. Beyond the one-time deployment and ongoing subscription fees, there are no other hidden fees, additional annual charges, or recurring costs associated with technical support, consulting, or customization services.

Since the entire deployment typically takes less than three months, and part of the time spent by Centive's professional services team is at its corporate office, travel and expense (T&E) costs are kept to a minimum. The subscription fee is based on the number of system users, and typically, Centive's customers sign a one-, two-, or three-year term with an annual, upfront payment.

To illustrate, Compel's total annual pricing (in USD) for an organization with 200 users is roughly $100,000, which translates to just under $50 per user per month. For 500 users, the cost (in USD) is slightly more than $200,000 (which, with a volume discount, translates to under $40 or so per user per month). The one-time, professional services (deployment) fee depends on various measures, such as the number of compensation plans, complexity of the plans, number of interfaces, etc. An average deployment cost (in USD) is around $30,000, although it has been known to be as low as $7,500, and as high as $100,000 for the most complex and demanding deployments.

To appeal even more to the small to medium business (SMB) market segment (which worships the low costs and rapid deployments offered by the likes of Xactly or Varicent), Centive introduced Compel Express in August 2006. Compel Express is a turnkey service for companies with fewer than fifty sales representatives. The underlying idea here is to provide a dedicated consulting resource for a two-week-long engagement to build and model plans, and to integrate with upstream and downstream systems, in order to prepare the users for final testing and rollout once the engagement period ends. Customers pay as little as $7,500 (USD) for the setup fee, and a $50 (USD) subscription fee per user per month thereafter. While this introduction quickly led to several wins and full deployments in as little as three business days, time will only tell whether this service will have a major, or catalytic, impact for Centive when competing in the lower end of the market.

On Demand Compensation Management Partnerships for Spiffed-up Success

Partnering up for Spiffed-up Success

As momentum for Centive's Compel continues to grow, the solution has sparked interest from a wide variety of business and technology partners. The most prominent result of this flurry of new interest was the May 2006 announcement of the availability of Compel for Salesforce.com's AppExchange—Centive Compel for AppExchange. With this development, Centive has become a certified solution partner of Salesforce.com, the leading on demand, customer relationship management (CRM) vendor.

Salesforce.com customers can now deploy Compel within their Salesforce.com implementations. The solution will provide these users with an at-a-glance look at interactive dashboards that display quick summaries of key sales performance indicators with a single-click, drilldown capability. Built on the AppExchange on demand platform, Compel for AppExchange has since been available for test drives and deployment at http://www.salesforce.com/appexchange. More recently, Centive has become active within the Salesforce.com Incubator Program, which opened in January 2007 in San Mateo, California (US) for a number of selected independent software vendor (ISV) partners.

Centive Compel for AppExchange is 1 of more than 430 applications created by Salesforce.com and its customers and partners that are now available on the Salesforce.com AppExchange—the world's first on demand application platform. AppExchange (renamed Apex and bolstered by its own namesake programming language) provides ease of customization and integration for Salesforce.com deployments, and enables a slew of on demand applications that go beyond the realm of CRM. Apex enables all of these on demand applications to be easily shared, exchanged, and installed with one or a few clicks into a customer's Salesforce.com account. For instance, Compel ensures a single sign-on with the Salesforce.com application, and is displayed as a commissions tab in the Salesforce.com interface.

In addition to the Salesforce.com Apex certification, Compel features integration with other CRM systems (albeit via either comma-separated value [CSV] files or Web-service integration) to enable sales representatives and managers to forecast compensation based on opportunities within their pipelines. This integration provides customers with full automation of the sales life cycle. Branded as From Prospect to Paycheck�, the following phases are involved: qualify, forecast, strategize, close, commission, and payroll (that is, from the point of pipeline initiation through to the commission paid to the sales person).

This integration of opportunity-based earnings and actual commission earnings is aimed at ensuring sales representatives stay focused, aligned, and motivated to close the right business. While sales representatives should be able to more easily forecast their commissions and identify those deals that will maximize individual earnings in a given period, sales management becomes equipped with real-time access to key performance indicator (KPI) metrics to help them better manage their assigned teams.
Through a much tighter integration with the Apex application programming interfaces (APIs), Compel imports pipeline opportunity data to enable sales associates to forecast commission and bonus earnings for current periods. Compel applies import filters, such as estimated probability, amount, seats, stage, completed milestones, and close dates, to allow users to select opportunities that meet specific pipeline criteria.

For example, users can forecast opportunity-based earnings associated with a predicted opportunity close date in the current period, as well as a number of additional days, such as the current month plus sixty days. Compel then calculates projected participant earnings, and processes the associated commission value of these opportunities according to the plan rules, taking into account such factors as reaching higher ramped tiers or hitting accelerators. From their sales dashboards, sales folks can narrow the base filter with criteria specific to their needs. Once the filter is set, Compel automatically saves it, and applies this filter to future opportunity imports. The personal earnings forecast, which becomes more accurate, enables sales associates to better prioritize opportunities and maximize commissions; it motivates sales representatives to keep their pipeline records up to date.

In October 2006, American Express Incentive Services (AEIS), a business-to-business (B2B), prepaid card industry leader, joined with Centive to offer prepaid AEIS cards as a special incentive reward, or sales performance incentive funding formula (SPIFF), option in Compel. AEIS, a joint venture between American Express Travel Related Services Company Inc. and Maritz Inc., provides B2B reward solutions, including prepaid cards, American Express Gift Cheques, and a Web-based reward management tool. Its products address a broad array of applications, such as employee reward and recognition, sales incentives, and consumer promotions, while helping clients drive consumer and employee behaviors, build loyalty, and increase brand awareness.

AEIS's prepaid cards provide Compel customers with a SPIFF option that is distinctly separate from a standard cash reward. A SPIFF is a small, immediate bonus for a sale, and traditionally, SPIFFS are paid, either by a manufacturer or an employer, directly to a salesperson for selling a specific product. However, unlike cash, AEIS cards may be customized and personalized, and can direct recipients' spending options to ensure that the reward is memorable, and that it has some sentimental value, too. A couple of examples of customization options include the ability to control card spend through AEIS's DirectSpend filtering process, and the ability to design a card face to feature a company logo, program theme, and participants' names. With such customization options, reward earners are reminded how they earned the card and who gave it to them every time they open their wallets.

Compel enables users to build SPIFF programs via the product's automated SPIFF Builder. With SPIFF Builder, users can quickly design their programs, choose an AEIS prepaid reward card as the reward option, and launch the program to the participants. The AEIS reward solution for Compel is seen as suitable for such sales incentive and dealer-distributor programs as sales contest SPIFFs, bonus payouts, dealer-distributor SPIFFs, training certifications, new business developments, sales lead referrals, salesperson performance recognition, etc. The idea here is to motivate sales people to deliver measurable results for the business.
Will Centive's Momentum Allay the Concerns of the "Doubting Thomases"?

Following the CompCentral divesture, some observers have rightfully assessed Centive's strategy as risky, given the fact that Compel alone now has to gain a sufficient subscription base to sustain Centive's business as well as any future product development or organizational expansion. The CompCentral business had previously produced most of Centive's revenue, and it even helped fund Compel. But only a minority of Centive's headcount was transferred to Incentive Technology Corporation (ITC). In other words, the staff and investment needed to market, service, and develop Compel will be relatively high initially in proportion to its revenue. The remaining Compel-based revenue streams will be relatively limited in the near future because of the nature of the SaaS market, which is subscription-based, and typically has smaller size deals than the on-premises counterparts.

To allay those concerns somewhat, Centive announced in November 2006 that the number of subscribers to Compel had surpassed the 10,000 mark. As a true indicator of leadership status, Compel has been selected and deployed by more chief financial officers (CFOs) and vice presidents (VPs) of sales than any other on demand sales compensation management system.

The vendor measures its on demand space leadership using many yardsticks, including product functionality, product maturity, number of customers, average customer size, awards, and coverage by the press and analysts. Namely, in addition to surpassing the 10,000 subscribers mark with about 50 corporate customers, Centive is also tracking up in terms of the average number of subscribers per Compel customer. In 2006, that number has reportedly increased by 26 percent, to an average of over 200 subscribers per customer. Compel is now deployed at companies ranging from those with as few as 20 sales representatives to those with over 1,000.

In December 2006, Centive announced MoreMentum, a program designed to help companies gain sales momentum by getting more out of their sales incentive programs. To this end, Centive will provide new Compel customers with free, personalized AEIS cards for use with their SPIFF programs. The MoreMentum program was available to new customers through the end of February 2007. In addition, Centive announced its own "More-Mentum"—a series of real world measurements that should validate the vendor's leadership position in the sales compensation market.

In November 2006, companies such as McData, UTStarcom, Flowserve, SPX, and BBUP completed deployment of Compel. Additionally, in the fourth quarter of 2006 alone, 17 companies, including IKON, ADIC, Knology, Cars.com, and Wolters Kluwer—representing more than 3,000 subscribers—selected Compel to automate their sales commission processes. The momentum continued into early 2007, with new customers that include well-known brands such as McKesson, ChoicePoint, and WebEx. At the same time, new "live" customers in February 2007 included Cars.com, Isymmetry, Intervoice, and the Asia-Pacific division of Quantum.

Product Development and Deployment Partnerships

For better performance and a richer user experience, Centive uses Flex technology from Adobe Macromedia for Compel's user interface (UI) instead of the more commonly used asynchronous JavaScript and XML (AJAX) technology in peer on demand applications. The technology's form elements (expandable and contractible, as required) in Centive Compel's UI, which business analysts use to build compensation plans, make it easy to arrange plan components and unnecessary to fill out a single, cumbersome form. Further, Centive uses technologies from Oracle, Microsoft, and BEA Systems for a strong and secure system performance.
Compel is hosted at a top-security, carrier-grade site that is SAS 70 Type II certified by Ernst and Young, and owned and operated by Computer Sciences Corporation (CSC), as mentioned in On Demand Delivery Compels a Compensation Management Vendor. SAS 70 is an auditing standard designed by the American Institute of Certified Public Accountants (AICPA) to enable an independent auditor to evaluate and issue an opinion on a service organization's controls. The service auditor's report contains the auditor's opinion, a description of the controls placed in operation, and a description of the auditor's tests used to determine operating effectiveness (if the report is a Type II). The audit report can be shared with the service organization's customers (user organizations) and their respective auditors. The service organization is responsible for describing its control objectives and control activities that would be of interest to user organizations and their respective auditors.

Also, while Centive has a back-office staff of nearly thirty individuals who are involved in all aspects of product development, upgrades, updates, and deployments, the vendor also has partnerships with many outside organizations for additional deployment services, customer service, and support. One of the more longstanding partnerships is the one Centive has with

On Demand Delivery Compels a Compensation Management Vendor

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.

A Dynamic Answer to Enterprise Resource Planning for Services

Epicor, a Microsoft BackOffice certified company, has built nearly a $400 million (USD) business by being early adopters of .NET technology and one of the first enterprise applications to have 1,000 customers running on Microsoft SQL Server (for the first time in its history Epicor surpassed the $100 million (USD) mark in the fourth quarter of 2006). In addition, strategic acquisitions of Scala Business Solutions in the global mid-market sector and CRS Retail Systems, Inc. in the retail industry have established Epicor's growth in the ERP market. The Scala acquisition has solidified Epicor's global presence in over 140 countries around the world.

With the Scala channel and the aggressive Microsoft-centric technology road map, Epicor has filled a gap within the Microsoft Dynamics family of products. However, it remains to be seen how Microsoft will respond to Epicor's growth. Will ERP for the services market experience another acquisition? Or will Epicor continue on its own path, chipping away at the Microsoft ERP marketplace?

In ERP for the services industry, Epicor has established its presence and its fully integrated offering in the upper mid-market (user organizations with revenues between $250 million {USD} and $1 billion {USD}). In the Microsoft world, where Dynamics SL caters to small services organizations and Dynamics AX competes in the mid-market services sector, primarily through Microsoft's industry builder initiative partnership with Foliodev, there is significant room for Epicor to dominate this space. Epicor delivers a complete ERP solution for larger services organizations targeting the architecture, engineering, construction, Marcom, management consulting, accounting, and software industries that require strong project accounting, resource planning, and time and expense capabilities. With the combination of its customer service model, market expertise, and comprehensive functionality critical to larger services organizations, Epicor delivers a Microsoft-centric ERP for services offering where the Microsoft Dynamics product line falls short in delivering a complete ERP system for services organizations in the upper mid-market.
Epicor's emphasis on customer service has and continues to fuel its growth and success. More than any other mid-market ERP player (except for Microsoft) Epicor has an impressive 15 support centers around the world, consisting of 250 specialists that provide support to clients in 20 languages. In today's marketplace, features and functions play partial roles in the selection process of buyers evaluating ERP solutions. More frequently, ERP players focus on value-added capabilities, such as the quality of their support and customer service, as critical differentiators in the marketplace. In fact, many smaller vendors leverage their higher quality customer service and industry expertise to differentiate their offerings when competing against the tier one ERP giants (such as SAP and Oracle) in the mid-market. During Epicor's user show last October, an overwhelming majority of clients expressed that Epicor delivered excellent customer service by ensuring timely responses and resolution of user issues. Consequently, Epicor has capitalized on its leading customer service approach to gain market share from large tier one ERP vendors.

What's New in Epicor for Service Enterprises?

Epicor for Service Enterprises 8.1.1 focuses on delivering expanded capabilities in the customer relationship management (CRM) and project modules, together with new capabilities in account management. To better serve the upper mid-market in the services industry, Epicor has tuned performance in a number of key areas. Over the course of 2007, Epicor is planning on delivering new capabilities in resource management, multisite, and collaboration in order to better meet the demands of mid-market services organizations with multiple locations.

Epicor has overhauled its resource management module for the upper mid-market services industry including enhancements that streamline its ease of use, develop a resource workbench for capacity and resource planning, and offer off-line capabilities in Excel. Similarly, Epicor is aggressively pursuing its development strategy in the resource management module to grow market share in the mid-market services industries where resource management capabilities are core to the business. Furthermore, the enhancements will serve larger customers with international operations, delivering new features to address multi-company requirements, multiple tax issues, multiple currencies, multiple sites, global resources, and varying business rules in order to manage the diverse data of global services organizations.

Epicor's new information worker (IW) initiative will provide unparalleled collaboration capabilities for Epicor clients that are power users of Microsoft Office applications. Today, Epicor IW leverages Microsoft Office 2003 applications, integrating the ERP capabilities of Epicor with Excel, Outlook, Word, and SharePoint (Microsoft Office 2007 support is coming in a future release). This will help Epicor improve its clients' productivity by extending the use of Microsoft Office with Epicor. Epicor IW clients are able to synchronize their customers, bids and opportunities, client histories, and resource schedules with Outlook contacts, appointments, and tasks, eliminating duplicate entry into each system.
Epicor has also simplified the collaboration between its system and Microsoft Office applications, such as Word and Excel, by quickly searching and dragging information from the Epicor task pane to fields in Microsoft Office. Moreover, Epicor users can save these documents to the SharePoint server, and then initiate a workflow process to create a transaction in Epicor along with the necessary document link managed by SharePoint server, thus ensuring improved collaboration and tracking of data. The addition of Epicor IW will improve the efficiency of an Epicor organization that is a power user of Microsoft Office applications, and that is looking to reduce multiple data entry and to streamline Epicor's interoperability with Microsoft Office.

Product Strengths

Epicor's biggest strength lies in its strategic technology partnerships with Microsoft. This partnership enables Epicor to deliver complete functionality on the popular Microsoft platform. Epicor's commitment to Microsoft technology also enables its clients to fully take advantage of Microsoft's technology road map to deliver a service-oriented architecture (SOA) framework. In fact, Epicor's current SOA offering is based on a Microsoft .NET framework, which is easily adaptable to client environments running on a Microsoft platform. Epicor's use of Visual Studio leverages Microsoft technology to assist organizations in their SOA strategies in the customization, reuse, and integration of the Epicor system within their existing infrastructures. Additionally, Epicor's tight integration with Microsoft Office (through its IW module) and Microsoft Project provides above average collaboration and project management integration for project-oriented organizations in the services sector. Consequently, services organizations with Microsoft shops can optimize their productivity with Epicor for Service Enterprises.

Epicor's focus on delivering a competitive best-of-breed professional services automation (PSA) solution provides the advantage of offering comprehensive project management and time and billing functionality, in conjunction with complete back-office capabilities critical to running a successful, billable services organization. With respect to features, Epicor offers above-average resource management capabilities with its resource workbench module, assisting organizations in managing the resources that drive their businesses. Moreover, its Microsoft-centric solution is ideal for Microsoft shops that are looking to maximize the collaboration between Epicor and such Microsoft solutions as Dynamics GP for accounting, ProClarity for business intelligence (BI), SharePoint for collaboration, and Microsoft Project for project management. As a result, for an organization seeking a fully integrated ERP system, Epicor's solution delivers fully integrated PSA capabilities (including complete project accounting) on a single platform.