Kudos to Xactly

Xactly, the SaaS-based incentive compensation solutions provider, has kicked it up a notch. The user meeting I attended last week in San Francisco was very successful — but more importantly, it made some real news in the compensation space.

Conferences like this often are news generators — or, more precisely, they’re PR engines. Everybody with a show announces something, even if it’s just the next product release. News outfits dutifully carry the announcements along with a few quotes from the boss and an analyst or two, and that’s that. This is not to say that the announcements are unimportant, just that they strike a certain level.

That wasn’t the case last week with Xactly, though. It introduced some thought leadership that could come only from a relatively mature SaaS company. It took a big chunk of the data it managed and made it anonymous, so that no one would know whose data said what. Then it looked for patterns in the way companies paid their people — a methodology that it would replicate across multiple industries. Xactly called it a “benchmark.”

First up was the SaaS industry — that is, companies selling Software as a Service. Xactly has deep roots in SaaS, and it was relatively easy to run some analytics against the data, but what it discovered was amazing. Seventy-nine percent of SaaS sales reps missed quota and only 14 percent made or exceeded it, Xactly found. Now let’s peel this onion.

Time to Churn?

First — wow Batman, that’s gotta be a lot of unhappy reps trying to live on base salary, and I’d bet there was significant churn in the ranks. Why stay if you can’t figure out a way to make a living? But second, as CEO Chris Cabrera said, these companies are looking for growth rather than profit. He’s right, of course. If you’re burning venture capital, revenue is less important than market share, and the name of the game is to put as many reps into the territory as possible to up the chances of gaining penetration.

This might be something we’ve intuitively known for a very long time, but to see it in concrete numbers raises the perception significantly. More telling, to me, is the fact that Xactly has similar benchmarks waiting to be released on seven other industries.Very soon, for the first time in history, we’ll be able to see patterns in sales compensation in eight markets. This inevitably will help managers and HR types to truly understand compensation, and it will help reps to better know whether their jobs are keepers or if a little churn is in order.

Can it also serve to inform the sales reps that they’re being, shall we say, used? Used. If there is a 79 percent chance you won’t make quota, would you accept a standard pay package that essentially treats you like a human advertising medium while paying you like something else?

Could this possibly be good news for marketing automation vendors? It could, if sales people were to start avoiding SaaS jobs like a bad habit. In lieu of the hardcore sales approach, lack of quota attainment might make sales people scarce to the point that companies will need to get more savvy about how they market, and that could be good for marketing automation. See? With so many reps not making quota, I could see the VCs calling time out on their portfolio companies’ business plans too.

Simple Computers, Smart People

All this is well and good, but the significance of this announcement doesn’t end here. There are lots of companies with similar data that can be scrubbed to reveal distinct patterns in a variety of industries.

For instance what would Zuora’s subscription billing data reveal if subjected to the same treatment? Or Salesforce’s? What might these companies learn from reviewing their industries’ data? What might VCs discover about their investments? What might entrepreneurs learn about white space in markets? The possibilities might not be limitless, but they are significant. It seems that best practices ought to be forthcoming soon.

This is a new world in which almost anything can become known quickly. It seems to me that Xactly has made a big down payment on the second machine age, after a book by that title. They’ve found a way to leverage already-collected data using simple computers and some smart people. They will be able to share what they learn with their customers to enable them to be better at a critical piece of their business: compensating performance.

This isn’t going to cure cancer or global warming, but I believe we’ll look back on this in 10 years as the beginning of a new era in data-driven management. Cabrera has been talking about this approach for a long time, and I know several other CEOs who have similar ideas. I think this could be a game changer. As I intimated at the beginning, this was not your average conference announcement.