ROI: Incentive Comp. Provides Measurable Results

Transcription

1 ROI: Incentive Comp. Provides Measurable Results

2 Executive Summary This report evaluates the business impact achieved by three financial services companies that implemented TrueComp Enterprise from Callidus Software to manage their incentive compensation operations. This study concludes that payback can be accomplished in as little as 6.1 months, and that significant financial benefits and business performance improvements occur in the following categories: Revenue Growth Business executed that would not have occurred without the use of TrueComp. Includes faster time to market with incentives to promote new products and services, additional focused selling time among the sales force, and increased mindshare with broker channel and dealer networks. Effective Use of Incentives Effective use of incentive compensation budget dollars to maximize market potential. Includes sales force motivation and morale improvements, better visibility into sales performance, reduced cost of sales, and more effective use of targeted incentives. Productivity Improvements Elimination of errors, payment redundancy, and administrative staff and systems previously required to support inefficient compensation processes. Also includes improved financial predictability and better use of staff for value-added business processes. Solution Payback Summary Customer 1: Insurance Company The first customer case is a service provider within the financial services sector that offers such long-term savings and retirement products as annuities, life insurance, and institutional products. Highlights: 3-Year ROI: 109% NPV: $2,387,771 Payback Horizon: 6.1 months Customer 2: Service Provider to Financial Institutions The second customer case is a service provider to financial institutions (e.g. regional banks, local credit unions and major banks) throughout the U.S. and Europe. Highlights: 3-Year ROI: 8,355% NPV: $78,845,867 Payback Horizon: 12.3 months Customer 3: Financial Services Company The third customer case is a financial services provider to credit unions and their members. Highlights: 3-Year ROI: 166% NPV: $3,906,418 Payback Horizon: 7.1 months 2

3 Table of Contents Executive Summary...2 Solution Payback Summary...2 ROI Study Report: Enterprise Incentive Management Solutions...4 Product Spotlight: TrueComp Enterprise, Callidus Software...4 Introduction...5 About this Study...5 Study Methodology...6 Terminology & Definitions...6 Revenue Growth...7 Increased Sales Performance...7 New Business Opportunities...8 Quicker Time to Market with New Products...8 Increased Time Devoted to Sales Activities...8 Effective Use of Incentives...9 Improved Sales Margins...9 Increased Cross-Selling/Up-Selling...9 Increased Channel Partner Satisfaction & Effectiveness...9 Productivity Improvements...10 Savings on Replaced Incentive Management Solution...10 Reduced Reporting Costs...10 Reduced Commission Check Fulfillment Costs...10 Reduced Incentive Management Staffing Costs...11 Avoidance of Incentive Overpayment...11 Lower Staff Attrition Costs...11 Reduced Compensation Error Rate & Dispute Management...12 Improved Regulatory Compliance...12 Improved Financial Predictability...12 ROI Profiles...13 Customer Case 1: Insurance Company...13 Customer Case 2: Service Provider to Financial Institutions...16 Customer Case 3: Financial Services Company

4 ROI Study Report: Enterprise Incentive Management Solutions Product Spotlight: TrueComp Enterprise, Callidus Software Extracted Insights and Conclusions This study validates that TrueComp Enterprise drives more profitable sales processes and captures additional revenue. Read more Enterprise Incentive Management (EIM) solutions enable real-time insight into sales commission status, giving management the ability to proactively analyze incentive program performance and effectiveness in detail. Read more The net result of continuous, trusted commission feedback to the selling team is improved performance more selling time, more sales, higher per sales transaction size, and increased profits. Read more An EIM solution streamlines the change management process for incentive plans, often bringing an organization 2-4 months of additional sales time by allowing the enterprise to get to market earlier. An EIM automated enterprise is a more nimble organization that has the competitive edge of getting to market efficiently and expeditiously. Read more With TrueComp Enterprise, over-discounting is better curbed and controlled by continually discouraging such behavior. The net result is an improvement in average sales margin. Read more Effective incentive plans catalyze change, enabling enterprises to launch and introduce new product more successfully to the marketplace. Read more Organizations using TrueComp Enterprise reported that their channel partners satisfaction with the business relationship increased and performance improved from a better understanding of financial objectives, the incentive game plan and commissions reaped to date. Read more Whereas prior compensation systems required extensive IT services, TrueComp Enterprise requires minimal IT support. The commission department is now self-sufficient because of TrueComp Enterprise s intuitive user interface. Read more The company recognizes that it has attracted more business as a result of having TrueComp Enterprise as a critical component in its technology infrastructure. Read more 4

5 Introduction In order to meet corporate objectives and revenue goals, it is essential that organizations effectively motivate and compensate employees, channel partners and dealer networks. Enterprise Incentive Management (EIM) is a key driver to achieving corporate goals and objectives. An enterprise that is on-plan in regards to revenue objectives is more predictable and more apt to be on-track for growth targets and operational expansion plans. In today s highly competitive, dynamic business environment incentive compensation management is evergrowing in complexity. Enterprise strategies feed this complexity with intricate revenue plans that require a balanced sales approach, often simultaneously promoting products and services across multiple business lines to evenly build its customer base and market share. As a result, enterprises are increasingly challenged by the administrative and logistical quagmire of incentive management and fulfillment. In addition, enterprises wish to exercise tighter controls over organizational behavior with stronger predictive modeling capabilities to forecast incentive plan outcomes and guide plan enhancements. Most enterprises that rely on home-grown - often spreadsheet-based solutions are destined to reach a critical pain level. Enterprises are rapidly moving to automated EIM solutions to replace their highly manual business process. Automated EIM solutions not only streamline the entire continuum of the incentive management business process, but also provide the enterprise with a new level of business insight. About this Study In May 2005, Callidus Software initiated an objective ROI study that examined and quantified the key ROI value drivers and areas of cost savings realized through the adoption and deployment of TrueComp Enterprise. TrueComp Enterprise is installed in over 95 large enterprises today, including 9 of the 30 companies that comprise the Dow Jones Industrial Average. Specifically, Callidus comprehensively explored how TrueComp Enterprise helped enterprises automate and streamline business processes to reduce costs and gain efficiencies, improve sales margins, and enhance revenues. This study captures and analyzes the economic impact realized by three enterprises as the result of its TrueComp Enterprise deployment. Customers were selected for the study on the basis of sufficient deployment experience and significant solution usage to pinpoint the: Key areas of value delivered by TrueComp Enterprise. Total Cost of Ownership (TCO) of TrueComp Enterprise deployment. Bottom line ROI realized through the adoption of the TrueComp Enterprise solution. Payback period for reaching break-even on the TrueComp Enterprise investment. 5

6 Study Methodology Callidus Software identified and recruited three customers utilizing TrueComp Enterprise. As a first step, Callidus conducted phone interviews with multiple executives within each of the three customer sites (e.g. IT, finance and business groups) to inventory the value and cost drivers that contributed to the solution s bottom line ROI. Applying these discoveries, our team created a custom ROI calculator that modeled each value and cost driver. This ROI calculator, an Excel-based tool, was segmented into multiple worksheets: revenue enhancement data, costs savings data, investment data, and the ROI scorecard. The ROI calculator was configured to capture metrics data for a period of 3 years from contract signing. The costs of implementation and the length of implementation are therefore included in the measured time period. The ROI calculator generates annual total benefits by taking the sum of the net incremental changes in the business metrics that are included; annual costs are similarly a summation of all charges and fees associated with the implementation and operation of TrueComp Enterprise. The annual ROI for each year of the 3-year period is calculated by subtracting Total Investment Costs from Total Benefits. Using the ROI calculator, Callidus contacted each of these customers for a second time to capture specific business metrics to benchmark the environment prior to and after solution deployment; this ROI calculator was also used to document capital and ongoing support and maintenance costs associated with TrueComp Enterprise and its implementation. Callidus then presented and reviewed the ROI profile with each customer site to confirm and validate data accuracy. Terminology & Definitions ROI The equation for determining ROI % is: ROI = Total Net Benefit / Total Investment NPV Using a time-value-of-money approach, the Net Present Value ROI is calculated using a standard NPV formula that discounts the net cash flows by the cost of capital (in this case 10% was used). Benefits Benefits were categorized as both tangible and intangible. Tangible Benefits can be directly tracked and connected to bottom line financial impact. Tangible benefits include increased revenue, new business opportunities and avoided/reduced costs. Only tangible benefits were used in computing ROI and payback horizon. Intangible Benefits include benefits that either cannot be measured, or are quantifiable, but do not drop to the bottom line. 6

7 Investment Investment, alternatively referred to as the Total Cost of Ownership (TCO), represents the financial expenditure that must be made in the solution in order to extract its benefits. Investment covers both upfront deployment costs and recurring lifecycle costs. Deployment costs include perpetual solution license fees, implementation costs, hardware infrastructure (e.g. servers, storage) and orientation training. Recurring lifecycle costs include internal/external IT staff costs, technical support, solution maintenance contracts, and follow-on training costs. Note that perpetual solution license fees, implementation costs and orientation training cost are amortized over a 5-year period. Time to Payback Horizon To calculate the time to payback on the investment, the following equation was used: Time to Payback = (Total Investment)/Average (Total Benefit)/12 Revenue Growth This study validates that TrueComp Enterprise drives more profitable sales processes and captures additional revenue. Callidus customers itemized a list of areas where TrueComp Enterprise had notably delivered discrete incremental value to their organizations. These value drivers are detailed below. Increased Sales Performance Enterprise sales performance depends upon the efficiency, productivity and effectiveness of the sales team. EIM solutions continually reinforce an organization s sales goals by motivating the sales force to maximize their individual commissions. Large product portfolios often comprised of a combination of products and services inevitably yield complex commission structures as enterprises encourage the sales force to crosssell and up-sell through special bundling and SPIF programs. With often different commission plans to simultaneously manage, it is difficult to manually track, manage and gauge the success of such a sales strategy. Prior to EIM automation solutions, enterprises often wrestled with a plethora of spreadsheets to track sales commissions and incentive events. Spreadsheets proved inadequate in their inability to accommodate multiproduct sales interrelationships (i.e. product bundles, cross-selling and up-selling incentives). Therefore, the financial and business management teams had no means to access real-time feedback as to how the business was actually tracking to the sales plan. Further, employees and channel partners had no method for viewing their individual incentive progress; no feedback resulted in less motivational direction to the selling team. EIM solutions enable real-time insight into sales commission status, giving management the ability to proactively analyze incentive program performance and effectiveness in detail. The net result of continuous, trusted commission feedback to the selling team is improved performance more selling time, more sales, higher per sales transaction size, and increased profits. 7

8 New Business Opportunities Some enterprises create entirely new business opportunities as the result of having the ability to manage sales strategies that were once impossible to contemplate for implementation prior to EIM automation. In addition, some service organizations sell incentive management services using TrueComp as their technical infrastructure to support the service. Such a service provider s TrueComp ROI experience is profiled in this study; TrueComp Enterprise s capabilities enabled this enterprise to expand its service portfolio and tap into new revenue streams. Quicker Time to Market with New Products Developing and implementing an incentive plan is a critical component of a new product s go-to-market strategy -- and often the schedule bottleneck of the product roll-out. Effecting business changes to incentive plans typically requires the involvement of business, finance and IT groups. An EIM solution streamlines the change management process for incentive plans, often bringing an organization 2-4 months of additional sales time by allowing the enterprise to get the product to market earlier. An EIM automated enterprise is a more nimble organization that has the competitive edge of getting to market efficiently and expeditiously. Increased Time Devoted to Sales Activities Internal sales teams and channel partners continuously track their commissions. They perform this activity whether or not an automated EIM solution is in place. However when the selling team has a general distrust of the accuracy of the company s incentive management process and generated commission data, the selling team invests significant time in shadow accounting, literally computing their personal sales transactions and incentives to double check the numbers. EIM solutions provide both the management team and each individual in the selling team efficient access to trusted financial data. EIM raises sales force confidence and focuses them on sales activities. TrueComp Enterprise customers reported that they reaped increased sales productivity because their selling teams spend less time personally tracking and calculating their commissions, and more time selling. More time spent doing prospect development led to more closed sales. In short, the TrueComp deployment changed how the sales force spent their time by eliminating a major distraction. More hours spent selling resulted in increased revenue. 8

9 Effective Use of Incentives Value was realized at Callidus customer sites by improving the use of budgeted compensation dollars to maximize market potential and meet corporate goals. Through more effective compensation programs and better visibility into goals and attainment, Callidus customers have seen strong return in the following areas: Improved Sales Margins Over-discounting is a problem for many enterprises in the manufacturing sector. A well constructed commission plan discourages discounting by negatively penalizing the commission rate if the discount exceeds a certain limit, usually implemented using a sliding scale approach. However, if the plan is managed manually, the selling team has no access to the data and no feedback on the personal rewards/penalties of discounting appropriately/inappropriately. An automated EIM solution provides continuous feedback to employees and sales partners on the merits of their individual discounting practices. With TrueComp Enterprise, over-discounting is better curbed and controlled by continually discouraging such behavior. The net result is an improvement in average sales margin. Increased Cross-Selling/Up-Selling Enterprises typically have more than one product and more than one product line. They often experience difficulty getting the sales force to push new products and new product lines. The problem stems from sales team s propensity to sell what it is familiar with. The power of an incentive plan lies in the financial motivation that it creates for the sales team. Effective incentive plans catalyze change, enabling enterprises to launch and introduce new product more successfully to the marketplace. Reinforced compensation plan disincentives, through lack of accelerators, can cause a sales team to move to new products. The selling behavior of the sales team can be highly influenced and directed to sell combinations of products (i.e. bundles), upgrades of the customer s current offering, add-on capabilities and services (i.e. up-selling), as well as leverage the current relationship through sales of other complementary products (i.e. cross-selling). However, if the cause-and-effect of the incentive plan is not continually reinforced with the sales team, the incentive plan loses its potency. Enterprises attributed increased cross-selling and up-selling activity to their TrueComp Enterprise deployment due to: Management s increased ability to create balanced, attractive incentive programs that promoted their entire product portfolio. Sales personnel s ability to better understand the rules and benefits of the incentive program through real-time access to their individual commission history during the sales period. Increased Channel Partner Satisfaction & Effectiveness Many enterprises rely on external channel partners to achieve the organization s sales goals. These external relationships may be sales representative organizations, dealer chains, broker networks, etc. Frequent and accurate communication between the enterprise and the channel partner is a top imperative for an effective relationship. Communicating the business rules and intricacies of the sales program is paramount to a profitable outcome. Enterprises using TrueComp Enterprise reported that their channel partners satisfaction with the business relationship increased and performance improved from a better understanding of financial objectives, the incentive game plan and commissions reaped to date. TrueComp Enterprise was a critical communication tool for the enterprise and its channel partners. 9

10 Productivity Improvements EIM solutions streamline incentive planning, administration and fulfillment. The bottom line result is lower operational costs. Savings on Replaced Incentive Management Solution Enterprises have wrestled with the complexities of incentive management for sometime. In many cases, the organizations cobbled together processes using a web of interdependent spreadsheets; others employed multiple products to achieve some level of incentive management automation. Enterprises using TrueComp Enterprise reported an overall cost savings in their incentive management infrastructure by replacing their former solutions with TrueComp Enterprise. A deployed TrueComp Enterprise achieves a lower TCO due to the following solution attributes: Grid architecture achieves lower maintenance costs, with higher reliability. Truly distributed architecture accommodates homogeneous and heterogeneous system configurations, making use of any existing enterprise system that is underutilized. Systems can be incrementally added as needed. This leads to lower hardware infrastructure costs. Highly portable solutions can run on a broad range of operating systems. Existing computing infrastructure investment is fully leveraged. Designed for a business user with Windows-like GUI and English syntax, training and technical support costs are minimized. Highly scalable design can readily handle any enterprise size and compensation plan complexity. Reduced Reporting Costs An integral process component of incentive management is reporting. Enterprises must provide commission summaries to their employees and channel partners on monthly, quarterly and/or annual basis. The cost components of reporting include the staff to manage the report development and fulfillment, printing, shipping reports to all recipients, microfilming printed reports for permanent record, and archival storage costs of the reports. Using TrueComp Enterprise, the entire cost associated with this traditional process is avoided through the transition to Internet-based reporting, since each payee has visibility to their online report anytime anywhere. Payees always know what they are going to be getting and why, removing the need for guessing. This visibility has the added benefit of inspiring confidence in the system, reducing the need for shadow accounting. Customers participating in this study reported typical annual cost savings from $109,000 to $271,000. Reduced Commission Check Fulfillment Costs The process of printed commission check fulfillment has been replaced by electronic commission transactions. Avoiding the administration of the printed check process brings significant savings to enterprises. For example, one company profiled in this study reported an annual savings of $10,

11 Reduced Incentive Management Staffing Costs A manual incentive management process is labor intensive. Financial staff must reconcile all sales transactions to determine each payee s commission for the time period. Managing 50 to 100 different compensation plans for thousands of payees using a cascade of spreadsheets is extremely time consuming. Further, the financial staff must then analyze the sales results to direct incentive plan changes to improve sales performance. EIM automation frees financial staff from this administrative burden to refocus their attention on business strategy. IT staff involvement is also required for custom report development and implementing the incentive plan changes. With TrueComp Enterprise, major compensation changes that require new data feeds and new structures can be accomplished in an order of magnitude more quickly days instead of months. The net result is that the organization is much more agile and nimble, requiring less staff to support business and IT operations. Enterprises with TrueComp Enterprise deployments do more with less. Avoidance of Incentive Overpayment Good commission planning is a balancing act. It requires careful analysis of the sales force performance with a clear segmentation of the achievers and underachievers. This is necessary to determine appropriate level setting as to when and what to pay when an individual meets sales goals. Typically, if a sales person makes 80% of goal, s/he makes 80% of compensation. However if the sales person is above 100% of goal, accelerators are encountered. The performance of a sales force is frequently distributed: a portion doesn t come close to making goal and another portion of the team substantially exceeds it. Enterprises end up with a bi-modal situation, when they would prefer to have a bell curve - a balanced sales organization performance. When a plan is unbalanced it is common for enterprises to payout more commission fees than is necessary to motivate the selling team and meet business sales goals. TrueComp Enterprise includes strong analytic capabilities to guide the enterprise s development of quotas that are well matched to its selling team s performance. By doing so, an enterprise recognizes significant costs savings through the avoidance of overpaying incentives. Lower Staff Attrition Costs When sales personnel are motivated with 1. an achievable, clearly detailed incentive plan 2. reliable, accurate ongoing feedback of their accumulated commissions 3. and timely delivery of their commission checks the individuals are more satisfied with their employment situation. This leads to a lower attrition rate in the selling team. Not having these three organizational ingredients in place often leads to higher risk of staff underpayment, lower staff morale, and higher staff attrition. Replacing staff is expensive. The cost of recruitment administration, interviewing, placement fees, new staff orientation/training and the business down time from not having an employee up to speed in the position all contributes to the cost equation. TrueComp Enterprise continually reinforces business goals and communicates individual performance to the selling team. 11

12 Reduced Compensation Error Rate & Dispute Management It s no surprise that a manual incentive management approach is prone to low data integrity and high error rates. This typically results in a high incidence of compensation disputes logged by payees. Using a spreadsheet approach, data error resolution and dispute management can be quite time consuming, likened to looking for a needle in the haystack. Customers using TrueComp Enterprise reported that data errors and disputes with commissions were greatly reduced. Equally important, data error and dispute resolution were accomplished an order of magnitude more quickly and easily with TrueComp Enterprise. The need to manually reconcile commission discrepancies from several years prior was no longer a problem. Associated enterprise expenses became much more predictable, alleviating the need to look through paper statements to find discrepancies. Improved Regulatory Compliance Many enterprises, such as those in the financial and insurance sectors, are subject to compliance with regulatory guidelines and rules. The financial and insurance sectors frequently use independent brokers to sell their products. The entire nature of paying commissions to brokers is currently subject to regulatory scrutiny. TrueComp Enterprise opens this financial reporting to regulatory agencies, thus facilitating regulatory agency review and reducing the incidence of fines. Additionally, public companies in all industries are subject to new Sarbanes-Oxley related audit standards. TrueComp Enterprise is useful in establishing internal controls over the incentive compensation management process, which can be deemed deficient in companies that have no formal system in place. Improved Financial Predictability Enterprises that have not automated their EIM business processes find it difficult to pay commissions in the same period that they were earned. Enterprises typically accrue commission expense days in arrears due to slow commission payout processes. As a result, the organization doesn t have final compensation cost information, and must rely upon accrual-based accounts to make their best guess. If the enterprises estimates are off, there can be an impact on earnings statements. Enterprises with TrueComp Enterprise deployments achieved quicker turnaround in payout of commission expense, enabling them to pay in the current period that commissions were earned. These enterprises have the benefit of knowing exactly what compensation is going to actually cost them at any time. Enterprises reported that having timely, accurate compensation information led to improved, prudent business decisions. Enterprises felt they were more financially predictable and credible to their management and shareholders. 12

13 ROI Profiles Customer Case 1: Insurance Company Company Profile The first customer case is a service provider within the financial services sector that offers such long-term savings and retirement products as annuities, life insurance, and institutional products. The company writes individual variable annuity contracts which enable customers to invest in mutual funds and other products. The company also manages employers 401(k) retirement plans. These financial products are sold exclusively through channel partners, a network of over 200 frontline sales people. With annual revenues exceeding $13 billion, 500 payees, 40 different compensation plans and 48 million annual compensation transactions, the company recognized that it needed an incentive management solution. Prior to TrueComp Enterprise deployment, compensation Associate VP & Controller management was completely manual, performed by the business staff using spreadsheets. The company wanted to automate this process with a fully supported, best-of-breed solution. Financial compliance and the desire to be better prepared for audits also factored significantly into the decision to invest. Pain Points Since the wholesale business was completely unautomated and managed through spreadsheets, the situation became untenable. We selected a 3rd party, best-of-breed solution that was fully supported. TrueComp has increased the effectiveness of our frontline sales team. By substantially reducing sales team shadow accounting we have recouped 2,600 days of additional selling time annually. The business was rapidly growing in complexity; compensation management of 40 different incentive plans became too difficult to handle manually. The company wished to improve compensation data accuracy. Too many manual processes had led to an unacceptably high compensation data error rate. With 20 managers individually calculating compensation with their own interpretations of how incentives should be calculated, the company wanted to standardize this process. The company had no capabilities to easily audit compensation payout. Being a financial institution, such capabilities were paramount to ensuring regulatory compliance. Finally, because the compensation group was entrenched in time consuming, manual compensation management activities, the business team had no time to analyze the compensation data to evaluate the compensation plans to optimize sales performance. Investing in TrueComp Enterprise The company constantly changed its products and incentive programs for its channel partners to selectively promote different lines of business and emphasize business strategies. Such incentive strategies occurred at least every two weeks. Each sales partner qualified for and participated in multiple incentive plans to encourage aggressive cross-selling and up-selling of products. Since the business was completely unautomated, managed through spreadsheets, the situation became untenable. 13

14 Prior to TrueComp Enterprise deployment, the company really didn t have full insight as to the effectiveness of its incentive programs. While the initial goal was to automate the incentive management process, the company s ultimate goal was to use TrueComp Enterprise in an analytic capacity to uncover inconsistencies in the incentive plans across the product line and ensure a balanced, standardized, well designed incentive program. The company was never before able to get a complete, comprehensive view across the entire product line and sales organization. The company forecasted that TrueComp Enterprise would create more time for business analytics activities, enabling business/financial staff to spend the majority of its time analyzing data. ROI Profile Revenue Impact Increase Sales Due to Increased Sales Force Time Devoted to Sales Year 1 Year 2 Year 3 3-Year NPV $1,728,718 $1,728,718 $1,728,718 $4,299,065 Total: $1,728,718 $1,728,718 $1,728,718 $4,299,065 Reduced/Avoided Costs Compensation Mgmt Staffing Savings $ 0 $ 175,000. $175,000. $276,108. Total: $ 0 $ 175,000. $175,000. $276,108. Total Tangible Benefit: $1,728,718 $1,903,718 $1,903,718 $4,575,174 Total Investment (TCO): $ 875,476 $ 881,956 $ 881,956 $2,187,403 ROI ($) $ 853,242 $1,021,762 $1,021,762 $2,387,771 Payback Period (in months) 6.08 Intangible Payback Profile Revenue Impact Increased Sales Force Time Devoted to Sales (Days) Year 1 Year 2 Year 3 3-Year NPV 2,600 2,600 2,600 N/A Reduced/Avoided Costs Reduction in Compensation Disputes (%) 240 -> % 240 -> % 240 -> % N/A Reduction Dispute Mgmt Activities (Days) N/A 14

15 ROI Analysis The company deployed TrueComp Enterprise 3 years ago. The company estimated that each of their 200 frontline sales people at their channel partners spent 2 hours a week tracking and checking their individual compensation calculations. TrueComp Enterprise has increased the accuracy of commission data, thereby increasing channel partners trust in the company s incentive management business processes. The practice of shadow accounting has been eliminated, since each sales team member can view individual compensation reports at any time online. This has enabled the company to reclaim 2,600 days of selling time annually. Taking into account the revenue share of each of the three product lines (i.e. life, annuities, 401(k)), average sales transaction size per sale, average selling time to achieve a closed sales transaction, and average profit margin per product line, this additional selling time contributed over $1.7 million in net annual revenue. After the first year of deployment, the company also recognized a cost savings of $175,000 by avoiding hiring 2 additional business/finance staff members. TrueComp Enterprise streamlined the incentive management process making it possible for the company to grow its business with sympathetically scaling its staff costs. Compensation disputes also decreased. Prior to TrueComp Enterprise deployment, 20 compensation disputes arose per monthly pay cycle (i.e. 240 annually); post deployment, the disputes dropped by 50% to 10 per monthly pay cycle (i.e. 120 annually). Dispute resolution time also decreased. Compensation disputes averaged 2 hours of finance staff s time to resolve prior to TrueComp Enterprise deployment. The combined 50% drop in disputes and drop in resolution time per dispute to.75 hour enabled the finance team to recoup 19 person days over the course of the year. Data accuracy and data traceability were both enhanced. Since the company was already employing electronic reporting and payment prior to TrueComp Enterprise deployment, no cost savings were recognized in these areas. Payback was achieved in just over 6 months on the adjusted 3 year project. 15

16 Customer Case 2: Service Provider to Financial Institutions Company Profile The second customer case is a service provider to financial institutions (e.g. regional banks, local credit unions and major banks) throughout the U.S. and Europe. Creating marketing programs with accompanying compensation SPIF programs for its clients internal sales staff and external channel partners (i.e. broker networks), this service provider creates and manages compensation plans that goal its clients workforces. The company builds customized plans for clients according to their needs for brokerage channels and internal sales forces. Our business is providing promotions management services for the financial services industry. TrueComp is the infrastructure that allows us to bring new products to market. Director of Commissions The company s top goals are to provide timely and accurate commission information to its clients. The company prides itself on being the forerunner of the industry. Being technologically advanced is a critical component to maintaining its market leadership. The company must be able to handle widely diverse types of compensation structures in order to be flexible to its clients. The company is committed to meeting the growing demand for analytical reporting of compensation data. While compensation reports from 10 years ago did not allow clients to download, extract and analyze data today these are must-have capabilities. Deploying TrueComp Enterprise in February 2002, the service provider now processes 7-8 million compensation transactions per month for its 7,000 clients (i.e. payees). Pain Points The company wanted more control on commission expenses and more commission expense visibility. Attaining this level of visibility would guide the company on where to renegotiate with each client s commission rate, giving it greater control of expenses. The company needed to stay competitive by providing its clients with an increased range of products. These new products warranted the need to create unique commission structures and plans, all of which needed to be aggregated into one report. Dynamic changes in the financial industry and the need to create new compensation structures for packaged SPIF programs mandated the need for flexible, automated incentive management. The company needed to expand its service portfolio to include analytics that helped its clients to determine whether their compensation plans were undergoaled/overgoaled. 16

17 Investing in TrueComp Enterprise The company was using a home-grown incentive management solution, created as an extension of its billing system. The time had come for a standalone incentive management process that was not limited to a fixed set of pre-specified compensation plans. TrueComp Enterprise was a logic-based system that provided maximum compensation plan flexibility. Clients needed easy access to reports that could be efficiently published via the Internet. Using the homegrown EIM solution, the company, out of necessity, had to focus all resources on just trying to keep up with manual compensation payment processes each month. The company simply didn t have time to analyze the performance of its clients compensations plans. After evaluating TrueComp Enterprise, the company knew it could streamline the compensation payment process and provide the integrated analytical tools to offer its clients add-on strategic analysis services. Critical to their solution evaluation were the following: Ease of getting data out of the system for analytics. Ability to easily integrate with current A/P processes. Electronically report to clients via the Internet. ROI Profile Year 1 Year 2 Year 3 3-Year NPV Revenue Impact Increase Sales Performance $ 0 $25,000,000. $61,750,000 $67,054,846. New Business Opportunities $ 0 $ 5,000,000. $11,000,000. $12,396,694. Total: $ 0 $30,000,000. $72,750,000. $79,451,540. Reduced/Avoided Costs Paper Reporting Cost Savings $109,000. $109,000. $ 109,000. $ 271,067. Commission Check Fulfillment Savings $ 10,000. $ 10,000. $ 10,000. $ 24,869. Compensation Mgmt Staffing Savings $ 0. $ 70,000 $ 70,000 $ 110,443. Total: $119,000. $189,000. $ 189,000. $ 406,379. Total Tangible Benefit: $119,000. $30,189,000. $72,939,000. $79,857,919. Total Investment (TCO): $406,961. $ 406,961. $ 406,961. $ 1,012,052. ROI ($) ($287,961.) $29,782,039. $72,532,039. $78,845,867. Payback Period (in months)

18 Intangible Payback Profile Revenue Impact Sales Revenue from Early Market Entry of New Products ($) Increased Revenue from Channel Partners ($) Year 1 Year 2 Year 3 3-Year NPV $ 0 $3,421,688. $ 2,296,875. $ 4,553,517. $ 0 $8,320,000. $10,400,000. $14,689,707. Reduced/Avoided Costs Reduction in Compensation Disputes (%) 120 -> % 120 -> % 120 -> % N/A Reduction Dispute Mgmt Activities (Days) N/A ROI Analysis TrueComp Enterprise has enabled the company to offer an advanced new compensation program service to its clients that could not be offered in the past. This has allowed the company to expand and broaden its service set and realize substantial increased revenue opportunities. Compensation reports are no longer printed for clients; instead compensation information is sent electronically. Prior to TrueComp Enterprise deployment, commission data was manually input; now data is electronically uploaded into the system. IT assistance is no longer needed for final report production. There is an enhanced flow of information within the company. Clients service groups can now perform analytics by accessing data directly at their desktops. This process change represents a savings of $109,000 annually. The company has also achieved quick turnaround on report publications that profile what each client has earned over the time period; this helps clients meet their financial reporting timelines. TrueComp Enterprise has also eliminated paper check processes; all payments are now made electronically. The workload of the company s A/P group has been substantially reduced. The company recognized a $10,000 savings annually. Quicker turnaround in commission expense processing enabled the company to pay in the current month, avoiding the day accrual commission expense that plagued them in the past. Having accurate compensation information has led to improved, prudent business decisions for the company. Whereas prior compensation systems required extensive IT services, TrueComp Enterprise requires minimal IT support. The commission department is now self-sufficient because of TrueComp Enterprise s intuitive user interface. This decrease in IT staff requirements for solution support and compensation processing enables IT to focus on other areas of the business. Operational expense for the commission payment process has been reduced. Disputes with commissions have decreased from 120 down to 4 annually and the average time to resolve a dispute has been reduced from 8 hours to 2 hours. The need to manually reconcile commission discrepancies from 2 years prior is no longer required. The company s associated expenses are now much more predictable. The need to look through paper statements to find discrepancies has been totally eliminated. Channel partners of the company s clients are happier because of increased accuracy of and visibility to compensation data. 18

19 The company recognizes that it has attracted more business as a result of having TrueComp Enterprise as a critical component in its technology infrastructure. The company feels it offers its clients the most advanced technology and the best business solutions, which has led to a stronger reputation for the company. In summary, the company s investment in TrueComp Enterprise has brought the following areas of financial payback, enabling the company to reach break-even in its investment within the first year of deployment: New business revenue and opportunity. Decreased staff in the commission and A/P departments. IT headcount reduction. Avoided cost of printing and shipping paper reports. Avoided costs of printing and shipping paper commission checks. Reduced time to trace a dispute discrepancy (8 man hours is reduced to 2 hrs to reconcile). Improved accountability achieved through increased timeliness in discovering discrepancies; quicker, prudent business decisions result from always knowing the accurate financial standing of the company. 19

20 Customer Case 3: Financial Services Company Company Profile This financial services firm the third company case - with over 5,000 employees and $2.5 billion in annual revenue computes compensation for 3,500 payees across 50 incentive plans. The company performs between 1.4 million to 3.4 million compensation transactions per month, totaling over $75 million in annual incentive payments. The company s goal was to reward its people well, accurately and quickly. Compensation plans needed to be tied back to strategy. The company deployed TrueComp Enterprise in January We justified that the company could rollout corporate strategies quicker with a compensation automation system. We forecasted a financial savings of $900,000 annually which was not only realized but exceeded. Assist. VP Field Compensation Financial Group Pain Points This company had four critical reasons for investing in an EIM solution: 1. More flexibility in supporting compensation plan changes that supported the corporate strategy. The compensation modification process, considered a process bottleneck, needed to be streamlined to ensure quicker time to market with new products. 2. Wrestling with the time consuming logistics of complex charge backs, the company needed to address cost structure issues. The company needed to lower unit costs and use less expensive, more efficient processes that would reduce headcount and increase operational efficiency. 3. Needed to eliminate paper reporting and replace with an internet-based reporting system. The paper processes were cumbersome, expensive and were a competitive disadvantage. 4. The company s system migration plan was to proactively move away from legacy and mainframe systems with the goal to eventually retire them. The desire was to slow mainframe growth. Investing in TrueComp Enterprise The company developed a detailed cost justification for the EIM system, forecasting both hard and soft costs/benefits. There was significant financial hard cost savings from printing and headcount reduction (from finance and IT). The company also justified that it could rollout corporate strategies quicker with a compensation automation system. Overall the company forecasted a financial savings of $900,000 per year which has been not only realized, but far exceeded today. The business requirements for the EIM solution were as follows: The ability to vary compensation plans by effective dates. Based on a rules-based engine to reduce IT support and ensure quicker time to market. Strong data integration capabilities to facilitate bringing transaction and data feeds into the compensation system. Strong Internet-based reporting capabilities so that paper reporting could be eliminated entirely. 20

21 Underlying EIM solution s technology was a fit into the company s corporate architecture/ infrastructure. Vendor had strong, comprehensive project methodology for customization, installation and deployment of the EIM solution. ROI Profile Year 1 Year 2 Year 3 3-Year NPV Revenue Impact Cost of Replaced Incentive Mgmt, Solution $1,950,000. $1,950,000. $1,950,000. $4,849,361. Paper Reporting Cost Savings $ 303,400. $ 303,400. $ 303,400. $ 754,511. Compensation Mgmt Staffing Savings $ 265,000. $ 265,000. $ 265,000. $ 659,016. Total: $2,518,400. $2,518,400. $2,518,400. $6,262,888. Total Tangible Benefit: $2,518,400. $2,518,400. $2,518,400. $6,262,888. Total Investment (TCO): $1,045,910. $ 890,910. $ 890,910. $2,356,470. ROI ($) $1,472,490. $1,627,490. $1,627,490. $3,906,418. Payback Period (in months) 7.1 ROI Analysis Due to TrueComp Enterprise s strong online reporting capabilities, the company saved $303,400 annually. This savings was derived from the reduction of one administrative person to manage report production, plus 80% recovery of costs from printing, and 100% recovery of costs from shipping, microfilming and archival storage. In addition, TrueComp Enterprise enabled the company to perform the compensation management function more efficiently. As the result, 1 business/finance position and 1 IT position were eliminated, bringing a total savings of $265,000. Major compensation plan changes that required new data feeds and new structures, used to take 6 months to implement; after TrueComp Enterprise deployment, such changes now take only 6-8 weeks. Similarly, minor changes that use to take 2-4 months now take 2-4 hours. This represents more than an order of magnitude improvement in IT response time. As the result the company feels the organization is much more agile and nimble. The annual costs of the company s former incentive management solution annual costs of ownership were high at $1,950,000, in comparison to the TrueComp Solution at $890,000 an annual savings of $1,060,000. Another important metric for the company is system availability and predictability. The company promised to have daily reports published at precise timeframes for the business; the company now has achieved a 98.8% on-time track record using TrueComp Enterprise. 21

22 In summary, TrueComp Enterprise has helped the company achieve the following: Replace a slow and costly reporting process with a real-time, online view for all payees. Decrease the compensation management cost to serve the product line, thereby making the solution group more profitable. Improved reporting and general efficiency of compensation system. Reduced operational costs. Redeploy staff to new business opportunities and initiatives that, prior to TrueComp Enterprise deployment, the company did not have resources to apply. 22

23 About Callidus Software Callidus Software ( NASDAQ: CALD) is the leading provider of on-premise and on-demand Sales Performance Management (SPM) solutions to global companies across a broad range of industries. Our software allows innovative enterprises of all sizes to strategically manage incentive compensation, set quota targets, administer producers, and align territories, resulting in improved sales and distribution performance. Over 1.8 million salespeople, brokers, and channel representatives have their sales performance managed by Callidus Software s products. For more information about Callidus, visit or call Corporate Headquarters Callidus Software Inc. 160 West Santa Clara Street 15th Floor San Jose, CA USA Tel: (408) Fax: (408) info@callidussoftware.com UK and European Headquarters Callidus Software Ltd 1 Quality Court Chancery Lane London WC2A 1HR United Kingdom Tel: Fax: USA Offices Atlanta, Austin, Chicago, New York San Jose, Scottsdale International Offices London, Sydney, Toronto Callidus Software Inc. All rights reserved. Callidus Software, the Callidus Software logo, Callidus TrueAnalytics, TrueComp, TrueComp Grid, TrueComp Manager, TrueConnection, TrueFoundation, TrueInformation, TruePerformance, TruePerformance Index, TruePerformance Indicator, TrueMBO, TrueAllocation, TrueProducer, TrueQuota, TrueReferral, TrueResolution, and TrueService+ are trademarks, servicemarks, or registered trademarks of Callidus Software Inc. in the United States and other countries. All other brand, service or product names are trademarks or registered trademarks of their respective companies or owners. 03/08 PDF 23