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Recently, while in San Jose for the loud Connect conference, I took advantage of an offer from Zuora (see disclosure) to visit a number of different vendors – in part to look at how they’re utilized third party subscription services to power their businesses but more specifically to look at the pain points they’ve encountered in scaling their businesses.

I visited Xactly in downtown San Jose. Xactly is a five years young SaaS vendor of sales performance management solutions – basically they power the systems that automate the administering, tracking, reporting and analyzing of sales performance. In other words they give functionality and visibility to the compensation of sales staff – think CRM, but for the post-sale, rather than pre-sale part of the cycle. Xactly was founded in 2005 by Chris Cabrera
who remains on as CEO.

For some background, Xactly has received $57million worth of venture funding, is on target to be profitable at the start of 2011 and has around 140 employees split between the US and India. What was interesting in my discussions with Cabrera, was the fact that for the first three years post launch, they achieved triple digit revenue figures – that’s significant growth and I wanted to talk to Cabrera both about the operational barriers to achieving that growth, and also about the communications strategies used to hit those figures.

In this first post I’d like to dive into the operational issues they saw when scaling. Like other SaaS vendors selling a product that, at least to some extent, replaces an incumbent offering, Xactly often comes across organizations happy to use manual processes to run their sales compensation systems – and like other similar vendors Xactly is trying hard to push the concept of the added value that a real time, completely visible, and connected system can bring. In Xactly’s case this is around creating a “sales web” a connected series of people interfacing with customers to up and cross sell – often these aren’t salespeople per se – Cabrera gave the example of a bank clerk talking to a customer about home loans and their system giving some visibility into this.

Xactly does this by integrating with the main CRMs (salesforce.com, Oracle and Microsoft Dynamics) to run sales compensation as an integrated part of customer relationship management. To do this Xactly uses a complex series of seven modules and, much like the organizations they’re selling to, encourages their sales staff to cross and upsell their products.

Until a year or so ago Xactly ran their subscriptions manually, using excel to do so – their business however places complex demands on these systems due to the seven individual products they sell with extensive cross and up sell activity and the multiple price points and deals they run – as Cabrera said, the reality for a SaaS business is that almost every deal has it’s own specific situation and parameters – meaning that almost every customer has a specific subscription and billing process.

Cabrera, in a refreshingly honest admission, recounted the tale from a couple of years ago of a sheepish looking financial staffer admitting to him that, due to a breakdown in the completely manual billing system they were running at the time, they’d not billed around $300000 worth of product several months previously. In his mind this was a direct result of running a manual system – it works fine…. until something goes wrong. Cabrera was adamant that deciding to use a third party service to automate these parts of the business saved Xactly from an administration dive bomb that would have threatened their very growth.

All in all my visit to Xactly was interesting on a number of levels – it’s always great to visit a SaaS vendor that is really executing on their growth plan, hearing Cabrera recount some of the mistakes they’ve made was interesting and I had the chance to take a reasonably deep dive into yet another SaaS vendor – a morning well spent!

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The next paper Krish and I are writing over at Diversity Analysis is one looking at subscription and billing services. It’s an area I’ve touched on frequently here and is a relatively busy, and increasingly complex, space. I’ve talked previously about Zuora, Vindicia, Aria systems and have spent much time in the past few days talking to other vendors.

It seems there is a big divide between companies that decide to roll their own subscription/billing system, and those who go with a third party provider. As part of my research I’m reaching out to companies asking what they currently do for S&B services, what they’d do if the were starting again, and why.

So as something of a crowdsourcing experiment, I’m aggregating all the responses I get here in a post. Vendors are welcome to comment below or contact me directly to discuss. Some responses thus far:

Robert Coup – Founder of Koordinates:

we’re not straight SAAS (more marketplace) but we did. Plan is to offload a bunch of it to @TeamXero via API though. [my response was to ask why they went down that route – Ed] There wasn’t anything really suitable. In hindsight I probably would have looked harder, dealing with things like GST is a PITA across suppliers/customers/commissions/etc

Julian Stone, CEO of ProWorkflow:

Yes. Built from scratch to use DPS [a local payment gateway – ed]. Only way to get what we needed.

Ian Sweeney – CEO of billFlo:

we did our own billing data aggregation, billing (sending invoices!) but farm out collection… time to explain our needs = the time for us to build. we have expertise. our needs will change. we want to control user exp.

Jason Lemkin, CEO of Echosign:

Yes because we started 4+ years ago.  We also wanted maximum flexibility in credit-card customers and ones to invoice.  Not what we would do again. [to which I asked what he’d do if we were starting again today from scratch – Ed] It’s complicated b/c I don’t think any of the services handle BOTH credit card and invoicing well.  Zuora is terrific but very focused on complex invoicing for subscriptions.  Paypal finally added recurring subscriptions to their API but you have to build it and that doesn’t help with invoicing.  They all need to integrate with BOTH Salesforce and your back-end, for us QuickBooks.  The start-ups with no funding I am not sure we’d trust.  To answer your question, we would use Zuora but it’s still only part of a solution that is more complex that it might at first appear.

Heather Villa, CEO of IAC-EZ:

Yes [we built our own solution] – security, dependability, wanting to minimize 3rd parties as much as possible – one less party that payment information has to pass through 🙂 (and one less party to depend on)

Feel free to join in the conversation…

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