On August 17th, 2017, 50 high tech sales compensation strategy and operations leaders attended Alexander Group’s third XaaS symposium at Salesforce.com’s headquarters in San Francisco. The Symposium was an opportunity to learn about the latest industry trends affecting sales compensation, hear about contemporary solutions, socialize issues and create a new network of friends. Learn more about the upcoming Technology/XaaS Go-To-Customer Symposium, August 14th in San Francisco.
Below are some highlights from this informative one-day event in 2017.
Panel Discussion ‘Solving XaaS Sales Comp Issues’
Four esteemed panelists shared 1) sales representatives’ behavioral changes required by the XaaS evolution, 2) XaaS sales compensation challenges and 3) how their sales compensation job is changing.
- Nandini Ramaswamy – VP, Global Sales Compensation Design & Operations, Salesforce
- Robert Bieshaar – Sr. Director WW Sales/Services Incentive Comp, Autodesk
- Ely Lai – Senior Director, Sales Compensation, DocuSign
- Maria Schexnayder – Director, Quota and Commissions, VMware
Sales Representative Behavior Changes:
- Customer success is a tenet that needs to permeate all roles, not just post-sales roles.
- Companies need to incent hunters to sell good business that will grow customer lifetime value over time.
- The traditional technology companies need to evolve their account manager role and add new roles as they add XaaS offerings to their portfolio.
XaaS Sales Compensation Challenges:
- Companies need to balance specific versus simple solutions.
- It is often difficult to determine the right performance measure–ACV, TCV, MMR, etc.
- Many leaders are myopic, focusing on their own region, business unit or segment and not the entire company.
- Concerns about recognizing revenue given new ASC606 accounting rules.
Critical Success Factors:
- Panelists have obtained a seat at the executive table by being persistent, leveraging data and gaining executive trust.
- Panelists are also more involved in role design/confirmation.
- Companies are creating multi-year roadmaps for large sales compensation changes.
- Most companies are getting a head start on identifying, tracking and paying on new metrics.
Hunter vs. Farmer Sales Compensation Strategies
- Attendees are using multiple types of hunter/farmer coverage models.
◊ 40 percent of companies still have a traditional one-size-fits-all rancher model.
◊ 30 percent have moved to a pure hunter/farmer model.
◊ 30 percent are using teamed hunter/farmer models requiring ongoing collaboration.
- Some attendees shared that the different models their acquisitions use are creating integration challenges.
- Companies use different methodologies to pay for expansion selling.
◊ 25 percent have a separate measure within the target incentive
◊ 12.5 percent use a hurdle
◊ 12.5 percent use modifiers
◊ 50 percent use an add-on measure.
Compensating for Land Roles
- Almost all companies track leads from marketing to sales with a closed-loop process.
- More companies are using pre-sales to drive technical discussions vs. a more sales-driven approach.
- High interest is using digital channels to increase customer engaged time and reduce travel.
- No one has deployed any new roles who engage prospects on social media sites.
Sales Compensation for Post-Sales Role
- Only 60 percent of attendees are articulating their expansion motions, and none of them have completed the process.
- 20 percent have created roles with post-sales revenue responsibilities.
- There are five different flavors of the customer success role with responsibilities ranging from service and adoption only to having full responsibility for renewal and upsell.
- The most common customer success role focuses on usage and adoption.
Hybrids: Migrating the Needle Toward XaaS
- Participants are in different phases of ‘XaaS ramping’ (dabble, adapt, scale, realize).
- There is no silver bullet on how to provide pay parity between perpetual and XaaS offerings.
- XaaS sales difficulty and product readiness are critical inputs to determining any XaaS uplift.
- Companies must also clarify their product readiness and invest in enablement, training and other initiatives.
Paying on Consumption Pricing Model
- It is difficult to pay at the point of influence for consumption offerings since the contract value is unknown.
- This challenge is exacerbated when companies sell multiple technology solutions–perpetual, subscription and consumption.
- Attendees use multiple practices, ranging from estimated contract value to 4x quarterly invoice based on Q/Q growth.
- Evaluate job content to determine ongoing consumption payment duration to avoid annuity payments and sales representatives living off of past sales.
Sales Compensation to Enable Alliance, ISV and SP Partnerships
- As companies expand their routes-to-market and channel strategies, they increase the need to provide double quota and double credit to both the direct rep and channel reps.
- Attendees shared multiple challenges with providing double quota/double credit: a) the sales representative may get credit for deals that they did not influence/persuade, b) it is difficult to operationalize the quota/credit, and c) it increases the number of sellers receiving credit per deal.
- While there is a high interest in deal-based crediting, companies rarely use it, as it requires a high level of governance and is difficult to automate.
- As deal-based crediting is difficult to administer, most companies are living with imperfect approaches.
Using TAM to Drive Effective Quotas
- Although companies expect 50-60 percent of sellers to be at or above quota, Alexander Group’s benchmark database shows only 42 percent actually are.
- Companies use different quota methodologies; however, none of the participants is happy with their current practices.
- Select attendees are starting to leverage big data to tailor sales representatives’ quotas, although the approach is still nascent.
- Most attendees use Excel but are considering the use of packaged software.
- Hybrid companies are quite concerned about setting XaaS quotas as their business mix evolves.