Xactly – and Managing a Company Through Growth

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!