Achieving Sales Performance Optimization Through Automated Incentive Compensation Management

Achieving Sales Performance Optimization Through Automated ICM Jeff Staley Director, CRM Center of Excellence SAP Americas, Inc.

Agenda

Business Drivers for Automated ICM

SAP – Callidus Partnership

The SAP/Callidus Solution for Automated ICM

Joint Value Proposition for Achieving Sales Performance Optimization

Business Drivers for Automated ICM

Incentives Drive Financial Performance ¹ Accenture CRM Research Potential Dollar Impact in $M on Pre-tax Profit of Moving from Average to High Performance for $1Bn Business Unit - Accenture CRM research Brand Management Motivating and Rewarding People Customer Service Turning Customer Info into Insight Attracting and Retaining People Building Selling and Service Skills Strong Value Propositions Partner and Alliance Management eCRM Sales Planning Key Account Management Advertising Customer Retention and Acquisition Managing Product and Service Mix Promotion Ability to Change the organization New Products and Services Segmentation Building Service Culture Channel Management 1.5 13.0 13.0 12.0 10.0 9.5 9.0 9.0 8.0 7.5 6.0 5.5 5.5 5.0 5.0 5.0 3.5 2.5 2.0 3.0

Incentive Specific Pain Points Commission management is challenged with low quality data input, inflexible tools, and long cycle times. Currently, the Commissions Operations team meets these challenges through manual processes and labor intensive audits. Limited Speed And Agility To Adjust Managerial Visibility & Effectiveness Quality of Commission Calculation Inputs Labor Intensive Processes Pain Points

Complex technology & application portfolio hinders responsiveness to business needs

Multiple, disparate, and redundant systems from numerous acquisitions

Limited system feedback through statements and reporting, thereby impeding decision making

Long turnaround time for comp plan (weeks to months) and comp system changes (months to years) reduces ability to quickly drive results through levered compensation

Inability to do ‘what-if’ modeling and dynamically deliver incentives to drive business results

Inaccurate sales, billing, & quota data creates issues that need to be investigated and reconciled

Manual audits of sales, billing, & quota data require are required to ensure calculation accuracy

Payouts over $X are subject to mandatory audits, but smaller amounts are less scrutinized

Recalculations consume a lot of resources and are the only systemic way of reducing and compensating for data quality issues

End-to-end process is highly dependent on labor intensive sub-processes

Process is highly dependent on IT

Lack of visibility into end-to-end process requires significant manual intervention and verification

Comments

Incentive Compensation is Difficult Hard to Calculate Hard to Manage Hard to Apply Vertical Knowledge Plan Complexity Volume Data Feeds

Insurance

Banking

Telecom

Manufacturing

Pay on Profit

Pay on Market Share

Multiple Payees Per Transaction

Millions of Transactions

Thousands of Payees

Millions of Dollars Paid

Many External Data Sources

Rate of Change Visibility Integration People

Sales Is Dynamic

Millions of Report Pages Weekly

Sales, Customer and Comp Data

Divisions, Legacy Systems, Upstream and Downstream Connections

Disputes, Self-Services, Approvals, Reorgs

Sales Channel Employees

Field Sales

Sales Managers

Sales Engineers

Inside Sales

Channel Partners

Independent Agents

Retail Stores

Resellers & Distributors

Employees

Managers

Executives

Best Practices for a Performance Based Culture

1. Enterprise Goal Driven Sales Process

Analyze prior performance and trends

Regional/Channel, product revenue and profit goals

Plan new product introductions

Strategic Business Planning

2. Structure/Align Organization for Success

Territory and account planning

Assign product and customer overlays

Compare and model scenarios

Establish supporting sales comp strategies

3. Deliver a Timely, Relevant, Aligned Sales Plan

Establish timely sales incentives

Regional and product quotas and incentives

Cross-sell, upsell & SPIF’s

Ensure SOX auditability and traceability

5. Make Fact Based Sales Performance Decisions

Monitor performance against plan

Introduce new incentives on-demand

Ad-hoc adjustments based on results

Enterprise Alignment

Sales channel behavior fully aligned with enterprise goals

4. Field Execution with Transparency

Execute Marketing Campaigns

Field visibility against incentives

Eliminate shadow accounting

Reduce sales disputes

Plan approval

Improve sales productivity

SAP – Callidus Partnership

The Market is Open for Co-Innovation SAP 22% ORCL (Incl.SEBL&PSFT) 12% $30.5 billion Enterprise Applications Market Sources: Company data, market reports, analyst estaimtes, preliminary for 2004; based on product revenue spending for application vendors (including license and maintenance revenue) MSFT 4% OPPORTUNITY

Enterprise Applications

Enterprise Services Architecture

Platform for customers and ISVs

Win-Win

SAP as Honest Broker

SAP: clear, open, fair and efficient

LEADERSHIP

SAP’s Ecosystem Strategy Profitable Ecosystem Growth Enable Adoption of NetWeaver and the Business Process Platform Foster Co-Innovation among customers and partners to create high-value solutions and services Create Value for all ecosystem stakeholders Enabling Goals Customers Partners Developers Fuel collective, self-sustaining growth

SAP – Callidus Partnership SELECT SAP/CALLIDUS SHARED CUSTOMERS Why SAP chose Callidus

Demand driven by SAP customers for robust comprehensive, flexible and user-friendly ICM solution

Callidus delivers world-class ICM solutions – ranked #1 by Gartner

Proven technology solution across multiple industries

Market leading ICM solution combined with robust SAP NetWeaver platform and ESA – maximizing value to SAP customers

Over 30% of Callidus’ current customers run SAP

The SAP/Callidus Solution for Automated ICM

SAP with Callidus ICM: Closed Loop Business Scenario Sales Ops or Comp Analyst Sales Rep Reviews historical impact of sales performance vs. comp plans Determines appropriate changes to comp plans for products and territories Sells new product, receives comp statements. Initiates dispute for any discrepancies Reviews YTD performance of regions and current products performance Updates comp plan Receives notice of new plan and accepts it Reviews and settles dispute VP Sales Reviews success of program and compensation effect Comp Analyst VP Sales VP Sales VP Sales / VP Finance Sales Rep SAP Callidus

Integrated Business Process Flow: SAP/Callidus ICM Compensation 1. Review effect of past comp plans and performance 2. Model plans, set rules, release plans 3. Place Orders 4. Process compensation Sales Ops or Comp Analyst Sales Rep / Channel Partner Sales Force Automation / Channel Mgmt Model plans, create rules, release plans SFA & SD - Quote to Cash SAP ICM XI Process compensation based upon plans SD transactions 5. Analyze Effectiveness Sales Manage dispute process BI, SFA, Verify payments, Enter disputes SFA, HR Payroll, AP HR Payroll / AP Analyze plans and performance VP Sales, Finance SD transactions & Business Partner Biz Partner, Prods, Price, Territory

TrueComp Suite Analyze (TrueAnalytics) Target Audience: Executives, Bus. Analysts Build (TrueComp Manager) Communicate (TrueInformation) Target Audience: Field Sales, Field Mgmt. Resolve (TrueResolution) Target Audience: Field Sales, Field Mgmt. SAP Data Actionable Insight Plans, Rules, People Flexible Workflow Self-Service Target Audience: Comp Analysts, Comp Mgrs.

How Integration is Done Today CRM SAP Enterprise Business Suite Callidus FI Accounts Receivable SD Order Management Materials Management Business Intelligence Service Management FI Accounts Payable General Ledger HR Payroll SAP Enterprise Business Suite Business Intelligence Master & Transactional Data Source Systems Settlement & Reporting Systems Compensation Processing Business Partner

Integration Scenario and Roadmap Partner Contract will only include Powered by NetWeaver Certification for the Callidus TrueComp Incentive Compensation Management application Initial integration will focus on CRM and ERP Business Partner Master Data for employees or partners who will be awarded incentives via Callidus TrueComp SAP Business Intelligence SAP Enterprise Business Suite Settlement Systems Standard SAP Analytics Content SAP NetWeaver Business Process Platform (BPP)

CALLIDUS

TrueComp

Incentive Compensation Management

ERP Transactional Data Master Data ERP CRM Master Data Transactional Data

Joint Value Proposition for Achieving Sales Performance Optimization

Drive Revenue and Profitability with Proven ROI

Strategic Benefits of an Automated ICM Solution *Source:SAP customer experiences Callidus ROI Whitepaper 2-5% 50-99%

Productivity gain from reduced ‘shadow accounting’

Reduction in compensation disputes

Improved Quality Sales Productivity 60-100%

Reduced payments errors

Revenue 10-20% 10-20% 40-60% 2-5%

Savings from reduced reporting costs

Compensation management staff savings

Overall reduction in cost versus existing solution

Incentive budget savings from reduced errors

Operating cost 4-6% 10-20% 4-7% 8-10%

Increased revenue from product and channel growth

Increase in cross sell/up sell rate

Increase in indirect sales

Increase in close rate

Impact Tangible Benefits *

Strategic Benefits of an Automated ICM Solution

Flexible system allows for rapid changes in compensation models driven by changing business conditions

Individual goals always aligned with corporate goals and strategic objectives

Highly motivated sales force

Competitive advantage for attracting and retaining talent

High data integrity

Lower cost of ownership due to easier integration with other systems

Improved analysis capabilities to enhance decision making

Improved visibility and control

Enhanced management of end-to-end business processes

Increased business flexibility, efficiency and margin impact due to a flexible platform

Higher Revenue Potential Lower Costs Increased Managerial Effectiveness

Tangible Benefits of an Automated ICM Solution* (1/2)

Revenue

4-6% Top-line revenue increase from product and channel growth

10-20% Increase in cross sell/up sell rate

4-7% Increase in indirect sales

8-10% Increase in close rate

Sales Productivity

50-99% Reduction in compensation disputes2

2-5% Productivity gain from reduced ‘shadow accounting’

*Source:SAP customer experiences Callidus ROI Whitepaper

Tangible Benefits of an Automated ICM Solution* (2/2)

Operating Cost

10-20% Savings from reduced reporting costs

10-20% Compensation management staff savings

40-60% Overall reduction in cost over existing disparate solution

2-5% Incentive budget savings from reduced errors

Improved Quality

60-100% Reduction in payment errors

*Source:SAP customer experiences Callidus ROI Whitepaper

Why Companies Choose SAP/Callidus Solutions

Increase average transaction size 6-8%

Decrease average sales cycle time 10-20%

Reduce compensation error rate by 60-100%

Increase Salesforce productivity by 2-5%

Tangible Business Benefits: ROI Business Agility Lower Risk Enterprise Alignment

Address changing market conditions via effective mid-year adjustments

Align sales performance with enterprise strategy

Integrate demand, sales and supply chains

Accelerate new product introductions, territory and channel realignments, and compensation revisions

Deploy proven, NetWeaver-certified solutions

Benefit from SAP’s resources and commitment

Leverage joint investment and vision

Leverage benefits of market leading ICM solution integrated with robust SAP NetWeaver Platform

Gain actionable insight based on current results

Align behavior with enterprise goals

Adjust plans and actions in real-time

Analyst View on Benefits ….

Organizations are achieving tangible benefits from sales ICM software, including increasing accuracy (reducing errors to less than 1% per payout), reducing resource requirements in administrative and IT departments (by 50% or more in some instances), fulfilling deadlines and saving money.

Success in acquiring operational efficiencies and tactical benefits could create complacency and sap any commitment to pursue strategic benefits.

Sales ICM — in conjunction with territory management, quota management and analytics — can help organizations increase sales performance via improved organization, guidance and influence on sales behaviors.

Gartner 2007

What Analysts Say About the Benefits of Automated ICM

Market leading ICM solution combined with robust SAP NetWeaver Platform and ESA

Maximum Flexibility and Adaptability : Compensation plans can quickly be aligned with product innovation, updates to corporate strategy, and changes in business environment

Reduced risk and Total Cost of Ownership to SAP customers

Additional leverage from your investment in the SAP platform

Summary: Value of Joint SAP/Callidus Solutions

Distribution Industry Leaders Choose Callidus ICM Insurance Telecom Retail Banking Manufacturing & Technology

Customer Case Study: DIRECTV DIRECTV delivers satellite-based services to US customers in homes and businesses. DIRECTV’s complex operations include some of the world's most advanced technologies in the delivery of a seamless viewing experience. DIRECTV has more than 15 million customers, we're the industry leader in satellite service.

CUSTOMER PAIN POINTS

Comp system breaking under weight of its four-terabyte database and 25,000 plus payees

Payments made daily, weekly, monthly, and anytime in between; system buckled under this pressure

Payee base outgrowing their 30 homegrown applications, including Microsoft Excel and Access

Needed to address over/under payments, inability to provide an audit trail, difficulties disseminating reports, and future growth

PROJECT OBJECTIVE

Need for a robust ICM system to use sales compensation as a strategic differentiator when incenting its distributors, dealers, suppliers, and manufacturers (Fry’s Electronics, Best Buy, and Circuit City)

Need to resolve compensation related disputes

Need to build trust and confidence with its sales channel when paying and providing visibility associated with variable compensation

Nortel Selects SAP/Callidus for Enterprise ICM Nortel is a worldwide provider of communications technology with 33,760 employees in over 150 countries. Nortel has a global sales force of approximately 3100 sales people who are paid incentive compensation via a labor intensive legacy compensation application and spreadsheets .

Why Enterprise Incentive Compensation Management (ICM)?

Failing legacy comp system with high IT maintenance & compensation staffing costs

High volume of dispute resolution calls with slow response turnaround from large team using manual process resulting in (from 6 Sigma analysis) “shadow accounting” consuming 7% of sellers time and accounting for 23% of attrition rate.

Requirement for a flexible global compensation and reporting environment that is responsive to and supports sales leadership revenue generation goals

Need for compensation plan modeling tools for development of more focused and appropriate sales plans for different lines of business and regions.

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Additional Slides

Incentive Compensation Value Proposition Achieve Superior Business Value Operational