In its Critical Capabilities for Sales Performance Management report, the global research and advisory firm Gartner rightly recommends to assess vendor capabilities against business requirements and conducting an evaluation process that includes a request for proposal (RFP) and proof of concept (POC).
A carefully conducted POC is indeed important. And it does provide great insight into vendor capabilities and how a system might work in your environment. At the same time, the formal proposals received in response to an RFP (or alongside a POC) provide critical information regarding the vendor’s evaluation of your project. An important element of these proposals is – no surprise there – the pricing.
Experience has shown that Sales Performance Management (SPM) pricing proposals these days are not always straightforward. This is not necessarily due to intentional misdirection on the part of the vendor but partly because of the costs associated with cloud deployments.
Whether intentional or not, many attractive price proposals in the SPM space include hidden costs that you will only learn about later.
Typically, SPM pricing is based on a price-per-user formula with a sliding scale. That is, the more users you have, the less expensive the price per user. The trouble arises when you begin implementing your shiny new incentive compensation management system. Then, you may discover additional costs that were not obvious in the proposal, creating misaligned expectations in terms of the solution’s total cost of ownership.
Without getting into specific figures, here are three hidden costs you should look for when calculating the long-term value of an SPM solution.
- Transactions processed – Vendors generally provide a basic package based on transactions processed per month or year. However, you are also likely to be charged for data records stored in the system such as payee data, sales transaction, etc.
- Sandbox – With any live SPM system, you need a sandbox environment to experiment with new code, specifically to determine the impact of changes to things like compensation packages, sales teams, classifications, regions, credits, and rollups. This is surely necessary, but can be seen as a separate service, for which some vendors will later introduce separate fees.
- Calculation fees – The frequency of transaction and compensation calculations can also play a role in unexpected vendor fees. Depending on your business, you may need different kinds of data processed at different frequencies, or even periodically ad-hoc. Your needs may also change over time. You may begin with a weekly compensation report, but switch to a daily, which requires much more frequent data processing. Your SPM costs can be seriously impacted by these frequency issues, which should be taken into account when evaluating a vendor proposal.
To reduce or eliminate such hidden costs, you’ve got to first be aware of them. Then, you can include these issues in your RFPs or look for them in shortlisted proposals, as integral to the scope of work, pricing information, and terms and conditions. Done right, this makes your evaluation of the total cost of SPM system ownership as accurate as possible.
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