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In a very quiet and very subtle move, Callidus Software (NASDAQ: CALD) has offered to purchase the assets of ForceLogix for about $3.75 million. This sales applications software company provides sales coaching software to help sales managers realize the full value of their sales representatives. In 2010, Callidus Software entered into an OEM agreement to embed ForceLogix within a new offering called Sales Coaching; it clearly concluded that the opportunity to expose the application to further opportunities in its customer base was too important for ForceLogix to be allowed to continue to operate independently, and so it used some of its stated cash position of almost $11 million at end of September. This step into a pre-sales and sales management application is a key move toward expanding its sales performance management position. I would guess that Callidus sees some significant revenue growth in 2011 and beyond for its purchase.
The ForceLogix application is one that I have been tracking for many years. It has come a long way; its latest 5.5 release includes a series of great advancements. The core application is known to be quite robust in providing a series of performance and process metrics about a sales rep as well as guidance on places to improve. The advancements that came out in August with the new version include support for sales manager coaching, performance improvement plans and reviews and coaching suggestions. In addition, the application includes an offline version with synchronization to enable coaching and reviews even when not connected to the Internet. Critical advancements in workflow, notifications and tracking make the core application more robust, and its utility is improved with new management views for assessing actuals, competencies and trending. These advancements support what our sales benchmark research found improve efficiency of sales processes is a top benefit of sales performance management that every organization should be investing into and Callidus is one of the key suppliers of it.
It’s important to note as well that ForceLogix had stepped up its development efforts along with focused sales efforts. In fact, its list of customers has grown to include Corning, Lenovo, Motorola and others. Foreshadowing this move, ForceLogix had already been expanding its integration with Callidus with single sign-on and use of underlying information and metrics. Now with Callidus buying the assets, will it offer jobs to all of the employees and keep the same level of investment and growth? Time will tell.
On the Callidus side this is a positive growth opportunity, and one that comes as the company has been reducing its operating footprint and costs. Despite this shrinkage, Callidus is closing new customers both at home and across the globe (which is a growing percentage of its business); among those added are AAA of Michigan, ESPN, Health Net and others. Callidus has been working its way through a very difficult transition from a license-and-maintenance model for its offerings to a recurring software-as-a-service rental approach that now represents 72 percent of its total revenue in its third quarter results. This conversion is no easy task and as it finds further growth in the market will provide an interesting case study of business management and an operating model transformation.
Focusing on profitability and margins is good financial management, especially for a public company, but it alone is not enough if the company isn’t able to market itself effectively against peer competitors – in this case, competitors like Merced Systems and Varicent, which have been increasing their marketing and sales efforts, and Xactly, which appears to have flattened its spend in this area. Most interesting was the pullback of Callidus’s efforts with salesforce.com; at the latter’s 2009 Dreamforce conference it showed the new set of products in which it had invested significantly and which I analyzed. Since then Dreamforce 2010 has come and gone and Callidus did not even exhibit at the event. Although in my opinion salesforce has not invested significant effort recently in advancements for sales forces (See: “Can Your Sales Force Trust Salesforce.com?“), there remains activity in that area, and all of Callidus’s direct sales compensation competitors were present and this year’s show and actively in dialogue with prospects and Xactly appears to have the front seat as salesforce uses its products and has many partnering activities in motion.
Competitively, Callidus, like others, will face the reentry of Oracle into this space with its Fusion CRM for Sales which I have recently assessed (See: “Sneak Preview and Analysis: Oracle Fusion Applications for CRM and Sales Organizations“), and major releases from Varicent (See: “Sales Compensation Easier To Manage with Varicent 7“) and Merced (which already has a Coaching Plus application that it highlighted at its recent conference. This will make it even more important for Callidus to effectively market its advancements and value if it is to compete in this highly competitive environment. It has appeared in 2010 that it has removed itself from most common marketing activities to slash its operating expenses. For Callidus the question is whether SAP will come back and embrace Callidus as a partner or as an acquisition or will IBM decide to expand its existing sales analytics solution.
Callidus has also found some other critical application expansion opportunities. It recently highlighted an onboarding application that has had yielded growth in the insurance industry – it helps streamline agents’ ability to operate across carriers quickly, in some cases in only 30 minutes compared to the week or more required in a manual process. This application is yet another example of the potential of sales performance management.
I believe that in acquiring the assets of ForceLogix Callidus Software has a great opportunity for growth, but it will have to beef up and improve its marketing efforts to ensure it can compete for consideration in this area. It has a solid foundation as we have assessed its company and products in our Value Index. Clearly the newly augmented application will offer an opportunity to sell back to its customers, but Callidus must reach for the larger opportunity of organizations starting with sales coaching and then progressing to improvement in sales compensation and other sales performance management applications that it has and should expand, build and partner more for in the future.
Mark Smith – CEO & EVP Research
Contact centers face a number of challenges beyond simply answering customer calls. Among them are improving customer satisfaction, increasing the number of calls resolved at the first attempt and ensuring agents comply with regulations. But chief among these, my research into contact center analytics shows, is the mandate to reduce the average length of time it takes to complete calls.
Doing all of these things requires information. My research also shows that companies are just beginning to realize that one of the most substantial sources of data that can be used to derive this information is the calls themselves, which they can record. However, accessing this data and analyzing its content has until quite recently been possible only through the application of an enormous amount of manual effort, in the form of supervisors or analysts listening to recorded calls and reporting on their content.
This began to change when vendors such as Nexidia emerged with products that automate the entire process. Nexidia’s suite of products, Enterprise Speech Intelligence (ESI), allows companies to capture information about calls, analyze their content and report on what both agent and customer said. Its search facilities allow companies to pick out calls containing defined words or phrases and thus focus as needed on customer sentiment, agent performance, trends and the root causes of calls.
ESI’s proven abilities have allowed the company to achieve record performance this year and raise additional funding that will allow it to continue investing in the product as well as expand into other focus areas and geographies. This growth is likely to accelerate even more now that it has announced a major partnership with Cisco.
As well as being a major supplier of telecommunications equipment and software, Cisco has a major presence in the contact center market. Its products are used by a large number of companies that have chosen to build their centers on the voice-over-Internet protocol (VoIP) or are using a mixed traditional and VoIP environment. These include a multi-channel ACD and systems for call routing, computer-telephony integration and multi-channel contact management. The new partnership between the two vendors means that using an integrated offering, companies can now capture and analyze calls as they are happening; Nexidia’s tool taps into the voice stream in real time and delivers the content for analysis, enabling a company to identify what is being said as it is being said.
This opens up all sorts of promising new possibilities. Call center management could identify as it’s happening an agent saying the wrong thing or missing an opportunity to close the call or make an up-sale. It could listen to customers’ negative comments as they’re made, making it possible for a supervisor or senior account manager to intervene. The possibilities are unlimited, determined by the rules built into Nexidia.
For this all to happen, though, someone must be alerted about the situation and take appropriate action. As those that follow me regularly know, I am a great advocate of the smart desktop as critical for customer experience management, which provides the ideal tool to alert agents, supervisors or others. Somewhat to my surprise, I have discovered that Cisco recently released such a product, Cisco Finesse. This provides a desktop that integrates traditional contact center functions into a single thin client. It allows companies to build a customizable environment that gives agents access to multiple systems and sources of information and provides a place where alerts can be surfaced. The integration with Nexidia thus completes the chain, allowing companies to alert users based on real-time analysis of the call flow. The calls can of course also be recorded, enabling them if they wish to use all the normal functions of ESI to gain insights from them.
This opens up all sorts of possibilities for companies to innovate in how they handle customer interactions, which means they have another promising tool to use to provide customers with better experiences. Doing so has of course become an even higher priority in today’s challenging economic circumstances. Are you ready for this level of innovation?
Richard Snow – VP & Research Director