Sales Management Rapidly Becoming More Science than Art

Sales management in the channel is more mysterious art than science. But as predictive analytics software continues to evolve additional light will soon be shone into one of the darkest corners of the channel.

IBM recently moved to acquire a provider of an analytics application that has been specifically developed to address the challenges associated with managing sales organizations, including the optimization of compensation and allocation of territories across multiple companies.

Varicent Software created a software-as-a-service (SaaS) application that allows sales managers to not only create models via which they can optimize the management of internal and external sales organizations, they can also more accurately predict what impact additional sales people or reseller organizations might have on actual revenue.

According to Paul Hill, IBM vice president for performance management and business analytics, the acquisition of Varicent Software will extend IBM’s analytics push into an area that clearly needs more sophisticated software, especially when transactions frequently involve as many as 20 to 30 sales people that work across multiple organizations.

Today sales managers working in collaboration with the finance department typically rely on a custom Excel spreadsheet application to manage the sales organization. Like most Excel applications those spreadsheets are highly prone to errors. The end result is a lot of contention, especially between external solution providers and the vendors they represent.

Of course, Hill notes that the assumption is that errors always do the sales person or solution provider wrong. In fact, Hill suggests it’s just as likely that analytics applications are going to discover errors that favor the company that hired the sales person.

Theoretically, predictive analytics applications should reduce tension over compensation. But at the same time it will also serve to hold everyone in the channel more accountable. For many salespeople in the channel that may come as a rude shock given tendencies to eschew formal paperwork in favor of, at least in theory, spending more time in the field with customers.

Conversely, the use of predictive analytics might also make it clear that many regional channel managers don’t have much of handle on what is actually happening inside their territories or that most of the sales incentive programs in place or either a waste of time or wind up costing the company more to manage than they are worth.

In a world where compensation is sometimes based on subjective criteria the rise of predictive analytics applications targeted specifically at sales management is also going to require channel organizations to be a lot more rigorous about who was exactly compensated for what, especially in an era where compliance requirements are becoming more stringent with the passing of each new day. Naturally, sales people may not appreciate the complexity those regulations add to the compensation process, but in the U.S. government’s zeal to protect those investors it’s unlikely they are going away any time soon.

What all the means is that for better or worse the latitude that many sales managers once enjoyed as it relates to how they allocated various forms of compensation to business partners is rapidly disappearing. The good news is that Varicent Software is a SaaS application that solution providers can just as easily use on their own terms to figure out who is , and who isn’t, doing right by them.