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We have just released our 2012 Value Index for Total Compensation Management (TCM), in which we evaluate the competency and maturity of vendors and products. Our firm has been researching this category for many years, and our latest benchmark research in total compensation management found some improvement among applications in a field where many organizations still use outdated applications to manage an area with large financial and human capital impacts.
I am excited to bring this research to market again this year. No other research firm performs this level of analysis or follows it up on a regular basis. The Ventana Research methodology utilizes a request for proposal and assessment approach, and each value index takes six months to complete; unlike other analyst firms, we look at the product details that have the most importance to successful adoption and use. In the process we identify best and worst practices that further refine how we assess technology vendors in this category.
Our research, including this Value Index on Total Compensation Management, looks at the complete range of aspects of compensation, from types of pay and benefits to the processes required to manage them and communicate with workers. We examine role-based requirements for an organization, as well as integration with performance and talent management. We look closely at the key product areas – usability, reliability, manageability, adaptability and capability – and also the customer assurance areas of validation and TCO/ROI.
A lot has changed among TCM suppliers in the past year. For instance, Plateau, which we rated Hot in 2011, was acquired by SuccessFactors, which in turn was acquired by SAP. Now SAP is focused on using SuccessFactors offering and placing the product investments on this offering. Taleo was acquired by Oracle and its product was put aside in favor of the newer Oracle Fusion Compensation Management.
This year we found many talent management vendors claiming to manage compensation, but some provide only a place to enter current compensation data for use in performance reviews or provide limited capabilities. These vendors lack a total compensation management approach that can be used across all roles – administrator, management, manager and employee and support the processes, communicated and integration required for meeting these needs and support of talent management.
Our Value Index methodology assesses vendors across the seven categories noted above, each weighted according to its priority to buyers, and sums the results to 100 percent for scoring purposes. We placed a heavier emphasis this year on usability, reliability and manageability, which organizations indicated in our benchmark research are increasingly higher priorities. You can read the details on our methodology and process in the full TCM Value Index report.
Our analysis in the 2012 Value Index found six vendors that provide robust offerings. All six are rated Hot, which is the highest value level and demonstrates maturity of offerings. SuccessFactors ranks at the top, closely followed by Peoplefluent, then SumTotal Systems, Oracle, Excentive and ADP. We noted in our analysis that SuccessFactors and Peoplefluent showed rapid product advancements every quarter, and their focus on usability, manageability and reliability helped raise them above last year’s ratings. Oracle is a vendor to watch, with its latest release of Oracle Fusion Human Capital Management, which includes compensation and is available both on-premises and in the public cloud. New to the Value Index is Excentive, which is dedicated exclusively to total compensation management.
We take a lot of pride in our Value Index, and we believe it is cool to be a Hot vendor. The competitive market for these applications comprises a very mature set of products. Congratulations to the vendors that survived our detailed assessment processes and granular analysis, which represent how organizations assess and select vendors. If you want some further information, you can download the executive summary. We look forward to offering continued guidance to buyers on this critical application category for HR, finance and operations professionals who need to engage and retain employees by taking a comprehensive approach to compensation management and applications.
CEO & Chief Research Officer
Retaining talent and managing financials related to compensation should be a top priority for the HR and finance functions of companies, and many of them realize this. In our recent benchmark research in total compensation management, 72 percent of participants said it’s important or very important to have a compensation system aligned to their processes. One newer provider to the market, Excentive, started in 2002 in Europe and expanded globally in 2009. Its Excentive Compensation Cockpit supplies more than just a managerial view of compensation; it’s a total compensation management application that enables users to design and model compensation across an entire workforce or for the specific needs of the sales and service lines of business.
Excentive has customers that operate across multiple countries, such asVodafone, Mercedes-Benz and Stryker. Its software supports the strategy of using compensation to retain talent and not just an obligation. As many organizations seek simpler methods to deploy sales incentives for agents and dealers, Excentive has made its software easy to set up and deploy in distributed organizations. In addition, Excentive uses the performance benchmarks of its customers to develop a range of metrics concerning calculation, communication, reviews and disputes, comparing results before and after using its tools.
Its application has a range of functionality with a good level of usability and manageability. They make it easy to access and integrate transactions across existing systems to recognize deals and link to individual employee compensation plans. The software includes a managerial dashboard that provides access to detailed reporting that can be used to assess to a performance index. It addresses compensation auditing and governance, which has become a key priority to ensure that appropriate compensation is given. The auditing capabilities offer easy navigation to the rules underlying a bonus or incentive, which helps in resolving disputes that can affect an organization’s ability to address issues in a timely manner.
While the product name’s focus on a cockpit is not entirely descriptive of what it offers, it can provide a view of sophisticated compensation plans covering merit pay, variable compensation, incentives, stock options and other forms of compensation. The compensation modeling environment provides flexibility to handle the rules and workflow required to operate divisions and varying currencies. In addition it provides integration back into payroll systems that can be tracked through the system. Excentive also can help in bonus management, salary review and equity management, activities that are not always considered part of compensation management.
Our research indicates the importance of integrating compensation management into talent management; more than one-third of organizations indicated this is very important, and two-thirds ranked lack of integration as the top barrier impeding compensation planning. Excentive should work to provide integration points to such systems with its application, and maybe even partner with providers that need a more sophisticated approach to compensation, such as Cornerstone, Saba and Ultimate Software; some providers already have an integrated compensation management application. Excentive also should be considered in areas like sales compensation and incentives where companies have complex compensation models related to sales quotas and products across customers and territories. The sales compensation management market includes suppliers such as Callidus Software, Merced Systems, Varicent and Xactly, but Excentive is demonstrating that it can compete in what are now two different markets with only one product, which depending on the alignment of compensation and sales operations could give it an advantage in the next couple of years.
We could not include Excentive in the 2011 Value Index for Total Compensation Management because the company had fewer customers and company efforts operating in North America in 2010, but it will be part of our 2011 evaluation for publishing in 2012, after its large growth in this part of the world. Excentive has a good opportunity to shake things up in the compensation application market. Organizations should consider its application and the successes of its customers as part of their own research.
Mark Smith – CEO & Chief Research Officer