Mark Smith's Analyst Perspectives

Many organizations want to improve the performance of their sales and customer service operations but have difficulty increasing efficiency and producing better results. One barrier to improvement is sticking with the status quo of managing sales operations and performance through spreadsheets, as 47 percent of organizations still do, according to Ventana Research’s benchmark research on sales performance management. Also many organizations continue to expect good results from using sales force automation (SFA), but our research shows that 39 percent of organizations are not satisfied with these systems. We also found that the number-one driver of efforts to improve is to make sales performance strategic. In customer service, optimizing utilization of call center agents is a top requirement; another is increasing customer satisfaction, cited by 89 percent of participants in our benchmark research on agent performance management.

Merced Systems takes on these challenges with its performance management software designed for sales people and customer service agents. A key focus of Merced is to help create a closed-loop process that extends from coaching through performance to compensation and incentives that can motivate strong performance. I have tracked the company for more than five years and recently attended its annual customer summit to see examples of its deployments and learn more about best practices in some of its customer organizations from around the world. These large organizations include BT, ING, Nationwide, Sprint, Telstra and others that have deployed Merced to tens of thousands of sales and customer service professionals.

Merced has expanded its product suite since the last time I reviewed it, moving into sales compensation and modeling by acquiring U.K.-based Practique and since then building around it a range of applications including sales coaching and analytics. Merced has brought the same approach to agent performance in customer service, adding capabilities for business users including analytics, planning, modeling, reporting, dashboards, process, workflow and organizational development. Let me review the major components of the product suite.

Merced PerformanceSuite is currently in release 3.8, announced earlier in 2010. It has more robust hierarchy support, a Microsoft Excel add-in, application monitoring and the new Incentives Plus module for integrating variable pay and rewards to enable pay-for-performance efforts. The Observation Management application for Coaching Plus provides assistance for evaluations and use of best practices for driving incremental improvement. Coaching Plus provides dashboards for understanding performance and enables root-cause analysis on why improvement is not occurring. With a simple environment based on forms and workflow, it can be used to set proactive alerts that notify supervisors of issues that need to be resolved. All of this is built with a common library of key performance metrics that are useful for understanding performance and the impacts of coaching.

Merced Incentive Compensation Management provides a platform for modeling incentives through roles and hierarchies so managers can calculate variable pay and rewards in a consistent manner. The application provides a spreadsheet-style interface that makes it easy to design and manage calculations. An essential feature is the ability to make adjustments from claw-backs, charge-backs and draws, which are common occurrences in sales organizations. The application allows users to perform quota management and determine progress toward attainment, along with the ability to submit payment disputes, approval and integration to payroll through workflow and audits. Compensation plans can be communicated directly from the application to the workforce.

Analytics and dashboards remain central to MercedIntelligence, and now the company has launched Sales Compensation Analytics, which uses technology from MicroStrategy to determine how to optimize sales performance. At the conference Merced also unveiled a territory planning capability.

Merced Systems provides its products in both on-premises and hosted forms so customers can choose how to buy and where the software actually operates; our research finds that customers prefer to have such a choice. Merced Systems has made significant improvements in its hosting platform with safe-harbor certification, a new storage-area network (SAN) and a 64-bit computing technology infrastructure. Merced already hosts over 150,000 users and says this approach is very popular with new customers.

Merced Systems previewed its next major product releases, which will increase support for performance processes in sales and customer service including advanced workflow and a portal. Merced has not announced support for mobile devices in its applications, but Sprint, one of its largest customers, has the applications operating on its HTC smart phone. Merced is also investing in its client service and customer success team to increase loyalty; like its users it depends on satisfied customers to adopt its applications.

Merced Systems does not provide everything that an organization needs to manage agent performance, but to fill the gaps it has developed partnerships, such as with Nexidia for speech analytics, which my colleague has discussed (See: “Merced Systems and Nexidia Partner for Agent Performance Management“). He also has reviewed them in more detail. Partnerships help Merced broaden its suite, as our Value Index on agent performance management found.

Merced Systems has come a long way since the roadmap was set to unify sales and service performance that I assessed in 2008. It is a top-ranked vendor of sales performance management in our Value Index assessment. Its growing number of customers and reinvestment in R&D for expanding its product line suggest that Merced is breaking away from the crowd as it is continuing to hire and has had seven years of profitability. If the advances continue, it could become the next salesforce.com in terms of bringing performance management to front office areas of sales and customer service with potential to expand into field service.

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Regards,

Mark Smith – CEO & EVP Research