Published: September 11th, 2015

When Emilia De Simone thinks of how companies should compensate for sales in the cloud space, it’s not about moving from an old model to a new one.

The principal consultant at Sales Incentive Solutions said it’s about accepting that the old models, which have remained the same for decades, maybe a century, are first no longer a one-fits-all and second, must now adapt constantly.

“So as some of these guys get bigger, maybe they should be looking at compensation as something they need to manage and put more resources behind,” De Simone said, referring to a room of solution providers. She was speaking at a workshop entitled Effectively Compensating for Sales in the Cloud World, held by CDN at its annual Channel Elite Awards.

“I think that’s going to be a big shift for some of these guys,” she said.

Naturally, there are challenges associated with a move as big as this. Service providers today are already fumbling between the one-time commission model, the staple of the on-premise era, and new models that somehow encompass incentives for both upfront client acquisition and subsequent monthly account management.

This requires fluidity, De Simone said, something that may still be lacking for the channel.

A big piece, here, De Simone said, was that companies need to ensure that incentive opportunity is the same or greater than previous models.

This may involve lowering the value of the initial sale but ensuring that it can be made up over the course of the subscription (often a year), such as in a 60 to 40 per cent ratio, and building the revenue that the sales rep is being paid for into the targets of the following year.

“Based on the people in the room, this movement towards Target Total Compensation (TTC) and having a variable structure, I think some of them just aren’t quite there,” she said. De Simone explained that, given the prevalence of cloud today, one would think that these kinds of models would be more commonplace.

Nevertheless, she says, there are companies, there are smaller companies who have adapted these practices for three years or more, whereas larger businesses who are more in tune with industry shifts have been phasing similar practices in for a long time.

That is not to say that larger organizations can’t learn from smaller ones, however, especially in the area of simplicity.

To De Simone, a company with 200 sales people tends to believe it needs a complex sales plan.

Similarly, she has seen disasters where plans was not properly explained.

“An average plan communicated well will outperform a great plan that is not communicated well,” she said.

Other strategies that she would recommend to the channel include:

  • When moving from on-premise to cloud, targets need to be adjusted, usually downward and in the beginning, the cost of sales goes up
  • A sales person will dissect every plan and every word to understand how to extract every penny
  • That being said, sales plans need to align with sales reps. This is an area that De Simone says companies do badly. Sales managers are often not being paid the same way as the reps. Companies often have eight or more measures, and should really narrow them down to four at most
  • Knowing your market and competition.  Companies should consider getting together and sharing strategies
  • Auditing plans on an ongoing basis will ensure it works well