Companies typically pay between 2% and 10% too much in commission to their sales staff, according to Geoff Roach, Callidus’s vice president of software operations in Europe.

Such a claim illustrates the difficulties that many organisations have in managing bonuses, commission, stock options and other forms of staff compensation, a factor that has encouraged the formation of a slew of incentive management software vendors.

Callidus Software, founded in 1996 by former technology consultants Andy Swett and Scott Kitayama, is considered by analysts at the Gartner Group to be one of the market leaders in this nascent market.

The idea is that the software can help major organisations – typically those with more than 200 direct sales staff – to better manage and track the whole gamut of staff compensation schemes. In the process, they can offer more sophisticated packages to key staff and ensure accuracy in the process. And it is not necessarily just for sales staff, says Roach.

Analysts see big potential in the incentive management software market. AMR Research predicts that revenues in this sector will grow to $2 billion (€2.3bn) by 2005.

Furthermore, Callidus has been singled out as the market leader by analysts at the Gartner Group. This is no mean feat for a privately held company that can count business application giants such as Oracle, Siebel Systems and SAP as competitors.

“The fact that Callidus has focused purely on enterprise incentive management from the start has enabled us to stay ahead of our larger competitors,” claims Roach. However, it also competes with pure incentive management software vendors such as Incentive Systems and Synygy in the US, and Practique Associates in the UK.

Callidus has scooped up some $70 million (€80.3m) in venture capital. The company’s core product is TrueComp. It comprises three modules: TrueComp Manager automates the day-to-day tasks of administering compensation; TrueComp Modeler provides online analytical processing (OLAP) capabilities; finally, TrueComp Viewer enables users to access and view data related to their own activities.

Callidus also relies heavily on partnerships with other technology vendors to augment its own technology. For example, Viewer is based on Actuate’s front-office reporting software. The OLAP capabilities are based on analytics software from Hyperion. The company also partners with data integration specialist Informatica to provide the capability to pull together data from legacy systems.

TrueComp is not cheap. A licence for around 200 users costs between $150,000 (€172,000) and $200,000 (€230,000). Customers can expect to pay about the same price again for implementation, either by Callidus or one of its system integration partners.

Despite its high price, Roach claims that TrueComp can deliver a quick return on investment. In just six months, Veritas Software of the US says that it managed to recoup the $750,000 (€861,000) it paid for a TrueComp licence, says Roach.

Callidus certainly boasts a blue chip, multi-national customer base. It has more than 70 customers including Nike, JP Morgan Chase, Apple Computer and, of course, Veritas.

Roach is confident that the company will reach profitability before the end of June 2002. A public offering should follow before the end of 2003, he says. Key to these ambitions will be an increase in European sales where it currently has just five customers.

During 2003, Callidus will face increased competition from the major enterprise application vendors such as Oracle and SAP, which have neglected incentive management software. “[They] will offer outstanding integration to their application backbones,” says Joe Galvin of the Gartner Group. But, he adds, larger vendors will still fail to close the capability gap with the pure-play vendors such as Callidus.

At the moment, therefore, Callidus looks to be in a strong position in a market that analysts view as being increasingly important for productivity. “Sales organisations that fail to execute reporting and payments of incentive commissions in a timely and accurate manner will decrease sales-force productivity by 20%,” says Galvin.