At Xactly, the Gazelles Are Caught on the Way Up Not Once, But Twice

Among some lower-middle-market companies, few customers are more coveted than those that reside in the middle market’s bottom quarter.

Such is the case with Xactly of San Jose, California, a venture-backed, software-as-a-service (SaaS) firm that lately appears to be just as enthralled by the growth of other bottom-quarter firms as it is with its own. This says a lot, considering that Xactly signed on 75 new customers during the company’s third fiscal quarter ending on October 31, 2012.

Among the signees were Aerchive, Angie’s List, Forsee, Live Ops, Rosetta Stone, and Zendesk — all newbie spenders and all lower-middle-market firms. For Xactly — a developer of sales-compensation tools — the middle market’s bottom quarter these days represents not one selling opportunity, but two. Inside the quarter’s upper reaches, Xactly continues to tout its traditional enterprise platform (Xactly Incent), while at the lower end of the bottom quarter — where emerging firms barrel across the $20 million in sales mark — Xactly is aggressively promoting a “self-service” cloud offering (Xactly Express).

The seam separating the two worlds can be found roughly at the $100 million sales mark, according to Scott Broomfield, a senior vice president and general manager of Xactly’s small and middle-market businesses.

“When a customer gets to be at about $100 million in sales, this means that they are now a 400-, maybe 500-employee company, and it’s here, between 400 and 500 employees, where the complexity of the sales cycle escalates quickly,” explains Broomfield, who views the $20 million sales mark and $100 million sales mark as key doors-of-entry for Xactly within the bottom quarter.

At the $20 million mark, Broomfield estimates, firms are roughly at 100 employees, of whom 20 percent are likely to be sales professionals.

However, whereas most 100-employee companies would likely have already invested in financial and human capital management systems, they have frequently ignored the area of compensation and bonuses and will very often attempt to use Excel spreadsheets to arrive at a calculation, according to Broomfield.

“So at a 100-person company, there is a back-office efficiency question that needs to get asked, which is, ‘How am I getting the value from our payroll?’ There is big value in paying right, paying in a timely fashion, and paying efficiently, and companies need to define incentives more broadly than just incenting salespeople,” explains Broomfield.

When it comes to garnering lower-middle-market companies as customers, it’s clear that Xactly believes that it is best to snare the gazelles on the way up, and its Express offerings are intended to appeal to those companies at a lower sales threshold where the economics behind SaaS offerings have increasingly been resonating.

The firm’s Express offerings increased their customers by more 30 percent in the third quarter, while at the same time, the developer closed its largest contract in the company’s 7-year history, along with multiple 1,000-plus seat contracts for its Incent platform.

For the moment, it seems that Xactly is enjoying record customer growth in both halves of the bottom quarter.