Real Time Commissions

Real-time commissions mean commissions within minutes or seconds of source data changes.  Commission software vendors all claim "real-time" commissions but few are actually real-time.  The graph below shows that most commission software systems still lag real data updates by days.

There are two major approaches software vendors take to updating commissions:

  1. Report-based.  These systems start with reports in a connected system as their primary source of raw data.  An example would be a Salesforce report.
  2. Object-based.  These systems link directly to the objects in a connected system as their primary source of raw data.  An example would be linking to Salesforce Opportunities, LineItems, Orders, Pricebooks, etc.

Let's discuss the important differences in these approaches.

Report-Based Commission Systems

Report-based commission software platforms don't actually hook into the specific objects in connected systems but rather rely on reports that you create (and update) in those systems.  These systems start their commission calculations from reports in the connected system--let's say Salesforce.   They require that you build a Salesforce commission report and then they use this reports as the raw commission data.  They then calculate commissions based on the data in the report.

One benefit of this approach is that these systems can sometimes use existing reports you have already built.  The big drawback is that this approach is not actually "real-time."  Reps will not be able to see how changes in the connected system affect their commissions any more frequently than you are willing to update your report.  

Sometimes these vendors will try to spin the fact that they are not actually real-time as an advantage.  They might ask: "Do you really want to push updates to your salesforce without anybody in finance reviewing them?"  But this is a red herring.  Real-time systems like Spiff can turn on and off real-time updates.  So you can always do whatever a non-real-time system does but those systems can never do what Spiff does.

Updating commissions in these systems requires that somebody literally logs into Salesforce and refreshes the report, makes sure it still looks accurate,  then re-runs the calculations.  Every time you want the commissions to update you have to complete this process. 

Even if you are willing to do this every 20 minutes or so, or even if you could automate the update of these reports easily--which you typically cannot--this approach has several critical limitations:

  1. The commission system has no idea what objects have changed.  Because the commission software links to a report and not directly to objects (for example, Salesforce deals), it doesn't know anything about object-specific changes. 
  2. Because the system doesn't link directly to objects, it cannot use a push-based approach to updating (see below for more information about polling- vs push-based updates
  3. If your connected system does not allow for a needed report or does not share reports via an API, this approach will not allow you to access the necessary information for commission calculations

These drawbacks make it nearly impossible for report-based systems to do minute-by-minute updates.  It also makes it nearly impossible for the system to draw important predictive insights about what types of commission plan changes lead to improved results.  E.g., what changes to plans will drive increased revenue.

Systems like Spiff are built to automatically refresh frequently (as often as once every 20 minutes) directly from links to objects in your connected systems.  

Object-Based Commission Systems

There are two kinds of real-time updates: 1) polling updates and 2) pushed updates.  

Polling Updates happen whenever the commission system--say Spiff--asks the source system--say Netsuite--for updated information.  Spiff gathers the updated information, puts it into Spiff, and recalculates commissions. 

Pushed Updates happen whenever the source system makes a change to a record.  In this case the source system--again let's say Netsuite--would notify Spiff every time a relevant record changes.  It would push the change information directly to Spiff very quickly (usually within seconds or minutes).  

All of the commission software vendors currently use a polling approach, even Spiff 1.0.  But Spiff is working on a 2.0 version that uses pushed updates.  This will move Spiff's update cycle times for approximately 20 minutes to seconds.

Many vendors claim real-time means updating commission calculations once per day.  Spiff currently allows users to set how frequently they want to update their commissions.  Spiff customers would probably start reaching a practical limit at 20 minutes--meaning the most frequent update cycle possible on Spiff is probably every 20 minutes.  Most of our largest customers update their commissions every hour, on the hour.  

There is a big difference between daily updates and hourly (or more frequent) updates.  So make sure you ask specific questions about what "real-time commissioning" means for the software vendors you evaluate.

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