A little more than a year ago, David Achim, the Executive Vice President of operations at Austin, TX based Rome Corporation, was complaining about the spreadsheet based sales compensation management software the company was using. “Spreadsheets are suitable for simple plans but are disappointing to the task of effective sales compensation management,” says Achim. “They’re manually intensive and potentially error prone especially when linking multiple spreadsheets. In addition, spreadsheets aren’t able to provide us with a ‘what-if’ scenarios, web reporting or any auditing capabilities.”

Rome Corporation, an enterprise software company that delivers integrated risk and opportunity management solutions to Global 2000 companies was in search for a product that would help them to do away with the cumbersome spreadsheets. They finally zeroed in on Xactly Incent; an on demand sales application made by Xactly Corp., a San Jose, CA based startup. “We’re excited to finally be able to automate our sales compensation and enjoy the benefits of real-time, web-based visibility with an on-demand approach,” Achim says. “I especially like that with Xactly Incent I can dynamically make changes to our compensation plan and quantify the future expense impact.”

Founded a little over thirteen months ago by Satish K. Palvai and Christopher W. Cabrera, Xactly has raised $12 million in two rounds of funding. In the first round the company raised $4 million from Rembrandt Ventures and Bay Partners. “They (VCs) blessed us on the very first day of meeting them,” says Palvai. Recently Outlook Ventures and Spinner Asset Management invested $8 million in the company.

Palvai, also the Vice President of engineering started the company in March 2005 with his friend Cabrera. They both worked at Callidus Software (NASDAQ:CALD). Palvai was one of the highest paid engineers at Callidus yet after a few years he found his vesting elsewhere. “I was passionate about building products,” Palvai reveals. “It was this passion and also the fact that I was not given any new challenges made me move out of Callidus.” The need to “help medium and small companies with on demand, real-time sales compensation package brought both of us together,” Palvai explains.

Due to high cost of automating sales compensation, only a few sales organizations have been able to realize the business benefits. However for a majority of the companies, the cost to acquire compensation packages has been impractical due to large upfront software license and maintenance fees. Executives and analysts spend hours tweaking the numbers, deciding who gets what bonus, incentive, percent increase, or special parking slot for things above and beyond sales performance and it can get pretty complicated fast.