Build vs Buy: A Comprehensive Guide to Sales Compensation Tools
Build vs buy is one of the age-old questions that applies to pretty much any piece of software. Is it better to buy it or should I just get my IT team to build it? Long answer short: it depends.
What we’re going to do here is break down what “it depends” on when you’re considering whether you should build or buy a sales compensation management solution.
Now, it’s natural if you’re thinking, “You’re selling a SaaS sales compensation solution, obviously you’re going to recommend buying” and, you know what, that’s a fair concern. But here’s the deal, we’re going to do our best to keep this objective.
We’ll give you a spoiler: not everyone should buy a solution. Yes, we said it! There are situations where build is the better option and guess what? We’re going to tell you when.
So, let’s get started!
There's a lot of information here, so if you want to jump right to certain section:
Before diving into the advantages and disadvantages of each option, let’s take a step back and think about exactly what you need from a sales compensation management solution. You probably already have a good idea of what you need it to do, the compensation plans it has to manage, and the processes it needs to work with.
We’re going to challenge you to think bigger. Some questions are for the here and now while others force you to reflect on your long-term needs. The good questions to reflect on beforediving into the “build vs buy”’ discussion are:
How much is sales compensation management currently costing you? How much time and money are spending on managing sales compensation? Do errors frequently need to be resolved? Do you really need to make a change? If you do, how big a change do you need to make?
How do you ensure a smooth adoption process? Regardless of your choice, how will you make sure the different teams will adopt it and use it properly? What’s your approach to getting buy-in from the sales team? The operations team? The finance team?
How will it connect your data? Do you need to pull data from several different platforms? A CRM, HRIS, or ERP? If so, how complicated is it? Do you need automation? Will importing data manually be a sustainable process?
How will you maintain it? The last thing to think about is your organisation’s capacity to maintain a solution. Do you have a large IT team with a lot of bandwidth or will this platform need to be maintained by the sales, operations, or finance team?
Once you’ve had a think on these questions, you’ll be ready to jump into the build vs buy discussion. So, let’s take you through the different options.
Option 1: Use Excel
Everyone’s favourite office workhorse, Excel can manage sales compensation as well. In fact, it’s the solution of choice for many companies. And why would that be?
Pros
It’s Easily Accessible: First and foremost, most companies already have a Microsoft Office subscription, giving their teams easy access to Excel. Since it’s pre-installed on most company laptops and has the flexible spreadsheet and calculation capabilities needed to create and manage sales compensation plans, it’s a logical first choice.
Quick to Get Started With: Companies need to manage their sales compensation somehow. When you compare Excel to buying an external solution, it’s quick to get started with if you have very basic compensation plans, especially since there’s no integration or migration work to do.
Hypothetically, you just open Excel and get to work.
Now, we all know that’s not how it works in real life. When you move outside the realm of super simple compensation structures, VBA training becomes mandatory, the sheets become complex and cumbersome, and managing everything is extremely time-consuming.
Cons
Isn’t Built to Handle Access Rights:Excel isn’t designed to handle multiple users with different administrative and usage rights. Excel is great when only the compensation manager is using it but what happens when the Head of Sales wants to make changes or the sales team wants to see their commission payout calculations?
This is where Excel runs into issues. You can create an Excel spreadsheet but you can’t easily split and share it in a way that people don’t see other’s confidential information. Without major time investments, it’s all or nothing; they get complete access or no access at all. This makes compensation transparency (a big motivator for sales teams) extremely arduous (which means it’s rarely done) and tracking and auditing manual overwrites by third parties a nightmare (which means the Excel is rarely shared).
You’ll also run into this issue if you build your own tool too. Yes, it’s easy to work out who should have access to it on January 1st, 2023. However, when you need to change those access rights, you’re probably going to discover that your tool’s ability to handle that is, well, terrible.
Can’t be Connected to Your CRM and Other Tools: Giving credit where credit is due, Microsoft has made some strides in making Excel more connected. However, it’s still nowhere close to what you need for sales compensation.
Those who manage sales compensation know they require data from multiple sources like CRMs, ERPs, and payroll software. Automatically pulling data from these different platforms into a spreadsheet is nearly impossible. Instead, this is handled manually, which obviously isn’t the best use of your compensation person’s time.
Doesn’t Adjust to Sales Organisation Complexity: Excel can work great when you have a few Account Executives working on the same revenue commission structure. That changes when you start adding BDRs, Account Managers, and Customer Success Managers who are split over different territories. The sales organisation's complexity increases significantly with each of these roles being compensated differently for different sales efforts. While this may not look complex to the sales leader, it can be for the team tasked with the day-to-day management of the sales compensation plans.
Naturally, this leads to large datasets full of complex compensation formulas (all of which you’ll need to create from scratch). While the majority are familiar with dealing with large, complex Excel datasets, these multi-sheet monsters are massive time sucks and increase the likelihood of manual errors.
Excel Doesn’t Manage Large Data Sets Well: Excel does a great job with basic calculations on limited datasets. This can work just fine for those with small sales teams or who have simple variable compensation structures.
However, if you have a big team or use complex compensation formulas, Excel becomes a lot less useful. Not only do they create plenty of opportunities for manual errors, but large, complex datasets also put a huge strain on your computer. This makes working with Excel slow and… ahem… “super frustrating,” putting it politely 😉
It Wasn’t Built to Specifically Handle Commission-Related Functions: Excel doesn’t give you any guidance or direction around the correct way to create and structure the functions that will compute your team’s sales compensation. You’ll need to build the proper formulas and implement them yourself. You won’t get any prompts on how to structure plans or set quotas, thresholds, accelerators, and cliffs which can make it hard to know if you’re doing it right.
You also won’t be able to add workflows to automate your validation processes nor will you get the level of traceability you need to conduct proper audits.
Option 2: Build a Solution
The second option is to build a sales compensation management tool yourself. Now, this can take a couple of forms: it can be a standalone tool or you can build it within another platform like a CRM (Salesforce or Hubspot, for example) or business intelligence tool (such as Power BI, Looker, or Data Studio).
Pros
Can be Built Using Existing Software: When most people think of the “build” option, they think of creating something from scratch. Now, this is definitely an option but another approach is to build the sales compensation management tool within an existing platform. Usually, that platform we’re talking about is a CRM and that CRM is often Salesforce.
Building a tool within Salesforce brings several advantages. All the sales activity and data are already on the same platform, making it easier to track and credit different activities. It also centralises most of your data, reducing the number of integrations you need. When you do need an integration, Salesforce has a huge library of ready-made ones that are at your disposal. You’re also already paying for Salesforce, so building a commission management tool inside of it means you don’t need to get another platform on top of what you already have.
Is Made for Your Needs: One plus on the “build” side is that the software is 100% created to address your specific requirements. That means you’re getting a sales compensation management tool that does what you need it to do and works with your existing tools.
It’s worth noting that this feature isn’t necessarily unique to the “build” option. The majority of well-designed “buy” tools are created to be highly customisable as well. In many cases, more than 60% of it can be adjusted to meet your needs. Nonetheless, it’s still not the full level of coverage you get when building a tool yourself.
You Have a Say in the Development Roadmap: Not only are you able to build a sales compensation management tool perfectly suited to your needs, but you also have a say in how it evolves. Rather than submitting requests to your customer success manager, you can work with internal teams to define, prioritise, and add the features that will be most beneficial to your organisation.
Now, there’s a reason we don’t say you have full control of the development roadmap. The reality is that your IT team (or the team who created the tool) has plenty of other projects on their plate. In addition, your sales compensation and sales teams are going to all be pushing for different features to be added. While you’ll be tasked with managing the development, you’ll also find yourself at the mercy of the competing priorities of the different stakeholders involved in the project.
Cons
Can’t Always Connect with Your CRM and Other Data Sources: Anyone managing sales compensation will tell you that one of the most time-consuming processes is manually wrangling all the data from the different platforms. Now, the point of a sales compensation tool is to automate this, but creating custom integrations for a standalone system is easier said than done.
When you go to the IT team with the request to build a solution, they’re more than likely going to tell you that connecting it with your other platforms won’t be an issue. However, more often than not, the level of complexity involved in making these integrations is underestimated. There’s no guarantee that all your other platforms even have an open API and, even if they do, that the integration is simple to build. The usual result? Significant project delays and frustration.
On the other hand, Salesforce has a large library of integrations at your disposal. This is going to greatly reduce the risk that you’re going to run into issues. That said, nothing is for sure. If there’s no integration or API, you can find yourself in the same situation.
Poor User Experience: When you’re building a new tool, it’s often the IT team (or at least IT people) tasked with leading the project. The design logic of the IT team building the tool won’t be the same as the design logic of the sales compensation people and, usually, user-friendliness isn’t IT’s top priority.
Often, custom-built tools end up being extremely non-user-friendly (translation: ugly and nearly impossible to use). It’s not necessarily your IT team’s fault either, they’re not sales compensation or UX experts. Their goal is to build something that works and move on to the next project. This can lead to extended development processes as the sales compensation team pushes for major UX overhauls or, even worse, they’re forced to begrudgingly go through time-consuming training to understand how to use it. Either way, it’s not likely you’ll be able to use your internal tool to pull together any interesting insights that could inform your business strategy.
The Cost of In-House Expertise or External Consultants: The idea of building your own solution is great in theory, but you also need to have the skills to do it or the budget to hire external expertise. If you’re looking to create a standalone solution, you’ll need to coordinate with your CIO to make sure your IT team has the resources to build it. It isn’t a given, particularly since most IT teams aren’t known to be lacking things to do. You may need to wait for them to integrate the project into their roadmap and hire dedicated developers. You also may be told “no” and made to hire some external developers to get the job done. Either way, it’s going to take a lot of time and money.
If you try to build it within Salesforce, you’re even more likely to run into the need for external consultants. Outside of large companies, very few have a dedicated Salesforce administrator and, when they do, that person is already handling a lot of moving pieces. This again pushes you into the arms of Salesforce consultants, who are going to cost you a big chunk of change.
May Struggle to Handle Complicated Team Dynamics and Commission Structures: Much like Excel, custom-built tools can have trouble managing the complexity that’s inherent to companies with large sales teams and multiple compensation plans. Mapping all your different sales compensation attributes, like ramp-up mechanisms, deferred compensation triggers, and product-specific accelerators, and then creating an internal infrastructure that can handle them isn’t straightforward, especially when they’re different for each team.
Building a solution in Salesforce won’t help you escape this issue either. Yes, Salesforce lets you set up custom fields, calculate formulas, and set up dashboards and reports. But managing advanced commission calculations? Good luck. You’ll need a team of Salesforce experts working for months, if not years, to build something capable of handling complex sales compensation plans. Because Salesforce wasn’t designed to manage sales compensation in the first place, there’s a real chance that you’ll never get all the functionalities you were looking for even after tons of development time.
Too Inflexible to Accommodate Constant Change and Manual Overwrites: Sales compensation plans are changing all the time. In most companies, it’s at least each year or two. Sure, you built your tool to handle an accelerator but what happens when you want to add product-specific cliffs and a team component two years later? If it wasn’t designed to handle these broad changes, custom-built systems (both standalone and in Salesforce) require even more resources to build out these new capabilities. You’re then again stuck negotiating with your IT team or rehiring external consultants to build them (and that’s assuming either is available).
There’s also the issue of manual overwrites. Most built platforms aren't able to manage different data layers for a single object. If a built solution doesn’t have this capability, manual overwrites can become highly disruptive, inaccurately modifying data elsewhere. For example, you may manually change a deal close date for sales compensation purposes. Without the ability to manage this, the platform will change the invoicing date as well.
Time-Consuming to Create and Maintain: Building a solution (whether that be a standalone tool or in Salesforce) takes time. From scoping out the process, getting budget approval, integrating it into project timelines, improving the user experience, getting people trained on it, and then building out the extra essential capabilities you’re bound to need, it’s not a fast process. Sometimes time is on your side but more often than not, you need things quickly. This isn’t a strength of the “build” option.
On top of being time-consuming to create, it can be equally demanding to maintain. When you build a tool or standalone module in Salesforce, you’re on the hook for maintenance. Fixing bugs, managing access, troubleshooting user issues, complying with industry standards, and building new features, that’s all you. Realistically, all this maintenance requires a person (or people) whose roles are at least semi-dedicated to managing and maintaining the system.
Option 3: Buy a Solution
The third option is to buy a sales compensation management solution from a vendor. There’s a variety of vendors out there: some focus on smaller businesses while others are experts for mid-market and enterprises. What’s important is finding the right solution for your specific needs.
Pros
Capable Solutions are Designed to Handle Complicated Team Dynamics and Complex Commission Structures: The first major advantage of buying a sales compensation solution is that they’re designed to handle sales compensation. That means they’ll have no problems dealing with shifting account attributions from one region to another with a follow-through of estimated potential earnings when sales incentives are paid monthly. In organisations with multiple roles across multiple territories, being able to manage this is pretty much mandatory.
Not only can these solutions handle your complex plans, but purchased solutions also help you correctly structure and implement your plans, providing you with commission-oriented prompts (because, you know, that’s what they’re made for) so you can be sure you’re using the right functions in the right way.
However, buyers beware. It’s not a given that every “buy” provider is capable of handling your level of complexity. Some smaller vendors focus on only simple use cases while providing a display that shows salespeople their potential earnings. These won’t be able to handle complex plans.
Instead, you need a robust solution (like Amalia) with the technical capabilities and in-house expertise to handle complicated team dynamics and commission structures while still being user-friendly.
Ready-to-Use Integrations and API Support to Connect with Your Multiple Data Sources: As we mentioned, sales compensation processes are heavily dependent on gathering data from multiple business systems. The big plus to purchasing a solution is that the APIs you need to centralise sales and financial data and create a single source of truth are already there and ready for you to use.
Whether it’s native integrations or easy-to-use API connectors, the overwhelming majority of sales compensation platforms connect with a vast number of CRMs, ERPs, Finance, HR, and sales tools. These integrations make it simple to bring all your data into one platform. This doesn’t only let you automate many of your sales compensation processes but it turns your sales compensation management solution into a business intelligence tool, helping you pull strategic insights from the centralised data.
User-Friendly Interface is Designed to Handle Frequent Compensation Plan Updates and Exceptions (Like Manual Overwrites): In contrast to Excel and many “build” solutions, sales compensation tools are designed to provide a seamless user experience. In short, they’re created to be as simple, understandable, and easy to use as possible.
To accomplish this, most non-legacy vendors use a no-code approach. Rather than coding complex formulas, a no-code approach to sales compensation gives you visual interfaces that let you easily add and remove different attributes to create your sales compensation plans. Since they’re simple to use, making changes and updates to your compensation plans is a breeze (when compared to the other options).
There’s also the matter of exceptions and overwrites. With Excel, it’s hard to know who made an overwrite or exception, especially when it’s shared with multiple stakeholders. Some “buy” solutions provide the option to manually make in-platform overwrites to the data. However, they also keep an audit log, so you know who made what change and they don’t overwrite the data in the connected platform (which supports good data hygiene).
Customer Support to Get You Setup (But They Need to be Good): Another plus of buying a solution is the fact that, if your vendor has a good support team, you won’t be alone. Most solutions provide some level of customer support, helping you get set up and comfortable using the platform. Ideally, these customer success managers are experts in sales compensation. If they are, the support team can be a valuable resource, especially for companies that may not be super confident about all the ins and outs. Having someone guiding you through the initial setup process can help catch common pitfalls and ensure your plan is implemented correctly.
But, as we’ll see below, this is dependent on them being good. If they’re not, you’ll find yourself feeling just as by yourself as you would using Excel or building a solution.
Quicker to Implement and Easier to Scale: Time is a luxury that usually isn’t on the side of the people managing sales compensation. Non-legacy “buy” solutions are generally cloud-based and nimble, making them quick to get up and running. We’re talking weeks rather than months.
Speed doesn’t just apply to set-up. User-friendly sales compensation solutions offer their customers this level of agility when it comes to editing existing plans and creating new ones. With features that let sales compensation people easily make changes ranging from team updates down to an individual salesperson’s compensation, “buy” solutions are much more adept at scaling with companies.
Cons
Customer Support Isn’t Up to Your Standards: Customer support can be a huge benefit, but it can also be a curse if it’s done badly. If you opt for a solution where the support is lacking (or they’re not sales compensation experts), you may find yourself without the guidance you need to properly set up your plan and get the most out of your platform.
For example, we’ve heard of an incentive expert working with a sales compensation vendor for months trying to customise the formulas they needed to connect the account allocation in a particular territory. However, it didn’t work and their provider’s support person wasn’t knowledgeable enough to make the fix before the payout calculations needed to be done.
This is why it’s essential to do your due diligence on potential providers’ customer success teams before deciding to buy.
Development Roadmap is Driven by the Provider: You can (and should) evaluate vendors to understand how well they meet your needs. While you may find exactly what you’re looking for, the reality is that you’ll never have complete control over the product roadmap. You can share feature requests with your customer success manager but, in the end, you’re at the mercy of the provider. It’s they and they alone who will decide which new features are created.
This can become particularly frustrating and risky if the vendor’s roadmap doesn’t align with your needs. The last thing you want is your internal credibility to take a hit because the vendor isn’t delivering the features that you need (and that they may have promised you). The costs associated with changing are high, so making the right choice and aligning on their roadmap is critical for both yourself and the organisation.
Switching Costs are High: Sales compensation management platforms are particularly “sticky”. By “sticky”, we mean hard to change. A properly implemented sales compensation management solution sits at the centre of your organisation, integrating data from multiple platforms and driving processes that affect sales, operations, HR, and finance. Switching to something new isn’t exactly straightforward. Between the migration and process handover, there are a lot of interconnected details that need to be kept in mind. Again, this is why it’s important to do your research to make sure you’re getting a solution that meets both your current and future needs.
Sometimes There are Hidden Costs: Some providers have huge libraries of integrations, tons of case studies, and sizeable customer lists. However, these same vendors may have many unhappy customers due to hidden costs. This situation is particularly applicable to some legacy providers who make a large portion of their revenue from the professional services that are necessary to get their platform to work correctly. These hidden service costs, which can easily be up to 30% of the annual cost of the platform, can be an unwelcome surprise.
There’s also the matter of additional feature costs (which you can find from platforms both new and legacy). Do you want to use this new forecasting tool? Well, that costs extra. Again, this can be a bitter pill to swallow for companies who think they are getting a whole solution but discover they need to pay extra for various add-ons.
What’s Best for You?
You’ve seen the pros and cons of each option. So, which is best for you? It’s going to depend (yes, again) but this is what it’s going to depend on:
Size of Your Sales Team
The first attribute that’s going to help you make a decision is the size of your sales team. Do you have 100s of BDRs, AEs, and Account Managers each selling different products in different markets around the world? Well, you’re going to have different needs than a start-up with five AEs doing everything.
The Complexity of Your Compensation Plans
The next criterion is around the complexity of your compensation plans. Companies using a simple revenue commission structure won’t need a hardcore sales compensation management tool. Those with tiers, accelerators, cliffs, team components, deferred payouts, and high volumes of deals closed every period are going to require something more capable.
Business Goals and Growth Trajectory
Last but not least, you need to reflect on your business goals and growth trajectory. Take a long-term view and forecast how you see your organisation evolving throughout the potential lifetime of your sales compensation tool. Maybe you have 10 BDRs and 10 AEs right now but are planning to have 80 next year. Making sure the solution can meet your future needs is just as important as ensuring it can meet your current requirements.
Our Recommendations
We’ve outlined the options and broken down exactly what criteria you should be using to make a selection. Now, we’re going to give you our recommendations.
When You Should Use Excel
You should never use Excel. No, we’re kidding 😉
If you’re a small company with less than 10 salespeople and/or have simple sales compensation plans, Excel is the way to go. Let’s be realistic, there’s probably only one or two compensation plans to deal with and not that many people to manage. Building or buying a solution at this stage is overkill. Better focus your time and resources on selling.
When You Should Build a Tool
Building a sales compensation management tool can be a good option when you’re a large company with an existing CRM or IT team, a comfortable budget, and a longer sales cycle. Given the internal expertise and budgetary availability, these companies are capable of building, managing, and maintaining an effective custom compensation management tool. Long sales cycles reduce the complexity the tool will need to manage, further increasing the likelihood that it will be a useful solution. That’s not to say it will be easy, but strong internal skill sets and long sales cycles greatly improve the chances of a successful outcome.
When You Should Buy a Solution
If you’re not a small company and not a large company with a CRM and IT team, buying is the best option. You’re likely managing a mid-sized to a large team of salespeople with multiple plans. You’re past the days of Excel but you’re not necessarily in a place where you have the need and budget to have a CRM or internal-facing IT team.
You’ll be able to roll it out quickly and you can leverage the provider’s customer success team’s expertise to help you properly implement and set up your compensation plans. The user-friendly features make it easy to modify existing plans and add new ones as you grow. Overall, you get access to compensation expertise (that you may not have yet) and a ready-made solution that will allow you to implement an effective sales compensation strategy that rewards the right sales efforts.
Our one major word of caution if you decide to buy: do your homework on the provider’s approach to customer success. An excellent customer success team can make or break the success and adoption of the solution.
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