ZDNet: CRM Watchlist 2014 Winners: Finishing the Onesies

April 7, 2014-

By Paul Greenberg


Every year, there are a few companies who not only show up out of nowhere, but also then go on to be one of the winners. NexJ, the company you just read about was one of those back in 2011 — and now, in 2014 we have PROS, which is arguably one of the most surprising ever. What is surprising? Not exactly what you might think.

Really, if you think about it, this is a company that is publicly traded, has over $100 million in revenue, has a market cap of over $1 billion, has been around 28 years and has some powerful partnerships that increase their reach significantly.  You would think this would make them a prime candidate for a CRM Watchlist winner.

Yet, until this year, I never heard of them – except peripherally. Part of it might be that they own a very small, though highly strategic niche market – pricing optimization.  Part of it might be that their visibility in CRM is minimal – in part, because they have just recently (in 2010) hired someone who seems to be a very dynamic and savvy CMO – though it is their first CMO ever – which means they went their first 24 years without one.  That would explain why their visibility on a broader stage than just the pricing optimization theater in the round was at a minimum until recently.

Yet, with or without their visibility, this has been a very successful company with a great deal of opportunity to be even more successful if they tweak what they are doing – and that’s all it probably would take.  Not only would they continue to own their niche and expand their success there – because it’s a genuinely important business area that has quantifiable results – but they can expand their reach and thus their impact – and thus their revenues – with a few twists to their approach and an expanded view of their universe.

So what exactly is pricing optimization, you might ask, since it’s not something commonly discussed in the world of customer facing technologies and strategies?   It is, as it implies, the science and strategy of choosing the best price for a set of or particular goods and services. What isn’t so simple are the factors that go into choosing the price that works for your individual product, product portfolio, service offering etc.  In fact, it’s not only the business imperatives such as margin, etc. but also customer behavior. Segmentation is a big part of the analysis necessary to determine price. But not just, “the customer is spending this on this product” but anticipating customer behavior given an incredible array of factors in the market place.  So you are dealing with historic data, traditional analytics but also predictive analytics anticipating future customer behaviors.  That’s the tip of the iceberg. I don’t have the bandwidth or the experience to go into details but you can find some of them in this ebook by PROS, The Definitive Guide to Pricing, well worth reading. (I’d direct you to the Wikipedia article on pricing but, honestly, I do have enough experience to know that it sucks. So don’t bother).  Their technology supports the choice of strategy and also the programs that are part of the broader CPQ market – configuration, price, quotation – market.

If you need to put them in a place that is more CRM-squishy warm, they are a solid player in the sales effectiveness or sales optimization market – I assume the reasons are obvious, especially when you are thinking CPQ which has long been associated with the salesforce automation market – since Oracle introduced quotation systems into their SFA offering in 2004.   But even if you don’t see that, see it this way.  What kind of improvement in the odds of closing a deal are possible if you have precisely the most attractive price for your PROSpective (get it?) customer which, at the same time, provides the best possible margin for your company?  ‘Nuff said.

What makes this particularly interesting is that PROS just chose a small narrow slice of the sales optimization/effectiveness (your pick) market to focus on. This is, by the way, a time honored and often highly successful strategy that can work to your advantage. Years ago, when the amazing Steven Olyha, was running CSC’s and then Unisys’s CRM practice, he took a look at the Consumer Packaged Goods (CPG) market and sliced it laser-thin with an intense focus on trade promotion.  Unisys, in particular, became the rock star for trade promotion strategies, programs and technologies and the practice was wildly successful. Steve’s not in CRM any more.  I miss the guy.  The strategy worked big time – and clearly has for PROS.

What does PROS technology do then?  How does it support this highly complex strategic endeavor?

Effectively there are four components that they offer:

  1. Deal Optimizer – This is the one that comes the closest to the heart of sales optimization/effectiveness.  It is an analytics engine that recommends pricing, discounts, and quotes to (hopefully) increase the chances of a successful deal closure.
  2. Price Optimizer – This is more general than Deal Optimizer and more strategic. The idea is to take a lot of information about markets, companies, changing conditions, competitive information, existing examples, pricing histories and a whole lot of other variables and use them to determine pricing strategies and price lists for a market.  It also is able to take into account the business rules of the company using the tools and apply these strategies across all business units, according to PROS “by applying price lists based on business rules and optimization science.”  What makes this module particularly intriguing is that it can modify all this pretty close to on the fly – meaning it can account for volatility in the market.
  3. Rebate Optimizer – This one not only create rebates, but analyze them prior to execution – showing what the financial impact will be on, for example, a pending deal.
  4. Scientific Analytics – These analytics focus on how pricing affects profitability.  That isn’t as easy or simple as it sounds because to do that, you have to anticipate customer behavior, given the prices that you are suggesting to them.  How willing are they to pay those prices – given their purchasing histories?  What would be the impact if they weren’t willing? What kind of modifications have to occur with pricing to both get the customers to buy whatever it is you sell and to still provide the kind of profitability that you are looking for?

Thing is, though, they don’t rest on their laurels when it comes to continuous improvement.  They invest heavily in R&D to stay on top of the market and the latest thinking and also to create the best possible tools and techniques for pricing optimization.  To give you an idea, their R&D spend, in 2013, on revenue of $144 plus million was around $32 million roughly 22% of their total revenue.  Jeez.

The personnel and the culture that supports that staff are pretty remarkable. Aside from a deeply experienced and highly capable management team led by CEO Andres Reiner, an extremely business savvy leader, who took the company to its current heights, they have another layer of data scientists and 25 people with doctorates in various appropriate disciplines working full time on what they call transformational approaches to pricing optimization and more generally CPQ.

But the personnel are both the foundation of and only as good as the culture.  One of the things that genuinely impressed me was their holistic view of culture (and their ability to support their story with stories). Unlike many of the submissions – winners or otherwise – they pay attention to all the things that go into creating a productive culture – one that reflects and sustains a company that likes its employees, values their contributions to the company and at the same time, understands the company’s social responsibilities as a significant institution that lives in a society that provides it with “sustenance.”

Among their actions:

  1. Keep employees aware/engaged – Two electronic newsletters produced a week – Java Jolt – sales tools, tips, techniques, stories; Watercooler – all employee news with the stories of the lives of the employees, not just the workplace
  2. Regular employee get-togethers– happy hour events (5 a year) at nearby bars/restaurants, at PROs expense; family celebrations; cultural holiday celebrations; health fairs.  Thirty events like this held in 2013.
  3. Community Outreach – PROS gives time off for volunteer work; Their Community Outreach Program (COP) is run by employees; Local area support to Houston like the Houston Foodbank Drive; Paralyzed Veterans Clothing Drive; quarterly blood drives; mentoring young people – and this is a small percentage of their participation.
  4. Employees are valued – not only compensation with benefits and employee stock purchase, but investment in professional development for employees (PROS pays for classes); awards of varying kinds that come with bonuses and prices attached including referral based awards.

These are representative of a textbook paradigm for a company culture that yields happy employees and results – and a workplace that people want to work at. Since 2010 they have grown from 378 to 800 employees – and managed to sustain the culture.

They have a very significant set of alliance partners with Microsoft, SAP,, and Oracle as their technology partners and Accenture, Deloitte, IBM and others as their integrators.  They partner with Wipro for energy and utilities work.  They have the big boys, but because the thinking isn’t around ecosystems, I’m of the mind they are doing about ½ or less of what they could be doing here. (see below for a little bit more detail).

This is a company clearly on a trajectory upward. It shows itself in their awards won, their employees, their revenue increase, and their increase in impact.  But they are so solid and so well organized and, while they represent a niche, it is such an important niche, that they could be even more than they already are by several magnitudes. But to get, among other things, they need to consider the following.

Things they must do

  1. Old school? Back to school – PROS is a remarkably progressive company as you can see from the description of their culture above.  But they show their 28-year-old age when it comes to their handling of analyst relations.  They have an antiquated understanding of the influencer world. Their dealings are with the traditional institutional giants like Gartner, Forrester and Aberdeen, and, at least judging from their entry and what little else I can find, that’s it. That needs to continue, of course. In fact, they should be expanding that to add IDC to the mix.  But as I’ve said more than once in these reviews, the world is not a world of analysts per se any more but a world of influencers.  That means that, in addition to the larger analyst relations and marketing research firms, there are boutique firms such as Constellation Research (with Ray Wang and Peter Kim, etc) who carry the same level of clout (though in a different fashion) as the bigger guys; there are independents out there – solo operators like Esteban Kolsky, Brent Leary, Denis Pombriant, Josh Greenbaum and Vinnie Mirchandani, who need to be reckoned with. There are content providers who are also major influencers like the folks at Diginomica led by Dennis Howlett who have to be accounted for.  There are media guys, like David Myron, editor in chief of CRM Magazine (among others), who also have serious pull that can’t be ignored.  Yet, I’m pretty sure that PROS doesn’t talk to the bulk of those I mentioned here – and there are many more. They need to bring their analyst relations up to speed to the 21st century’s version – influencer relations and start to deal with those that carry equal weight – though weight distributed in different places – to the traditional institutional firms.  Time for a big shift there.  PROS does so much else just plain right.  Time to step up and put this into place.
  2. I should be able to see for miles and miles… – PROS has been a star for a long time, though they didn’t get a CMO until 2010 – which means 24 years after they began.  That sets them back just due to the sheer length of their wait, though their current guy, Tim Girgenti, seems to be a mover and shaker type of CMO – just what they clearly needed. I don’t know the guy, but I’m impressed with his credentials. Nonetheless, while they have relationships with CRM vendors, they have no visibility nor do they seem to participate in the CRM industry, which is not a good thing. The CRM industry, as I have been told by many and certainly have observed, has some unique characteristics.  Unlike any other technology industry segment, it has a semi-organized but organic community that incorporates the influencers, vendors, buyers and media – all of whom know each other. Judge this any way you damn well want, as great and cool or insular and not so cool – I don’t honestly care.  But it is what it is. Participation in the community isn’t mandatory, but it certainly helps. Given the value that PROS brings to varying sales and CRM ecosystems, and the partnership they have, participation would be invaluable to them.
  3. Think ecosystem, please – Oddly, with all these remarkable people, and this interesting matrix of partners, and fascinating valuable culture, there is a gap in their thinking that needs to change somewhat dramatically (and, to be candid, dramatically stated by me) – and that is – they need to start thinking in ecosystems. They don’t. That lack leads to their discontinuity of having this great partner network and a nearly complete lack of visibility in the very community that their strength lays – CRM.

PROS was the 2014 CRM Watchlist’s biggest surprise. They are an excellent company, making real impact now.  Can they continue that? Can they accelerate their growth and increase their impact? I’m betting yes, if they make the improvements they need to. When you have a company with the culture they have and the smarts they manifest, it’s a pretty damned good bet to make. Plus, they won the Watchlist this year. That counts for something, I hope.


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