The economic collapse has been pretty good for Varicent Software Inc.
Over the past 12 months, as big banks started coming under close scrutiny for what many believe are errant compensation and incentive packages, some of the largest financial institutions in the world started turning to the Toronto-based software firm to help clean up the way they reward their staff.
The surge in new business is something Varicent should be used to by now. This summer, Profit magazine listed it as the fastest-growing company in Canada measured by five-year revenue growth. According to the magazine, Varicent's revenue between 2004 and 2009 jumped a whopping 12,473 per cent.
"We think we're in a very buoyant market, an emerging market, one that people understand instantly," said Dan Shimmerman, the company's president and CEO. "But the complexities are inherent, and the barriers to entry are very tough, so we're extremely bullish on the future."
Varicent specializes in sales performance management and incentive compensation. In layman's terms, the company helps very large enterprises figure out whether they are rewarding their employees for doing the right things - a calculation that usually involves sales staff but can extend to many other kinds of workers. In the big banks example, that means figuring out whether it's actually a good idea to reward staff for things such as the volume of loans approved or number of credit cards issued. It sounds simple, but at large companies the various incentive programs, rules, thresholds and other factors quickly turn the process into a complex mess. That's where Varicent comes in.
"Where [clients]unearth the most significant problems is in errors in the plans," Mr. Shimmerman said. "Miscalculating, assigning quotas, assigning overlays that shouldn't be there - that can cost millions of dollars."
Varicent's specialty is handling very complex incentive plans, or simple plans that process large volumes of data. One of the company's clients, for example, is a debit payment firm called Elavon, which deals with some 65 million transactions a month; each one makes a difference in some element of the incentive plan.
Mr. Shimmerman co-founded Varicent in 2003, along with Marc Altshuller. Both of them had been working for a company called Clarity Systems, which designs software for business budgeting and forecasting. It took the co-founders about a year to get their software up and running, but it wasn't until 2005 and 2006 that companies first started signing up to use the product.
Today, Varicent also has offices in England and Hong Kong. Its clients include General Electric, Fidelity and Research in Motion. The company ended 2009 with $25-million in sales.
Varicent's business seems to have a somewhat healthy relationship with the greater economy: When times are tough, companies may want to take a closer look at their incentive plans for possible waste; when times are good, they may want to broaden those plans. Either way, Varicent has a pitch to make.
The company tries to differentiate itself from its competitors by giving clients better visibility into the results their incentive programs are generating - essentially, providing clients with proof their plans are or are not working. The kind of results companies look for can vary greatly. Mr. Shimmerman points to a waste management company that was able to improve not only its incentive program for sales staff, but also one for drivers. "They based them on metrics like safety and timeliness and cleanliness - intangible metrics that they weren't previously able to push down to them," he said.
The company's meteoric growth has nonetheless raised concerns that it simply can't maintain such a blistering pace. Indeed, another 12,000-per-cent revenue increase over the next five years would appear to be much more difficult to achieve than the same growth from scratch. However, Mr. Shimmerman said the company is designed to be as forward-looking as possible to keep from stagnating as the workload grows.
"We've tried to put guys on the management team and in the company who have seen and done much more complex things. That's how we've scaled the company from the beginning," he said. "If we have a milestone ahead of us, we try to build the company much bigger than that, so that when we hit that milestone, we won't trip over it."