Get ready for another high-tech acronym: EIM, which stands for "enterprise incentive management." This is software that helps companies model, administer, and report incentive compensation plans. So, if an employee is doing well, he should get paid more, and vice versa.

One of the leaders in EIM is Callidus Software (NASDAQ:CALD), which went public last week. The company has an installed base of more than 75 customers, spanning industries such as retail banking, telecom, insurance, and manufacturing.

Traditionally, companies have developed in-house solutions for managing incentive compensation programs. But this approach tends to result in errors, lost productivity, and diversion of IT resources. Callidus has a better way, with its product TrueComp. It is a rule-based system that even non-technical people can use.

In fact, companies such as Oracle (NASDAQ:ORCL), PeopleSoft (NASDAQ:PSFT), and SAP (NYSE:SAP) see the allure of EIM and have been implementing such features in their software. Siebel (NASDAQ:SEBL) recently purchased a pure-play EIM player, Motiva.

Interestingly enough, the annual incentive compensation paid out is about $1.5 trillion for American and European companies. So, how big is the EIM market? Even Callidus is not quite sure. According to its prospectus, "specialized EIM systems is currently small, newly emerging, difficult to measure, and may not achieve the growth we anticipate."

Despite this ominous outlook, the Callidus initial public offering did well, jumping 32% on its first day of trading. In all, the company raised $70 million.

This does not mean the IPO market is back to its wild ways. After all, for the past nine months, Callidus had sales of $49.5 million and even a modest profit of $171,000. Not a bad performance in a challenging IT market.

Tom Taulli is the author of six books on investing and finance, including The Complete M&A Handbook (Random House). He is also a professor of finance at the USC School of Business (don't worry, he does come out of his ivory tower). You can reach him