CPQ (Configure, Price, Quote) is a term often used to denote the sales quote generation process at companies offering a complex range of products and/or services. Other terms that are used in this same context are ‘Quote to Cash’ (QTC) and ‘sales configurator.’
The idea behind CPQ software is to help companies configure complicated offers, correctly calculate prices and ultimately produce fast and accurate quotes based on that information. Ideally, CPQ software bridges the gap between lead and order.
Over the years, I have been involved in numerous CPQ tool selection projects and have seen CPQ tools implemented successfully at many companies. However, there have also been many less successful or even unsuccessful projects. There are several pitfalls, generally created by fear or caution, that stand in the way of successful CPQ solution selection and implementation and actual return on investment.
Although it is a superseded view, many managers still believe that it is better to have an all-in-one solution delivered by a single provider. It seems such a safe bet, which is precisely why every major ERP provider out there offers such an all-in-one solution. Managers are scared off by integrations and double maintenance, while any self-respecting provider claims that its solution is open and easy to integrate. The fact that the CPQ process in no way compares to the ERP process is overlooked altogether. An ERP provider has ample knowledge of the structured processes that make up the production process. And the same goes for the consultants working at the provider. But CPQ is a totally different field, where entirely different skills and expertise are needed. It is comparable to CAD and CRM, where it is generally accepted that these are not supplied by one and the same provider. No one would even consider replacing the CAD system when implementing a new ERP system (yet again). Practice has shown on many occasions that a successful CPQ tool can outlive multiple ERP systems.
The belief that simply making the technological possibilities available to the sales organisation is the solution, is entirely misplaced. I have seen numerous companies come unstuck due to their staunch conviction that the tool is the solution, based on the idea that as long as you stuff all the technological possibilities and limitations into an intelligent system (configurator), it will be problem solved. Things are not so straightforward in real life. Firstly, this is a long road and it often turns out that it was never properly ‘finished’ because it takes so much time and effort to work out all the possibilities in advance. And that while developments continue apace. The market changes, technology changes: it is basically a case of shooting at a moving target. But the biggest problem is that companies reason from the inside out. The sales department does not want a technological system. In too many cases, I have seen them simply refuse to use it. And then there is the complexity, which makes maintenance extremely hard for anyone. What sales needs is help converting customer requests into sales. What are the questions we need to ask to analyse a customer’s application and translate the data to a solution that stays within the company’s technological or commercial boundaries, regardless of whether or not these have already been worked out. This way, sales is a kind of gatekeeper for a company, making all order handling processes and systems so much simpler.
CPQ is uncharted and elusive territory for many. This makes it very tempting and seemingly safe to take small steps. Companies often go for simple solutions or start out with a simple product. The downside to this is, however, that the effect will then be minor and that it will not offer a total solution. If sales cannot put together and calculate that complex and not-100%-standard project with special conditions, but can only do a single or several straightforward projects, there will be no acceptance. Let alone if other sales channels, such as dealers, agents, or end customers, also need to be able to compile their own solution, today or in the future. Only if you base the selection and implementation phasing on the targeted end situation will there be a large chance of success.
Implementing a CPQ solution has major impact. Choices made in this respect will decide how successful a company will be. Where ERP systems are basically easy to compare, because the requested functionality is clear, things are different with CPQ systems. Partly because companies do not grasp the complexity and impact, they tend to make less rational choices, based on appearance (GUI, user interface) or the required initial investment, for example. They fail to adequately factor in whether the system can handle the required complexity in such a way that the logic will remain maintainable. And how much support will actually be needed during implementation, and more importantly during everyday use. More often than not, a seemingly safe bet for a minor investment leads to high implementation and maintenance costs whilst not delivering the targeted functionality.
In fact, all the above pitfalls have lack of vision and ambition as their common denominator. If a company’s management lacks vision and ambition, they will always make safe choices, and a CPQ implementation will then always prove costly and do little good. Management needs to have a clear goal and vision, be prepared not to restrict itself to standard options and have an open mind in trying to build the ideal process. Only then will they be able to achieve great things and secure the kind of return on investment that far exceeds their initial expectations.
To recap, my recommendations for your CPQ solution are the following:
Want to find out more? One of my colleagues or I will be happy to meet you in person.
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