Time For A CPQ Reality Break

The CPQ market continues to be one of the fastest growing in enterprise software. In the latest Gartner Magic Quadrant for Configure, Price and Quote Application Suites published 29th of January this year, Gartner estimates that market revenue for CPQ software reached approximately $878M in 2016. Gartner further predicts this market will grow 20% per year through 2020.

CPQ’s strong growth potential is continuing to attract investors, venture capitalists and sway enterprise software companies to acquire, build or merge their way in. Looking for a quick onramp into CPQ sales cycles, apps are quickly being created and launched. Creating quotes, using CRM-based (mostly Salesforce) APIs to get customer names, addresses, and contact data then adding in pricing and updating opportunities is where many start. Next steps include creating or buying a product catalog to expand the scale of quoting and product configuration. Guided selling, pricing table support, subscriptions, and services are often next. Every new CPQ startup or joint venture follows a comparable roadmap.

What’s missing from the roadmap of many CPQ vendors is an enterprise-grade product configuration engine and an excellent user experience to get the most out of it. There’s no focus on how to create a more agile product configuration experience that capitalizes on each customers’ unique configuration thread or unifying workflows. A vital part of customers’ configuration threads is support for prebuilt configurations, Bills of Materials (BOMs), ability to save prebuilt configurations, visibility to real-time inventory and more.The configuration thread also includes quoting workflows, which often require data from a diverse base of enterprise systems to be effective. This is a challenge from many CPQ solutions which have not prioritized integration beyond CRM.

How are CPQ startups who rushed into the market reacting to the needs enterprises have they can’t meet? They shop for product configuration engines that are low-priced enough to fit into their cost structures, begin building one or look to partner with a company who has product configuration expertise. At least 15% of the CPQ vendors today are in this situation, further fueling mergers and acquisitions across the landscape. Just delivering a quoting app sitting on a cloud platform is not enough to be competitive in 2018 and beyond, vendors need to do much more for the enterprises they serve.

Strip away all the hype of what CPQ can and can’t do for any business and what’s left is a core set of truths. These truths stand the test of time because they scale across any manufacturer and transcend the limitations of many CPQ apps that are in reality quoting utilities. These core truths include the following:

• Taking a model-based approach to product configuration scales, relying on product catalogs alone often fails. Modifying an existing product model once or replicating and editing it for a product line extension takes seconds. Modifying a catalog can take weeks. Product models are making CPQ strategies more agile, responsive and profitable.
• Creating, managing, promoting and pricing product configurations using a lifecycle approach scales faster and sells more than any other approach. Imagine you’re managing a series of product lines and you have ten new product launches coming up next month. In the majority of CPQ apps, you’d have to update each product catalog entry manually to the product description and pricing field level. By taking a more agile CPQ approach, all that needs to change is the product model once.
• Complex new products are proliferating faster than ever before, making time-to-market and time-to-customer deadlines more challenging to meet. This is the crucible that every CPQ app is passing through right now. With new products proliferating and customers wanting them faster than before, only those product configuration systems designed for scale and speed can keep up. The graphic below illustrates how an Agile CPQ strategy works.