The Blog

  • February 23, 2015
  • CPQ’s Time to Shine

    Transaction_3D-512Configure, price, quote (CPQ) software was once a barely thought about branch of CRM falling under the heading of sales enablement. But lately, it’s been getting a lot of attention from a familiar source, Salesforce.com. The question is why?

    You can easily argue that many forms of business don’t require CPQ so that’s a possible reason it’s been in the background forever. For instance, if you sell a service, chances are reasonable that you need to develop a customized statement of work with calculated estimates of time, materials, labor and few of those things come out of a catalog. Services sales has its own version of CPQ but it’s different and a story for another day.

    CPQ’s sweet spot focuses on line items, quantity, extended prices, add-ons and discounts but why Salesforce’s sudden interest in CPQ? I can think of some reasons. Some, if not most, CPQ systems like Apttus, also manage contracts and you can’t really have a valid contract about a deal unless there’s an itemized list of materials, promises, and all the rest. The same can be said on a services statement of work (SOW) but that’s, again, another story.

    In today’s marketplace many deals are consummated almost without human contact. Two people might get together to specify a need and the sales person will develop a quote and the haggling is conducted electronically, if at all. But the pace of business is so torrid these days that the turnaround time needed to develop a quote, get it approved by your boss, and into the hands of the customer is shrinking. If you can’t deliver quickly, your competition can, which would place you at a serious disadvantage. Subscriptions add a new wrinkle since those deals can be consummated with zero direct human contact. Customers have come to expect contracts as quickly as they can make selections.

    So in thermonuclear terms you could say that there’s an arms race ongoing in many markets to ensure that each sales team is adequately supplied with the tools that enable rapid and accurate quoting. Understandably, vendors like Salesforce want to ensure they can offer their customers a choice of quality solutions and they need to be able to do this at the enterprise level which often requires that the emerging vendors staff up.

    So, a few weeks ago Salesforce Ventures, Salesforce’s corporate investment group swung into action. They led an investment round (the B round) that garnered $41 million for Apttus, a high-flying CPQ vendor. Apttus’ claims to fame are multiple and include being built on the Salesforce1 Platform (very important to Salesforce) and offering some innovative technology that enables the user to access and use Microsoft Office products like Word and Excel to build quotations. No more wrestling with product catalogs and hand writing the first draft for your department admin to decipher. It’s a productivity tool for certain.

    Not to be outdone,  Steel Brick made a similar announcement raising $18 million in a series B round led by Shasta Ventures with participation from existing investors Emergence Capital and new investor, (tada!), Salesforce Ventures. That’s two CPQ vendors running on the Salesforce1 Platform that Salesforce has taken an interest in.

    It’s not strange to see a big dog like Salesforce stuff multiple arrows into its quiver and it’s a big market so I am sure the CPQ players will be able to differentiate well enough for the time being.

    What’s ahead? It’s just me, but I don’t think CPQ by itself is enough to build a story around that you can take to the public markets. In an era of universal platforms CPQ is a good thing to have but it is a feature at the end of the day. It will never be a platform outright, we are too far down that road. All that plus larger vendors’ thirst for end-to-end product and business process coverage suggests either a merger or acquisition or both — the order of events is not clear.

    You could imagine such a scenario for almost every category in the Salesforce AppExchange yet that won’t happen because Salesforce needs a well functioning ecosystem capable of generating billions in annual revenue if it is to reach its goal of becoming one of the biggest software companies in the universe. But CPQ is different, in many ways it is core to selling and CRM, and for that reason I could envision a scenario where one or both of these companies gets acquired by Salesforce as many other core competency companies have already. By investing early, Salesforce might be seeking to identify the right time and price.

     

     

     

     

     

     

    Published: 3 years ago


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