• September 27, 2017
  • You know you need this.

    Many businesses still don’t use CPQ, or configure price and quotation, tools in their routine sales processes. Maybe they don’t need it but if these businesses still cling to spreadsheet-based approaches to track things like price lists and product catalogs chances are good that they’re dealing with more overhead than they need to. Worse, they’re wasting time and therefore money. The choice between quote accuracy and timeliness is a false dichotomy. Today you need to have both or risk always being the best second choice.

    Businesses without CPQ have to check and re-check quotes before they go out the door adding delay and the potential for error. All businesses need to update and edit their catalogues and price lists periodically, but without a CPQ system, they also need to ensure that the right, or current, documents are being used, a never-ending task. As a result, these businesses have to focus on mechanical quote generation rather than the overall quote to cash process (QTC), which is more interesting and way more profitable. Here are some of the top reasons that CPQ automation is no longer optional for your business.

    1. Think faster and clearer. CPQ lets you think faster and to be one of the first vendors in the sales cycle to put a proposal before a customer. CPQ lets you propose quickly and with confidence knowing that your proposal will be complete and compliant with your catalog, price list and other business rules. It also gives you the ability to reconfigure quickly which is often needed.
    2. Lower risk. Standardized quotations take the risk out of giving the house away with an errant quote, making it possible for reps to do their own quoting thus reducing cycle time. Rather than having sales managers review all quotes, a time-consuming process, CPQ enables vanilla quotes to speed along while alerting managers to those that need review.
    3. Accelerate revenue. Faster and accurate quotes help ensure that your offer will be on top of the stack when decision time comes thus speeding decisions.
    4. Better billing. CPQ enhances billing when the two systems are well integrated, by providing an exact itemized list of purchased goods and services for your billing system. Exact copies of quotes can automatically go to the billing department so that when they are accepted and a deal closes, there’s no wasted time producing an accurate bill—and far fewer disputes too. For deals that deliver in multiple parts, CPQ provides clear itemization of what’s promised and what’s already delivered.
    5. Visibility through analytics. A database of quotes is fertile ground for assessing concretely what works well and what doesn’t in your sales process and helps in the never-ending quest to improve it. But that’s another big data problem unless you have a system that can provide the analytics. Bonus points for a CPQ solution that is integrated with your overall CRM, for a deeper view of the sales process, not just the close. Analytics can also flag for review those quotes that stray from accepted rules.
    6. Cloud-based, mobile first. If you’re lucky enough to be using a modern CPQ tool, your quotes can be available on multiple screens—from the CFO’s desktop to the sales manager’s phone, thanks to modern cloud infrastructure. This ubiquity enables better team selling and faster closes no matter where your team is operating.

    Modern CPQ evolved from applications that replaced spreadsheets. But those systems were often expensive and time consuming to operate so they were primarily used by big companies with complex rules and large catalogues. Times have changed and business has accelerated so modern CPQ with its small footprint on multiple devices, cloud capabilities, and built-in AI can now address a larger audience of businesses in a competitive landscape.

    Experienced sales people know there is no silver bullet for advancing every sales process, but they also know of the need to stay competitive. That’s why CPQ that can run on your mobile phone and that integrates with other key systems like CRM, SFA, and billing is no longer a wish list item for most businesses. Professional services companies have their own analogous issues that are solved with services systems that do similar things to CPQ, that’s a topic for another time.

    Published: 5 years ago

    They say it can take a product idea ten years from concept to mass-market appeal but that might be only an optimist’s viewpoint. Some of the best ideas in CRM right now have been marinating for at least that long and for some, much longer. Two great examples are analytics and CPQ that companies like Oracle and Salesforce and others have embraced with passion. Interestingly, each technology has traversed a path that needed other technologies to become fully mature.

    Analytics—and by this we mean business intelligence, data mining—an old term for what we now call machine learning—and big data needed a lot of hardware improvements to make itself prominent. For example, way back in the 1990s Kendall Square in Cambridge, MA, next door to MIT, became known as AI Alley for all of the startups there that were going to enable us to know customers’ minds before they did. Those pioneering companies are mostly gone now but their ideas generated big R&D throughout the tech sector.

    One of the major drawbacks of any kind of advanced analysis is the need for processing power on specific data. To do that you need fast CPUs but also, your data can’t be static and sitting on a disk. So the AI movement influenced not only speedups for CPUs such as multi-processors and federated computing but also in-memory databases and very dense memory.

    So of course it took twenty years to make all this happen but today we’re reaping the benefits of all that investment and research. Now we really do have the ability to probabilistically know what customers in the aggregate will think and we can act by putting next best action suggestions on a smartphone. That’s pretty cool.

    Analytics have come a long way but the ultimate benefit will likely be felt in the IoT as machines increasingly communicate with machines with rich data streams that have to be monitored for exceptions.

    CPQ or configure, price, quote software is even more of a now or in the moment idea. It was once a standalone category that could be grafted on to SFA for companies that needed it. But every company needs CPQ and without it many are reduced to relying on spreadsheet apps that often collapse under their own weight.

    Consider the spreadsheets involved in proto-CPQ. We all developed spreadsheets in-house to deal with needs not addressed elsewhere for the product catalog including prices and descriptions. Businesses also needed a spreadsheet for each deal, which would be updated multiple times within a sales process. Quarterly updates to the product spreadsheet and random updates to quotes invited all kinds of problems.

    Sales reps are known for their ability to seek out the shortest distance to close and we love them for it. But often the path went through using old quotes modified for new deals that often used old product catalogs and price lists and possibly the wrong discounting. In this scenario, management has to patrol every bid, every deal, and that’s getting to be hard to do. Management would rather be promoting the new product line with new pricing and other things that add greater value.

    There’s also the issue of turning the catalog lose on a website so that customers can configure their own solutions. But you can’t begin to do this unless you can build business rules into the process such as Product A is always sold with 2-Product B’s or 1-Product C plus services. Other forms of front office automation, like SFA, make it possible for reps to handle increasing territory responsibilities. This decreases the number of reps needed but leaves their managers with the same amount of work reviewing manually created quotes. The front office strategy today is to manage the exceptions—SFA with analytics and good reporting makes managing the territory easy. But spreadsheet-based CPQ is not a good fit for analytics so CPQ becomes the weak link in an otherwise improved sales process. Spreadsheet CPQ is impossible to manage by exception leading to slow turnaround on quotes and lost deals. To manage quotes by exception, the same as you manage a territory, you need a CPQ system.

    Not surprisingly, this is where analytics and CPQ cross paths. Analytics tools are great at finding the exceptions based on the business rules we set up. Rather than a manager scanning all deals or offers, a rules and analytics based CPQ system can simply flag outliers such as overly generous discounts or incorrect pricing. There might be legitimate reasons for the exceptions but there should also be easy ways to find and deal with them without having to sift through the majority of plain vanilla deals too.

    More than just saving labor or improving accuracy, a business that can more easily pivot on a customer’s quotation request and do it first, is in a better position to win. It’s a form of business agility, an idea much in the news today. Agility is supposed to be about flexibility and the capability to change and evolve rapidly to meet market demands accurately without incurring a great deal of overhead. Business agility is important because, while it might be possible to manually respond to a single special need, it’s not a good idea to base a business model on it. Specifically, responding to special needs—good! Doing it manually over the long run—not so much.

    Last point, if business agility is important to your business then software agility ought to be important too. This means, where possible, using solutions built on the same platform so that they use the same objects and data naturally, without having to rely on massive integrations. In my experience, many point solution integrations take a toll on IT that should be avoided if you expect to maximize your business’ agility.

    CPQ and analytics have come a long way over decades to provide us with some of the needed components of a truly agile business approach today. Spreadsheets have barely changed. In a more competitive world it makes great sense to ensure that every part of your key business processes (there’s nothing more core than sales) is supported by a system, not a spreadsheet, and the best way to do this is with platform based components like CPQ.

    Published: 5 years ago

    Zuora-Logo-Navy-largeZuora, the company that made its bones in subscription billing and payments held its annual user meeting in San Francisco last week and staked out some new turf. It had always been back office focused but its latest messaging includes elements of the front office. Perhaps it’s no surprise given co-founder and CEO Tien Tzuo’s history of having been an early luminary at Salesforce rising to the CMO position before he left.

    The new turf straddles the two worlds we’re most accustomed to dealing with, the front and back offices. This area, let’s call it the middle office, takes data from either side, changes it, and passes it onto processes that go in both directions. Among the applications that act this way are compensation management, subscription billing, customer success management, and possibly HR. But each application area does different things for different reasons.

    Compensation management

    Xactly may be the best example of a pure play comp system though certainly Callidus Cloud should be included. Sales incentive compensation used to be a pure back office thing because it tallied up sales and applied some algorithms then cut checks. But today, comp management is also about motivating people within an active quarter by identifying best opportunities and ensuring appropriate resources are applied. For this, the marketing and sales automation data is useful and derived information is fed back into SFA. That’s a long way from pure compensation.


    Of course you need to make the subscription bills accurate and get them out efficiently, but these systems throw off huge amounts of customer data concerning uptake and use which are valuable in helping to sniff out early warning signs of disaffection, churn, and attrition—all things to avoid if you are a subscription company. It is in this area that Zuora is making a bigger footprint thanks to its acquisition of analytics company FrontLeaf last year. The subscription data run through analytics can easily kick off processes that use billing, sales, and service, another front to back situation.

    Customer success

    Full blown customer success takes a page from subscriptions by capturing subscriber data and marrying it to other client data to produce compound metrics that can give managers a better understanding of how well a business is doing with the customer base. This area might see renewed competition with subscription billing vendors in the months ahead.


    Long associated with payroll and mainframe back office systems, the HR or HCM systems today are lending their data and insights to front office processes like field service and professional services automation influencing deal structure, reporting, and more.

    We could also easily add CPQ to the list too because back office catalogs, price lists, and pricing algorithms come to the service of SFA via CPQ to close better deals.

    So all of these application areas are staking out positions that are neither fully back office and certainly not fully front office either. They are opening up new territory and that is potentially very exciting because the other territories are rather full of settlers and we need somewhere else to occupy.

    I don’t know what to call it but that will come and I hope we avoid something as cliché as the middle office. This new area strikes me as another dimension. We’ve talked about systems of record for a long time and those systems belong to old school front and back office systems. But the new territory embodies more of what you’d expect from a system of engagement, a system that leverages all of the data businesses collect and actually turns it into unique and valuable IP.

    That’s what struck me about Subscribed last week. In so many words Zuora said we’ve done a pretty good job since 2007 of building a solution to the subscription billing problem. But now there are other challenges.

    Sales compensation added several important business processes once businesses were able to take their eyes off of the quarterly challenge of writing commission checks quickly and accurately. Incentive comp became all about doing the right business and boosting profits through being more intelligent actors in the market.

    I think something similar will happen with subscriptions. Now that the billing and payments issues are resolving Zuora is training its guns on pricing and packaging. Think about it, when your products are more or less electrons, innovation can easily happen around how you package and price and it can happen at much faster rates than we see in traditional product development—if you have agile systems.

    This is why the emerging middle ground is so important and why it’s one more thing to keep an eye on even if you’re not an analyst.




    Published: 6 years ago

    I’ve been saying for a while that we’re heading toward an era when process dominates and traditional transactions become just one part of those processes. Now, you might say that’s the way it’s always been and I won’t disagree. But historically, processes were more or less managed by employees who used information systems to inform their decision-making and the result was recorded as a transaction.

    Today we are increasingly asking our machines to run the show and that’s fine but too often we expect the old systems that supported employee mediated processes to support customers. It’s a bad idea too because in my research, one of the greatest sources of customer unhappiness is a process that crashed because the customer didn’t know enough to use the transaction support system properly. Truth be told, Einstein might not be able to fathom some of these older systems and I know he’d be one of the first to complain. He once said repeating the same action expecting a different result is the definition of madness. So I wouldn’t expect old Mr. Relativity to take more than one crack at some of the transaction support systems out there today.

    But there’s all kind of good news for process devotes like me these days. Two major customer facing processes have gotten the support they need and are writing CRM history—CPQ and Incentive Compensation. Another, the loyalty process is on the horizon.


    Like many of today’s star processes, CPQ was a totally manual thing for a long time and it involved many spreadsheets. There were sheets for products and price lists, sheets for discount structures, and of course, proposals were generated on spreadsheets too. CPQ was a manual task that many sales reps found ways around that ultimately cost their companies money. For instance rather than generating new quotes for each customer, sometimes a rep in a hurry would change a few particulars on another quote and have something. This often took no notice of delicacies like one customer’s discount level against another’s. Sometimes prices changed and the changes weren’t reflected in the cloned proposals. Ooops!

    It goes on and on but it’s nice to know that those days are in the past for any company that uses a modern CPQ system. Better yet, CPQ systems make it easy to include the boss in a workflow to check the discounts and configurations. So with all this CPQ became a process rather than just a bunch of loosely tied spreadsheets.

    Incentive Compensation

    The biggest change in processes, I believe, comes in the incentive compensation space. Here’s a process that started in the back office and completely morphed before becoming a sales tool. Compensation was largely a financial department thing handled by the CFO’s team at the end of a quarter. They tallied up sales and cut checks and sometimes there was broad agreement between the back office and the sales reps. Other times, the reps found errors and were upset.

    When automation took over it became very easy to come up with numbers at the end of quarters that everyone accepted. Incentive compensation systems replaced the overlapping spreadsheets that sales managers used to record attainment and incentivize reps, as well as the spreadsheets that the reps kept, often called shadow accounting.

    Then something really interesting happened. Sales managers realized they could proactively plan the quarter or even the year using what had only been a retrospective financial and accounting tool. Not only that but they were also able to more finely tune incentives. Early comp plans stressed a dollar value for making quota but with a real system, managers found they could assign goals by product, profitability, or just plain revenue if they wanted to. The point is they suddenly had the ability to customize the ways they managed people.

    We’re a long way from being done with this conversion too. Process centric systems like CPQ and Incentive compensation are becoming the places where back office meets front. CPQ is most effective when it can easily access back office data about what products a customer already has, the master product and price list, and the customer’s payment history. Incentive compensation can do a better job when it can integrate employee data from HCM systems, for instance.

    In all of this we can see a discussion starting about the incentive process or the quoting process and not simply getting the goals and objectives or a quote out the door. That’s progress because it gets us closer to being in some very important moments of truth with our customers and our employees. What’s next? I am thinking a lot about a customer loyalty process these days. Loyalty is too often associated with a transaction—you buy, I give something, a “reward” in return—which I think is wrong because it doesn’t really promote loyalty. If what you want is some way of assuring yourself that a customer will behave loyally even when you aren’t giving something away, then you need to seriously rethink it. Hint: Apple doesn’t give rewards or discounts but its customers are among the most loyal. Why? That’s a story for another time.


    Published: 7 years ago

    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: 7 years ago