CPQ delivered in Customer Experience Fashion


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In all likelihood you know that CPQ stands for Configure, Price, Quote. CPQ software helps mainly B2B companies to more efficiently sell highly configurable products. As the name suggests, the software helps sales people during the three steps of configuring the product, getting and agreeing a price for it, and finally initiating the quotation process. The more variables, or parts, a final product has the more advantage a CPQ tool offers to both, sellers and buyers. It is geared for streamlining and accelerating the sales process while reducing errors.

A CPQ system typically ties into CRM- and ERP systems and, apart from being made available to channel partners, is often also exposed through an e-commerce system (have you ever configured your car online?). CPQ currently being a hot topic (and not only since the planned acquisition of CallidusCloud by SAP) there is a good number of companies offering this functionality.

But in many scenarios CPQ also needs a CLM.

Now I hear you asking: what is CLM? After all there are many possible long terms for this abbreviation. Why does it connect to CPQ? And why does this combination make an appearance in a blog that distinctly focuses on CRM, customer engagement and ultimately an improved customer experience?

Starting from the end: CPQ, and by extension CLM, is more and more becoming a link between the front office and the back office and therefore has considerable impact on the customer engagement process, and hence influences the customer experience.

So, what is CLM?

CLM is an abbreviation for Contract Lifecycle Management. As such it deals with the creation of contracts, mostly from a set of predefined clauses, the negotiation of the contract, its ultimate approval and acceptance, and of course, with its renewal.

According to Wikipedia it is the “proactive, methodical management of a contract from initiation toward award, compliance and renewal.

While there is some competition in this niche, too, there are fewer players with high visibility.

The obvious link between CPQ and CLM comes from the fact that a part of the result of a successful quote is usually a written contract between the two involved parties that lays down the agreed upon relationship.

Less obvious, but at least as interesting, is the fact that a contract in itself can be treated as a configurable product.

How’s that?

A contract consists of a number of clauses. Some clauses are mandatory and some are not. Some clauses can get changed while others are fixed. Those changes can get done automatically, based upon underlying rules, by pulling data into them, or manually. There are dependencies between clauses. There is a need to track the history of the changes to the clauses used during the creation of a contract. Clauses themselves change over time. And changing clauses can lead into an approval workflow. Contracts are largely built electronically. Signature is often managed via services offered by the likes of DocuSign, EchoSign, Authentisign, … or similar platforms. G2Crowd offers a good list of e-signature platforms.

Exchange contract with product and clause with part then you are with me.

To be sure, the underlying technologies and even the representations do change. But then, requesting a change in a clause can lead to a change in the price and vice versa. The user groups have an overlap although sales reps do tend to deal less with legal frameworks than corporate lawyers.

However, what it boils down to is that users and customers need and want an efficient way of navigating the process of a complex sale, in an environment that requires the alignment of many different variables. A sales quote at an end needs both, a finalized bill of material along with an offer letter that contains descriptions, pricing, terms and conditions, and more.

Yet, while CPQ gets firmly there are only few vendors that are successfully offering both, CPQ and CLM. And then the solutions are not always well integrated into each other. Microsoft and Salesforce do not have own CLM solutions that address the sales side of the market but rely on partnerships, while SAP will have one via the CallidusCloud acquisition. Oracle offers a “contract management feature” as a part of its CPQ Cloud, which at least offers triggering the generation and reviewing of contract documents out of the quote.

This lack of integration makes it more difficult than necessary for their customers to offer the seamless and efficient engagement that an orchestrated triplet of CLM, CPQ, and CRM can accomplish.

CPQ – The Customer Experience Way

Targeting experiences requires tight integration. To deliver that CPQ needs a CRM, an order management system, and a CLM that seamlessly cooperate throughout the quoting process and then into contract renewal processes. The overall process gets orchestrated by the CRM- or CEM system, depending on the moniker that this system gets. The opportunity, or the quote itself, is the leading entity.

Apart from staple features like workflows, electronic delivery and review of a contract document draft and corresponding redlining, the CPQ-CLM combo needs to fulfill a number of requirements. As far as I know none of the solutions mentioned above can truly deliver them at this time:

  • The contract document is treated like a configurable product, with the clauses defining the variables
  • Even if the CLM stays a separate system it must be possible to formulate rules that link contract clauses to prices and vice versa. This helps in the case of regular subscription payments, to take a very simple example, but in a nutshell product configuration- or –pricing changes need to possibly link contract changes, like using a different set of clauses
  • The CLM itself needs to be able to work on its own document storage as well as on document management systems that are already available in a company, at least supporting the most important ones out of the box
  • Clauses, if changed for a contract, need to trigger customer specific versions of these changed clauses that can be maintained independently from their originals. This way it can get decided whether a customer specific clause or the (current version of the) general one is used for a renewal contract
  • A renewal opportunity/quote can get created by triggering the CPQ in one atomic operation from the CRM and not by triggering both engines and then linking the outputs
  • Contract analytics, including ‘what if’ scenarios that help to intelligently identify contracts that are adversely affected by a clause change will get increasingly important
  • The CPQ-CLM system needs to be tightly linked into the order fulfillment and billing systems, so that everyone involved has an accurate status on billing cycles and timely inflow of customer payments

To me it looks like Oracle is closest to delivering on the front part of the process, followed by the SAP-CallidusCloud system. SAP seems to be stronger on the back side of the process, covering the order management and billing processes, although contract renewals need to be improved, too.

Salesforce is able to line up a smooth story on the front part of the process but seems to lack overall integration.

And then there is Microsoft, showing … ooops, what do they show? At this time Microsoft seems to fully rely on its ecosystem.

I’d say that the race is on and that there are quite some developments that we should expect in the converging areas of CPQ and CLM.

Republished with author's permission from original post.

Thomas Wieberneit

Thomas helps organisations of different industries and sizes to unlock their potential through digital transformation initiatives using a Think Big - Act Small approach. He is a long standing CRM practitioner, covering sales, marketing, service, collaboration, customer engagement and -experience. Coming from the technology side Thomas has the ability to translate business needs into technology solutions that add value. In his successful leadership positions and consulting engagements he has initiated, designed and implemented transformational change and delivered mission critical systems.


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