I have spoken with many companies over the past year who are either evaluating, implementing or have recently implemented software that helps them create a streamlined QTC or CPQ business process. This mirrors the momentum and growth seen in the CPQ market, which according to a 2012 Gartner report was approximately 300 million in 2012 and growing at a rate of 25% annually.
What is CPQ? CPQ stands for Configure, Price, Quote. Another broader term used in this space is QTC which is Quote to Cash. Basically, this defines the A to Z process of taking a customer order from start to finish. From an organizational standpoint, this process usually involves sales, finance, order management, pricing, and legal at a minimum. As anyone who has worked in a high tech firm that does a significant amount of direct sales, the hand-offs between internal groups can be both time consuming and error-prone. The end result in terms of process and data, is a disconnected flow of information that can be incredibly difficult to analyze or assess after the fact. This is particularly problematic with those companies that do significant sales to existing customers or have a renewals business as it makes it difficult to assess the health of the business at a point in time or to assess how to improve upon existing capture rates.
So, this business problem has been around a while, so why is QTC software solutions so hot of late? Why are companies investing in streamlining and improving this business process? The clients I work with are seeking ways to increase sales velocity, improve the customer experience, and increase the overall sale to and profitability of each customer. In addition, the standard reasons to improve any business process apply: improve competitiveness and profitability. In particular, in high tech, the pace of acquisitions, product introductions and shifts in channel dynamics is ever increasing and companies need to be able to manage these effectively. In addition, visibility into this critical business process, that results in the amount of revenue they capture, can help them identify problems and opportunities and correct or take advantage of those quickly. Implementing an effective well run QTC process and system is the key to making this happen.
I have worked with high tech companies as employee, customer and consultant and know that the software itself and its capabilities is only ½ of the equation. If the business process or business logic that it enables is poorly designed (not leveraging competitive advantage, not keeping the customer experience in mind, not considering the impact on sales), then the software will not deliver on its promise. An outcome not desired by the customer or the CPQ vendor!
Here are some key takeaways gained from talking with companies over the past year who have evaluated QTC or CPQ vendors and implemented their software:
- Understand your current state CPQ business process but also develop the best-practices process that will lead you to your goals – implement the second and not the first!
- Be sure that the view (data and visualization) of the transactions is holistic and gives you the output you will need to make better decisions over time
o Think holistically about the process and implementation
o Make sure the software/system you are purchasing can adapt to changes in that analysis over time – so that you can improve as you learn
- Make sure that the systems integrations take advantage of the CPQ software capabilities
- If you must take a phased approach because of complexity, funding or organizational dynamics, be sure to make the ROI case for each phase of implementation so that all the implementation work gets completed over time (i.e – implementing ½ the sales transactions will likely not provide you with ½ the ROI)
The bottom line is – if you want to realize the benefits of improved profitability, efficiency and accuracy that can be delivered by a CPQ system – recognize that it is not going to happen just through the technology but it is also about effectively implementing a business process that fits your particular company, industry, business model and business objectives.
Customers still report issues with professional services, and with the ability to find resources with expertise in their industry. (Gartner, CPQ Market 2012)
