The Future of CPQ: What the Next Generation Might Look Like

CPQ is experiencing a golden age right now, with Gartner reporting that it will grow 20 percent year over year through 2020. Cloud-based solutions are growing even faster – 46 percent in 2015, according to Gartner. The Future of CPQ: What the Next Generation Might Look LikeThis is coming despite the fact that CPQ is not a rapidly-evolving technology. The basics of CPQ are all in place; its legacy in the manufacturing world has prepared it well for the changing needs of the rest of the business world. Complex product mixes, the need for margin protection, and the desire to deliver accurate quotes quickly while also taking advantage of all cross-sell and upsell opportunities are things any business can understand as major benefits. As a result, we’re not seeing revolutionary technical leaps forward in CPQ – yet. Most vendors are trying to absorb the demand rather than adding power to the products. But as the market becomes more lucrative, vendors will begin to look for features that set them apart. These features will change what CPQ looks like and deepen its role in the sales process. That future is not far off – in fact, some of the characteristics of the next generation of CPQ are already present in CallidusCloud CPQ. What will next-generation CPQ look like?

More powerful and more scalable

CPQ delivers enormous productivity gains. But when enterprises want to make purchases that include hundreds or even thousands of different items, CPQ applications are put under monumental transactional strain. They can bog down, and performance can slow to a crawl, meaning that CPQ is barely faster in these cases than the manual methods it replaced. The next generation of CPQ will employ new architectures that skip the brute-force computing common today and instead use in-memory computing approaches that are designed to make more efficient calculations and keep proposal generation times in the range of minutes and not hours. For large buyers and sellers, this will mean that any back-and-forth about quotes can be completed in an afternoon rather than over the course of a week.

Connected to augmentative sales technology

Voice-commanded assistants – like Amazon’s Echo – have been all the rage, and there’s no reason that this technology won’t become a staple of the business world, especially for sales. The ability to create quotes using technology that allows salespeople to verbally dictate the contents of a quote – and which can in real time suggest options, cross-selling and upselling opportunities, and help the salesperson stick to configurations that work together – has an obvious attraction. Now tie this to other systems – ERP for availability, for example, or voice of the customer data. You’ll get a real-time assistant that can indicate instantly how quickly orders can be filled or what a customer’s past experience with the company has been. (Negative? Maybe you can offer a pre-emptive discount as a way to further jump-start the relationship.) Furthermore, the assistant can make suggestions proactively based on the data. CPQ helps salespeople master large amounts of product data to deliver the right solutions for customers; these augmentative assistants will accelerate that and, by doing so, help the experience for both the customer and the salesperson.

Tied more closely to systems of motivation

CPQ does a great job of telling the customer what the bottom line will be for a purchase. In the future, by linking CPQ to compensation management solutions, CPQ ought to provide the same functionality for salespeople. Just as a quote lays out what the customer will be spending, the CPQ interface should tell the salesperson what commission he or she should expect should a quote meet with the customer’s approval. It must not be a simple calculation – all the factors of a commission plan, including SPIFs, bonuses and accelerators – must be included. Ideally, this will provide additional incentive to salespeople to get the most from deals. It’s the end of the quarter, the salesperson is right on the edge of an accelerator, and the current quote just misses that number – if the salesperson can see that during the quote generation process, it will motivate him or her to push for an upsell or offer services in order to cross that threshold.

Partnered closely with the Internet of Things

The Internet of Things promises a new level of service and, if executed properly, a new level of customer satisfaction. Things don’t break – they’re fixed before they break. Things don’t run out – refills and resupplies happen automatically. Those things are great, but there are activities behind the scenes that must take place to make the business transactions supporting those activities happen. Connecting IoT data with CPQ (and with Contract Lifecycle Management) will enable the business activities associated with IoT transactions to become as automatic as the IoT activities that get all the media attention.

Recommendations will go from rules-driven to analytics-driven

CPQ today is driven by rules – when you configure the system, you create the rules that you think will make for the most effective and lucrative quoting process. Some rules are fixed – if product A does not work with accessory B, that rule will remain in place as long as you sell those two items. But some rules are not fixed, like the best suggestion for an upsell when there are multiple options. Future CPQ will depend on advanced analytics to create prescriptive suggestions based on what’s worked best historically – not in general, but with specific types of customers in a specific vertical industry, and of a specific size. This will, again, depend on CPQ being connected to data in other systems, like CRM. It will make salespeople even more dependent on CRM, since the rules may change as your solutions collect more data with every deal.

By Chris Bucholtz | January 3rd, 2017 | CPQ

About the Author: Chris Bucholtz

Chris Bucholtz

Chris Bucholtz is the content marketing director at CallidusCloud and writes on a host of topics, including sales, marketing and customer experience. The former editor of InsideCRM, his weekly column has run in CRM Buyer since 2009. When he's not pondering ways to acquire and keep customers, Chris is also an avid builder of scale model airplanes.