Author: Mirza Baig
A CPQ solution, although closely associated with a Customer Relationship Management (CRM), is not at all a CRM solution nor is it an Enterprise Resource Planning (ERP) solution or a Contract Lifecycle Management (CLM) solution, but it falls somewhere in between.
Many claim CPQ solutions are meant to be used by the customer-facing front office team and some consider it to be a part of the middle office (more on this below), but whichever way you look at it - CPQ is a business software application that has defined its own category, just like CRM and ERP.
What is CPQ? A quick peek at the solution
Before discussing how CPQ works together with CRM, CLM and ERP environments, let’s quickly see what is CPQ? CPQ acronym is an abbreviation that stands for Configure, Price, Quote. CPQ solutions enable the sales team to quickly generate accurate quotes for simple and complex products with different pricing models for various markets.
This rules-based configuration tool with an intuitive user-interface (UI) enhances operation efficiencies by cutting down sales cycles, simplifying approvals, and eliminating quote and order errors. Some are able to cross-sell, up-sell and protect your profit margins.
What's this Middle Office?
As mentioned above some consider CPQ to be a part of the middle office; what exactly does that mean? To understand better how and why CPQ fits in between the CRM and the ERP system, the middle office concept must be explained with respect to the front office and back office of a company.
A Front Office: A customer-facing front office is responsible for marketing efforts, generating leads and qualifying them into opportunities. This front office may also generate simple quotes without much involvement from the back office. These are your typical CRM business users such as marketing, pre-sales and sales teams.
A Back Office: Similar to a front office, a corporate back office is responsible for processing the customer order and its fulfillment, followed by the billing and invoicing. These are your typical ERP business users.
A Middle Office: Consider the middle office more like a virtual business unit. It can be a sales team managing complex quotes or a combination of a sales team working closely with internal quote review teams such as inside sales, engineering teams or others, as required.
As the word implies, the middle office lies in between the front office and the back office. These are your CPQ system users who work on complex product/pricing quotes and may need to consult engineering or other subject matter experts (SMEs). In most cases, they would also be CRM users who are working on qualified opportunities.
The Lead-to-Cash Process Flow with CPQ
The typical sales process starts in CRM with leads and opportunities for individual customers or business accounts. The qualified opportunity can result in the request for a quote (RFQ) or a request for a proposal (RFP).
As a response to RFQ or RFP, the sales team uses CPQ to generate proposals with customer data that can be populated automatically from CRM opportunity. These proposal documents can be attached to the CRM opportunities and/or CRM quotes. Similarly, the CPQ quote can be linked to the CRM opportunity and/or CRM quote.
After initially providing a quote to the customer, any negotiations that take place before a customer accepts an offer can be managed in CLM to track changes in documents, such as the proposal document.
Finally, when a customer is ready to order documents can be electronically signed using e-signature solutions such as DocuSign & AdobeSign. Out-of-the-box integration with these systems is dependent on the vendor.
When a customer is ready to order, the CPQ quote can be converted to order and then sent to ERP for order fulfillment, billing and invoicing.
The CPQ quote will have an established link to the back office ERP order, just like it did with front office CRM opportunity and/or CRM quote.A High-Level Integration Architecture with CPQ
CPQ is typically integrated with at least one of the following business software solutions, with CRM being the most common one:
The above image is a simplified high-level architecture view of typical integration. As a best practice, a middle-ware integration platform should manage all data integrations to enable cross-system business processes flow.
SAP CPQ can help companies sell more and sell smarter. CPQ can be implemented as a standalone system or in an integrated environment, typically with a CRM system. Depending on a CPQ solution’s capabilities, most can and should integrate with ERP, CLM, and e-signature solutions. This is a huge benefit as cross-system integration can provide seamless end-to-end execution for your optimized lead-to-cash business processes. If you have questions about implementing a CPQ solution, just contact our Expert team at Canidium!