SAP CPQ Integration Series: Part 1, Introduction to SAP ERP system

SAP CPQ Integration Series: Part 1, Introduction to SAP ERP system

SAP CPQ Integration Series: Part 1, Introduction to SAP ERP system

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Author: Mirza Baig

Although SAP CPQ is an independent Configure, Price and Quote Software-as-a-Service (SaaS) application, it is quite often integrated with SAP Enterprise Resource Planning (ERP) on-premise system. This helps companies to take advantage of master data such as customer accounts, products and pricing from the back-end ERP system, as well as convert a CPQ quote into an ERP order. 
In this 1st installment of the integration series, we will focus on SAP’s offering around the product configurator, pricing and quoting applications. Let’s begin with CPQ.

CPQ Cloud Application 

SAP CPQ meets the modern-day needs for sales and customers by offering accurate quotes quickly. It increases sales reps productivity and offers optimized pricing for complex products or services

  • SAP Configure, Price & Quote (CPQ) - This is a sales and customer centric intuitive cloud application, built by CallidusCloud and acquired by SAP in 2018. It offers an user friendly product configurator with a robust rules engine to accurately price and generate proposals faster. It can be used for both simple products such as aftermarket parts and accessories as well as configurable products meeting complex quoting requirements.    
     

ERP Systems and the Variant Configuration Application 

SAP customers may use one of the various ERP systems. They support manufacturing and fulfillment processes for simple and complex products. The back-office product configurator runs on SAP’s ERP platforms. Let’s review some of the terms, what they mean, and their acronyms. 

  • SAP ECC - SAP ERP Central Component, commonly known as SAP ECC, is an enterprise software for midsize companies to large enterprises. It manages day-to-day business operations activities for accounting, procurement, sales and distributions, production planning, warehouse/inventory management, etc. It has supported 50,000+ customers in 25 industries since 2004. SAP now offers SAP S/4HANA, a modern ERP system built for the digital age, they plan to continue to support SAP ECC through 2027.

  • SAP S/4HANA - This is the next generation ERP system and will be the successor to SAP ECC discussed above. SAP says it is future-ready and can transform business processes with intelligent automation using Artificial Intelligence (AI), Machine Learning and advanced Analytics. It runs on SAP HANA – a market-leading in-memory database that offers real-time processing speeds and a dramatically simplified data model.

  • SAP S/4HANA Cloud - This is a SaaS version of SAP S/4HANA discussed above, with some limitations in capabilities. Customers can take advantage of cloud deployment of ERP saving them from the infrastructure hassle and costs of on-premise systems. System provisioning, implementation and deployments are usually faster compared to the on-premise version.

  • SAP Variant Configuration (VC) - This is a product configurator application that is used by manufacturing companies to capture make-to-order complex products. Business users can specify products by selecting allowed features that can be based on rules and constraints. The configured product information is shared between sales, engineering and production users. SAP VC (a.k.a LO-VC) can run on SAP ECC or SAP S/4HANA on-premise edition.    

  • SAP Advanced Variant Configuration (AVC) - This is a next generation Variant Configuration (VC) discussed above. It brings a new configuration engine for performance, improved syntax elements and embedded analytics for classification and configuration. AVC only runs on SAP S/4HANA cloud edition and on-premise edition.  

Table below summarizes which ERP system can run VC or AVC and can integrate with CPQ. It’s important to note that although SAP S/4HANA Cloud offers AVC, it does not integrate with SAP CPQ solution at the moment. SAP has it on the roadmap for the future.

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Final Thoughts

SAP VC has matured for over 2 decades and is being used at many leading manufacturing companies throughout the world. AVC makes this time-tested proven application much better. Running them on the industry leading ERP platform such as the S/4HANA, makes the backend on-premise system a single source of truth for the master data in an integrated SAP CPQ environment. 

CPQ is positioned to be more customer-facing compared to back-office VC/AVC applications that are more engineering and production focused. As you can see, CPQ does not compete but rather complements VC/AVC. 

Stay tuned for part 2 to learn about the architecture, data flow and middleware systems to realize the end-to-end process integration.

If you have other questions about SAP CPQ integration, please reach out to our team at https://canidium.com/contact/ and we will get back to you shortly.

Learn more about the author, Mirza Baig.
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