SAP CPQ for Software: How CPQ Addresses Unique Software and Service Industry Challenges

SAP CPQ for Software: How CPQ Addresses Unique Software and Service Industry Challenges

SAP CPQ for Software: How CPQ Addresses Unique Software and Service Industry Challenges

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Author: Bill Thane

CPQ software is beneficial for a variety of industries. In particular, service-based companies like software have improved their operations using SAP CPQ.

With so many blogs surrounding configure, price, quote software (CPQ) and it’s advantage within the manufacturing industry, it’s easy to become under the impression that SAP CPQ is exclusively a tool for industries with complex models. SAP CPQ’s abilities and features makes it ideal for extreme complexities, however that is dependent on the organization’s needs. SAP CPQ is also a great fit for industries like retail, with less complex pricing and configurations than manufacturing or high tech. In reality, SAP CPQ is quite versatile, providing configure, price, and quote capabilities to a variety of industries. This blog will be focusing on how SAP CPQ addresses the unique challenges of software and service-based businesses. 

So, what are the needs of companies in the software industry that would require an SAP CPQ solution? 
Configure

People commonly make the mistake of thinking that software doesn’t require configuration. Although not all software is this way, a lot of vendors do need this capability. Many software companies sell products and services whose configurations change based on a variety of requirements such as:  

  • Company Size
  • Company Industry
  • Database Size
  • Number of Seats or Users
  • Number of Servers
  • Operating Systems
  • Software Modules or Capabilities Selected
  • Integration Requirements
  • Administrator Licenses
  • Method of access - Mobile vs. Laptop/Desktop vs. Offline
  • Implementation, Maintenance, Training or Support Services


Gathering requirements to determine the proper software selections and configurations can be incorporated into the powerful SAP CPQ function known as guided selling. This allows the user to enter or answer pertinent facts about the customer’s needs to determine the correct solutions. 

SAP CPQ also offers other powerful, yet usable tools to customize the solution if requirements gathering needs to go beyond standard guided selling functionality. This allows the integration team to incorporate unique functionalities,  such as a complex customer survey. Canidium’s highly experienced SAP CPQ consultants can lead the way in these engagements. 

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Price

Just as configurations can be complex in the quoting of software products and services, so can the pricing requirements for software vendors. Pricing challenges that can be addressed by SAP CPQ include: 

  • Perpetual vs. Subscription vs. Usage-Based Pricing
  • Packaged Pricing
  • Volume, Tier or Usage-Based Pricing
  • Any of several types of license models such as Concurrent, Named User, Floating, Network, CPU or Core Based etc. 
  • Quote Based Pricing (Pricing Set Based on the Perceived Customer Need)
  • Monthly vs. Quarterly vs. Annual Pricing Often Based on Rate Plans
  • Subscription-Based* Mid Term Price Modifications Such as Upgrades/Downgrades and Prorated Price Changes
  • Internal Sales Pricing vs. Agent or Integrator or Re-seller Pricing

Subscription-based pricing, as mentioned above, and the concept of quotations for monthly, quarterly or annual recurring pricing is particularly challenging and critical for most software and services companies due to the following reasons: 

  1. Quotations must be timely and accurate as this revenue is often deferred and not collected in advance. 
  2. There must be complete synchronization between CPQ and the customer’s subscription billing platform to ensure accuracy.
  3. In many cases, deferred or subscription revenue can create the highest margins. 

Software companies need to be particularly diligent as to how a proposed CPQ solution approaches subscription pricing. Even large software companies have struggled with how to incorporate their customers' installed software data, contract data, rate plan, and pricing data into a cohesive quoting solution. 

CPQ solutions often rely on heavy customization, additional software licenses, or third-party software to support subscription-based pricing scenarios such as this. SAP CPQ offers the ability to approach this complex problem more efficiently .

SAP CPQ offers subscription pricing and renewal management functionality and an internal customizable asset tracking table. Although, for the sake of this blog, we will defer to a subsequent article to describe this in detail, be assured that the vast majority of subscription software quoting and billing challenges can be addressed by SAP CPQ. Additionally, the power of combining SAP Sales Cloud with SAP Revenue Cloud offers true and flexible lead to cash capabilities for the enterprise. 

Quotes and Documentation 

The challenges outlined in this article are centered around creating accurate quotes with varying product configurations and price models. The CPQ quotation often has to take into account a recurring price for certain products as well as fixed or non-recurring pricing for products and services such as training. Complex quoting requirements for implementation, professional services or statement of work (SOW) creation may also be necessary. 

As with any industry, professional and accurate quotes, proposals, order documents, and billing data are essential. SAP CPQ can retrieve data that is referenced during the quoting process as well as any necessary data from front office and back-office systems to create this documentation. The quote generation capability ensures that the software company’s branding is correct as well as controlling any supporting documentation requirements such as terms and conditions, service agreements, attachments, etc. 

SAP CPQ is a great option for Software companies

Whether the SAP CPQ solution is integrated with third-party solutions or combined with the power of SAP Sales Cloud and SAP Subscription Billing, the flexibility offered can address the varied needs of the software industry. These challenges are best met with the trusted advisors and integration specialists at Canidium. 

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

Learn more about the author, Bill Thane

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