Gartner has broadened its coverage of sales configuration systems to address the mounting interest in more-comprehensive configure, price and quote (CPQ) systems for aiding strategies in achieving sustained, profitable revenue growth. Although decreasing sales cycle times, administrative work and process errors represent leading near-term objectives, enterprises are increasingly exploring integrated CPQ applications to improve how sales channels manage opportunity qualification, quoting or bidding, and pre-close processes to increase win rates and the profitability of transactions.

This MarketScope provides an overview of the notable CPQ application suite vendors in this diverse market, which comprises best-of-breed specialists and large enterprise application suite vendors that assembled solutions around flagship sales configuration offerings. Enterprises will need to assess the sophistication, manageability and performance of core sales configuration functionality, as well as:

• The depth and breadth of accompanying pricing and quoting capabilities

• The cohesiveness of offerings in consolidating pricing, quoting and other value-add functionality, such as proposal and contract management systems, into a solution

• Vendor expertise with multiple sales practices and sales channels, such as direct, field forces, partner or consumer self-service

• Vendor focus and experience with a continuum of manufacturing/distribution styles that vary in complexity (see Note 1 and Note 2), including ship-to-order (STO) and available-to-promise (ATP)

• System usability of the entire suite for end-user roles, e.g., business administrator, sales professional, partner and consumer

• The scalability and performance of the entire suite in supporting diverse workloads from different user populations

• The suitability of provided delivery models for on-premises, hosted or software-as-a-service (SaaS) deployments

• Vendor viability and capacity to service Fortune 2000 enterprises across different geographies

This MarketScope analyzes the key CPQ software application providers that are marketing to sales buying centers or related supporting organizations. The purpose of this research is to help decision makers reassess and expand on incumbent sales configuration installations, and/or pursue net new investments in automating sales configuration and adjacent processes. Competing CPQ application suites are evolving from the longstanding sales configuration software market to address increasing demand for solutions that imbue meaningful improvements to lead-to-quote, quote-to-order capture and related selling processes via automation.

The impetus for this trend originates from executive-level concern with sustaining profitable growth by maximizing the performance of sales channels. These priorities have catalyzed a greater focus on sales innovation and projects that pose compelling business benefits. Hence, an increasing number of technical projects are being pursued to automate end-to-end CPQ processes that comprise needs assessments, opportunity qualification, guided selling, quoting, pricing, deal structuring, negotiations and pre-close support, approvals and order capture. New projects have also benefited from the economic recovery, which has released pent-up demand for investment in sales channels.

The primary purpose of CPQ application suites is facilitating process flows in sales cycles for deal and transaction development, in contrast with the function of product configurators in ensuring execution of orders and bills of materials for production or fulfillment purposes. CPQ suites expand on the scope of sales configuration systems to provide greater functional breadth and integration of capabilities for CPQ and other necessary content, to deliver superior in-line support for different selling approaches.

Such suites concentrate on satisfying the needs of direct sales organizations. They also need to be versatile to support marketing, partner and channel management functions and e-commerce installations, from expert users to casual, self-service use by partners and customers. Innovative CPQ suites will incorporate additional capabilities focused on sales effectiveness, such as pricing analytics, rich visualization and advanced sales content management.

Three prevailing, related business objectives are stimulating demand for enterprise CPQ application suites, spanning a continuum of priorities on governance, diffusing process efficiencies and, finally, instilling inherent improvements to selling practices:

• Increase the integrity and accuracy of quote-to-order capture processes to improve administrative efficiencies by reducing cycle times (e.g., generating quotes and proposals, standard approval processes and escalations) and sales errors that incur costs and order rework. This objective embodies traditional, tactical concerns that drove the original sales configuration market, and underpinned more than 60% of CPQ initiatives as a primary driver, according to a 2010 survey of 70 references. Related metrics are still employed in approximately 75% of business cases for projects.

• Increase productivity across selling processes involving product dialogues — spanning qualify-to-quote and quote-to-order capture processes — to streamline preparatory work with identifying and proposing items, ensure consistent communications on product portfolios (e.g., new product introductions and retirements), and enable greater efficiencies in converting quotes and proposals into orders. This objective expands productivity concerns from pre-close activities to front-end work with clients and prospects, while more ambitious efforts aspire to support multiple channels, such as partner and e-commerce sites. Approximately 25% of projects are driven primarily by this objective.

• Increase average deal profitability and size, thereby elevating overall sales effectiveness, by successfully recommending products that resonate with specific clients (e.g., cross-sell, upsell, product substitutions within bundles, kits or solutions), for the optimal prices that a market will bear. This includes delivering superior guidance on responses to negotiation tactics and buying behaviors. This objective is more strategic and is gaining visibility with innovative executives focused on margin and revenue generation, receiving credit in more than 12% of initiatives as a primary driver.

Industry verticals that have taken the lead in evaluating and investing in CPQ suites tend to be manufacturing-oriented, spanning such sectors as industrial manufacturing, transport equipment, industrial components and machinery, as well as equipment for the oil and gas and life sciences industries. The high-technology (hardware and software) and communications industries (equipment and services) have become increasing prominent. Business services represent an emerging segment.

An increasing number of sales implementations are being completed within six- to nine-month time frames, in contrast with historical averages of nine to 18 months, improving the potential for initiatives to demonstrate results within a fiscal year. In many cases, such projects are more manageable in terms of scale, scope and complexity (number of users, stock-keeping units, rules, etc.). Projects are also benefiting from improvements to CPQ offerings, including more baseline functionality available out-of-the-box; better modeling facilities for expert users (e.g., modelers, business analysts and power users); greater usability based on popular Web design principles or support for mobile devices (such as the iPad); and the emergence of alternative delivery models (hosting and SaaS) that present sourcing options for reducing costs in time and resources.

However, the CPQ application suite market remains immature. Most initiatives give precedence to delivering core sales configuration capabilities. Companies are just beginning to gain experience with deploying entire CPQ suites to support complex, end-to-end sales processes, particularly with guided selling, and dynamically assembling and pricing deals as elements are added, subtracted, substituted or modified. Such efforts will require richer analytics (such as price optimization) for planning and in-line process guidance, to help sales channels improve deal quality and the probability of quote acceptance. These capabilities will enable organizations to streamline any reconfiguration require for structuring desired solutions and associated pricing on behalf of customers, and yield efficiencies in advancing sales cycles.

Meanwhile, functional gaps often exist in complementary areas, such as contract management, and costing and estimation tools. Scalability and performance standards for various delivery models (on-premises, hosted or SaaS) will need to be maintained for diverse processing requirements for different sales channels — e.g., offline usage for direct field sales, or self-service for e-commerce and partner channels.

The size of the CPQ application suite market is still modest, with worldwide revenue estimated at approximately $200 million in 2010, an increase of approximately 20% from estimates of more than $150 million for 2009. These estimates include licenses, subscription fees, professional services fees, and maintenance and support revenue generated by the software vendors; however, they exclude sales of product configuration systems for ERP, manufacturing and fulfillment processes. Market sizing estimates are complicated by two factors that limit visibility. Two large enterprise application vendors (SAP and Oracle) are credible competitors, but the relevant product lines represent small components of their total portfolios, with their performance largely confidential. Conversely, a range of small, privately owned vendors are also active, and free of disclosure requirements typically placed on publicly traded firms.

In general, the enterprise application vendors tend to focus on broad support for end-to-end business process flows and/or multichannel sales. Meanwhile best-of-breed vendors seek differentiation by pursuing innovation in alternative delivery models (e.g., SaaS), guided selling, fronting engineer-to-order (ETO) manufacturing processes, integrating rich media and visualization, as well as mobility. In addition, the best-of-breed vendors try to distinguish themselves based on expertise in specific industry verticals.

This MarketScope analyzes the recent performance of 13 vendors competing in the CPQ market that satisfied predefined criteria for coverage. It rates each vendor based on our evaluation criteria and vendor-rating definitions.

CPQ applications suites provide an integrated software feature set that supports configuration, pricing and quote/proposal generation processes. CPQ application suites improve the guidance, governance and efficiency of selling unique combinations of products and/or services for different sales situations, while reducing the non-selling work and selling cycle times. These applications are designed to be deployed directly to salespeople, as well as for use by indirect channels (partners) and customers in self-service environments, typically for needs assessments and guided selling, as well as solution and negotiated sales processes.

Sales configuration applications represent the foundation of such suites, delivering core functionality supporting the actual mechanics of identifying, assembling and presenting products, options and product bundles, as well as variations. CPQ application suites should also include pricing engines and quoting modules as standard offerings, integrated with base sales configuration functionality, and ideally based on the same code base, development environment and administrative tools. Emerging capabilities include functionality for contract management, proposal generation and pricing analytics.

To be included in the 2011 CPQ application suite vendor MarketScope, a provider must satisfy the following criteria:

• Offer a native, stand-alone sales configuration application that is sold as a distinct, single product with a proven two-year track record of delivering production sales configuration systems to multiple clients

• Deploy the sales configuration application for direct use by salespeople partners or customers in a self-service environment, in at least 50% of live production clients on the last two major releases of its software

• Gain five net new, name brand clients for the sales configuration software during the past 18 months

• Provide a pricing engine and quoting module as a standard, integrated offering available with the sales configuration application

• Have at least 5% of live production clients using both pricing engine and quotation functionality with the standard sales configuration application in support of sales channels

• Demonstrate active market participation in CPQ deals/opportunities, including inbound customer inquiries to Gartner by prospects and clients, and visible efforts to market and sell CPQ application suites

• Have a sales presence and demonstrated sales traction in multiple vertical industries and geographies, including North America; Europe, the Middle East and Africa (EMEA); or the Asia/Pacific (APAC) region

• Retain a sufficient cash position to fund at least one year of business operations at the current burn rate

• Retain sufficient professional services or partnerships to fulfill customer demand during the next 12 months

Overall Market Rating: Promising

The outlook for the CPQ application suite market is promising, because the underlying value propositions are compelling to enterprises concerned with securing competitive advantages and boosting revenue through sales process innovation. Recognition is growing of the substantial impact these suites exert on fundamental selling activities with aligning products and services to customer needs, proposing solutions and fashioning deal elements for closing sales.

However, the market remains immature from the standpoint that many organizations' sales configuration requirements continue to predominate in initiatives, while track records remain limited as to deploying CPQ suites for complex requirements for end-to-end sales process support, dynamic configuration and pricing, guided selling and integrating analytics into CPQ sales practices. This market remains modest, with vendors of CPQ application suites estimated to have collectively generated approximately $200 million in revenue worldwide in 2010.

Based in Deerfield, Illinois, BigMachines is noted for securing significant market visibility and momentum as a provider of hosted and SaaS CPQ solutions. It benefited greatly from an association with salesforce.com's AppExchange, dating back to 2006, as a partner for quoting and configuration applications. Extensive brand recognition in the salesforce.com client base has proved valuable in enabling BigMachines to grow sales well above the market average. The vendor indicated it achieved 72% growth in overall revenue year-over-year in 2010, and is estimated to have generated approximately $30 million in revenue, and to have won about 70 net new clients during that period.

Geographic coverage from sales and support perspectives is strong in the U.S. and Canada, and growing briskly in EMEA. The vendor has also begun to focus on APAC, and opened offices in Tokyo, Melbourne and Singapore in 2010.

The foundation of BigMachines' strategy is to market annual subscriptions to the CPQ applications that it hosts and maintains on behalf of clients. The vendor follows two approaches to SaaS by offering subscriptions where the infrastructure and databases are shared, but clients access their own application instances, and by allowing clients access to their own application instances and databases on shared infrastructures. In addition, BigMachines' SaaS policy maintains a single code base and encourages clients to upgrade within one year of the latest version release.

The CPQ product line is also called BigMachines. It comprises a set of modules targeting sales channels, administrative processes and value-added capabilities, based on Java Platform, Enterprise Edition (Java EE). The offering is organized around three flagship modules, each delivering CPQ and workflow capabilities tailored for the requirements of a specific sales channel:

• BigMachines Sales Engine for direct sales enables guided selling, quoting and pricing processes

• BigMachines Channel Sales Engine enables partner self-service-based selling, including user interface (UI) personalization and management of external users

• BigMachines eCommerce Engine enables self-service selling directly to business customers, including online product catalog and shopping cart functionality

Underpinning the engines is the BigMachines Admin Platform, an administrative facility for defining UIs, product data, rules, constraint and workflows for configuration and pricing practices, accompanied by function editors and by wizards to aid usability. Additional key modules includes BigMachines Document Engine, which offers templates for assembling documents and content, particularly proposals, and clauses for agreements; and BigMachines Unplugged for delivering functionality to field sales forces for offline usage modes. A native reporting module was recently released for straightforward requirements involving just data resident in BigMachines, while BigMachines' integration platform allows clients to establish integrations with Web stores, CRM and ERP solutions using Web services.

BigMachines provides compelling functional breadth for ATO manufacturing processes of varying complexity, and is acquiring increasing experience in ETO with industrial clients. Since its founding in 2000, BigMachines has focused on oil and gas field machinery and broadened its vertical industry coverage to encompass other heavy equipment (e.g., fluid handling, compressed air and material handling), medical instruments and high-technology manufacturing. The vendor is also targeting emerging opportunities in software and business services; and because of growing name recognition, has gained entry into evaluations, regardless of vertical industry affinity.

BigMachines has excelled at acquiring partnerships for SaaS opportunities in sales automation. The relationship with salesforce.com deepened with the signing of a strategic OEM alliance in 2010 and the release of QuickConfig on Force.com, a light quoting and ordering tool for midsize businesses interested in guided selling. BigMachines is also the only CPQ partner in Oracle CRM OnDemand's "Inner Circle" program. It has acquired customers that have integrated with Microsoft Dynamics CRM as well.

BigMachines has also pursued partnerships with best-of-breed vendors to enrich its CPQ value propositions. It offers MicroStrategy for more-sophisticated reporting and multidimensional analysis capabilities, and has partnered with Vendavo and PROS for price optimization and analytics functionality.

BigMachines will need to expand and strengthen its consulting partnerships and quality assurance processes to accommodate growth in clients and customer-specific requirements. In a number of cases, customers reported requiring product enhancements to meet project objectives and expressed concerns over the cost and pace of implementations. BigMachines will need to further hone service delivery and version control (e.g.., keep clients upgrading within one year of a major release) to yield meaningful efficiencies from hosting its clientele.

Although BigMachines is integrated with SAP, notably with Sales and Distribution, its offering lacks formal certifications. The vendor should regularize a relationship with the SAP, such as joining EcoHub and integrating with CRM 7, because many target verticals disproportionately use SAP application installations.

BigMachines receives a Positive rating for its high market visibility from offering hosted and SaaS-based CPQ applications, its focus on CPQ for direct sales, and the size and growth of its client base, compared with other CPQ specialists.

Rating: Positive

Headquartered in Toulouse, France, and Skokie, Illinois, Cameleon Software is the only publicly traded, best-of-breed CPQ specialist covered in this MarketScope, and a veteran technology firm dating from 1987. Cameleon generated €8.52 million, or about $11.3 million, in 2010, an increase of 22% from the prior year. Formerly known as Access Commerce, Cameleon revamped the corporate organization, brand, product lines and strategy during the past three years. With the sale of several consulting practices in 2009, Cameleon concentrated on investing in its CPQ product, specifically to support guided selling, multichannel selling and configuration processes combining products and services. In addition, the vendor is looking to cultivate a SaaS-based clientele and aggressively expand into the North American market.

During the past three years, Cameleon has rewritten its application suite and released an on-premises offering called Cameleon Edge, as well as a parallel SaaS version called Cameleon Cloud. Cameleon Edge consists of four primary modules:

• Cameleon-Edge Configurator for deploying product catalogs and executing configuration sessions and pricing engine functions, supported by a constraints library, rule engine and nested configuration functionality

• Cameleon-Edge CPQ consolidates quoting, proposal, shopping cart and guided selling features (sales definitions, scripts, alerts, etc.) with the configurator

• Cameleon-Edge Designer for the creation and management of configuration models, business rules

• Cameleon-Edge Channel Selling for delivering e-commerce functionality for business-to-business (B2B) commercial relations, including partners and distributors

The Cameleon Cloud applications mirror the Cameleon Edge naming convention, and are provisioned via a SaaS model that supports a separate application instance for each client organization, and shares database instances. In addition, a version of Cameleon Cloud CPQ has been integrated with salesforce.com, as part of Cameleon's participation in the AppExchange partner program.

Cameleon's applications are written in Java, Java EE and JavaScript; support Ajax and a service-oriented architecture (SOA); and run on Oracle databases. Cameleon has invested in improvements to the UI to enhance usability and interactivity for nontechnical end users by leveraging Ajax, Java applets and Java Server pages. The vendor has also focused on mobility, and recently released Cameleon Mobile Configurator for enabling connected Wi-Fi and 3G access from iPads.

Like most configuration vendors, Cameleon started in manufacturing, in areas such as specialty vehicles and industrial equipment. The vendor later expanded into telecommunications and high technology, including software and hardware. Cameleon is now differentiating itself by targeting service industries, particularly insurance and financial services, as well as general business services.

The vendor has established a good track record in supporting complex ATO and ETO manufacturing requirements with its flagship configurator. Recent references report good flexibility in representing different permutations of services to selling channels. Because of positive experiences with system usability and the administrative functionality provided, references are considering transitioning more capabilities to advanced users within business for managing models (such as interim changes) with the support of IT staff.

Cameleon has a strong market position in France, backed by good references. It is competitive in EMEA and gaining increasing visibility in North America, where resources have been ramped up. Cameleon has established the early stages of a respectable partner network. The vendor joined salesforce.com's AppExchange program, is certified for SAP NetWeaver, has a longstanding relationship with Infor, and secured modest attention from several large consultancies for the European market, including Accenture, Capgemini, Sopra Group and Logica.

Cameleon still needs to build up visibility in North America markets, particularly for the Cameleon Cloud SaaS offering, which represents a small share of its installed base and must compete against the likes of BigMachines. The vendor also needs to build market mind share for its experience and capabilities in supporting insurance firms, guided selling and multichannel sales. In addition, the vendor will need to expand pricing functionality, such as through partnerships that integrate optimization capabilities.

Cameleon receives a rating of Positive for its focus on guided selling to improve sales effectiveness, broad functionality and intuitive UIs, technical abilities in configuring complex combinations of products and services, competitive position in EMEA and efforts to target business service markets.

Rating: Positive

Founded in 1968, Cincom Systems is a privately owned, diversified software vendor based in Cincinnati, Ohio, that pioneered the marketing of stand-alone software solutions independent of hardware. Cincom's portfolio of products is extensive, spanning solutions for application development, data management, document management business intelligence, contact centers and manufacturing. Cincom is estimated to have more than $100 million in revenue, and has built up a global presence, with offices in North and South America, EMEA and Asia. The vendor has indicated it is profitable.

Cincom is also a veteran of the sales configuration market, with almost 8% of its business derived from CPQ applications. The vendor has focused on the manufacturing industry vertical, particularly for sophisticated ATO and ETO requirements, and is strong in specialty vehicles, industrial machinery, electronic components, and commercial heating, ventilation and air conditioning (HVAC) systems. Cincom's CPQ offering is marketed under the Acquire brand, and comprises four primary components:

• Sales and Product Configurator (SPC) for delivering sales configuration, product catalog, pricing, quoting and proposal generation functionality, product modeling capabilities, and underlying business rules and constraint engines

• Socrates for providing a business rule environment for product experts and power users to develop guided selling and configuration rules in Web or Microsoft Windows environments

• Guru for providing a business rule and development environment that is integrated with Microsoft Visual Studio and supports the construction of composite applications for guided selling and product configuration

• Acquire Enterprise Sales Portal (ESP) for supporting collaborative selling capabilities for ETO content (e.g., blueprints) requiring integration with Microsoft Office SharePoint Server

Cincom provides intuitive environments for developing and managing product configuration rules, which are noted for flexibility in handling calculations for ETO configuration processes. Cincom also offers additional feature sets, such as bidding and cost estimation tools, knowledgebases and tools for creating call guides, and contract and order capture systems, that can help sales organizations automate sophisticated CPQ processes for solution, consultative, negotiated and project-based selling.

Cincom's Acquire applications are written in C#, NET, ASP.NET and JavaScript. SPC can be deployed on premise, hosted, or made available via a SaaS arrangement where the infrastructure is shared, but distinct application and database instances are provisioned to clients. In addition, SPC offers connected and disconnected sales configuration modes to provide more-flexible mobile options for data intensive sales tasks.

Through Cincom Data Services, integrations have been developed between SPC and salesforce.com, Microsoft CRM and SAP using Web services. In the case of Microsoft and SAP, integrations have been extended to the SPC offline client. Cincom stands out for its SAP experience, with productized integration with Variant Configurator and the Sales and Distribution module, certifications for NetWeaver Portal and placing Socrates on SAP's EcoHub. Cincom has also pursued sales partnerships with salesforce.com (by joining the AppExchange program), Microsoft Dynamics CRM (on-premises and SaaS) and Microsoft Dynamics AX. Customers have characterized Cincom as providing quality support and implementation services.

Cincom's biggest obstacle will be increasing its market visibility. Despite initiatives in partnering, alternative delivery models and marketing, Cincom's visibility in the CPQ market remains modest in comparison with other competitors, outside its target manufacturing sectors.

Cincom receives a Positive rating for overall organizational viability; experience with ETO manufacturing styles and integrating with SAP; the intuitive UIs of the modeling, rules and maintenance environments; and broad CPQ functionality.

Rating: Positive

Based in Copenhagen, Denmark, Configit is a privately owned firm that targets industrial manufacturing, high technology, packaging and plastics, life sciences and consumer products. Founded in 2000, the vendor originated from work performed in academia, and has focused on tight integration with SAP, to deliver a strong modeling environment and more-user-friendly CPQ functionality for sales channels. Configit's strategy is to become a front end of choice for SAP clients that rely on Variant Configurator for generating production configurations and bills of materials (BOMs), and is one of the few CPQ vendors participating in SAP's EcoHub partner program. The vendor is profitable, although the organization is modest in scale, and estimated to have generated less than $5 million in revenue in 2010.

Configit's product line consists of three primary components:

• Product Modeler for offline modeling, runtime environments for developing and validating configuration rules, constraints and models

• Configit Server for consolidating quotes, product data, prices and rules

• Configit Quote for delivering offline configuration, quoting and pricing functionality on PCs, as well as two-dimensional visualization

Versions of the CPQ and server components have been tailored for deployment with SAP Variant Configuration, and are respectively marketed as Configit Quote for SAP and Configit Server for SAP. Configit is a good fit for developing sales configurations for sophisticated ATO manufacturing requirements, and is building mind share among companies with ETO production processes.

Underpinning Configit's Product Modeler is its proprietary Virtual Tabulation technology, originally developed at the IT University of Copenhagen. Virtual Tabulation compiles a configuration file, using tables to express rules and define models that can accommodate extensive, complex combinations of products and materials. Several large manufacturing firms have been impressed by the technology for large model management requirements during sales cycles.

Configit Quote is written in .NET, and supports the Microsoft Office Fluent standards for user interfaces to facilitate usability. Configit Server is written in .NET and Java, while the Product Modeler is written in C++ and C#, and is deployed on Windows-based PCs. The vendor has also invested in localizing the user interfaces for Configit Quote to support German and simplified Chinese, along with Danish and English. An integration has been productized to extract master data from SAP that sits on the Configit Server for SAP. A Configit Software Development Kit is also available with Product Modeler for customers to develop PC or Web-based applications.

References found Configit's offering to be cost-competitive, and gave the highest scores to the vendor in rating implementation services. Feedback on business practices was also above average for positive reviews. Projects have avoided becoming too labor-intensive: All references reported requiring only one to four internal full-time equivalents (FTEs) and one to four resources from the vendor or third-party consultancies to complete implementations.

Configit's organization is small, with approximately 20 staff, and its global presence is limited, with a headquarters in Copenhagen, Denmark, and a branch office in Palo Alto, California. In addition, the partner network for services is modest, consisting mostly of firms specializing in SAP implementations and/or specific European markets. More than 80% of references reported relying on professional services delivered directly by the vendor. In addition, projects have also been long in duration, with 80% of references reporting implementation timelines of 12 to 18 months.

Configit Server can be hosted, but the percentage of the clientele using this option remains modest. Requirements for Configit Quote to be resident on PCs will gate opportunities with SaaS and hosting projects that need full Web access and zero footprints.

Configit receives a rating of Promising for technical strengths in modeling ATO and ETO requirements, as well as for its strategy targeting SAP's Variant Configurator installations with a sales-friendly alternative for sales configuration and quoting functionality.

Rating: Promising

Founded in 2000, Configure One is located in Oak Brook, Illinois and targets manufacturers that produce configurable equipment. The vendor has gained traction in the trucking, medical, electrical and construction industries. Configure One has indicated it is profitable, but the organization is modest in size. Gartner estimates that its revenue approached $5 million in 2010.

Configure One offers broad CPQ functionality with its flagship product line, Concept Enterprise Configurator, an application composed of the following key modules:

• Concept Core provides baseline configuration functionality, a rule engine and model definition capabilities

• Concept Pricing provides pricing engines and administrative capabilities (i.e., to build price books and price deals), as well as costing and estimation tools

• Concept Quote delivers quoting and proposal generation functions

• Concept Catalog provides functionality for developing and administering product catalogues for websites

Concept Enterprise Configurator offers good visualization capabilities (e.g., generating two-dimensional drawings in real-time), functionality for managing special requests, as well as BOMs and routing report features to support manufacturing clients. A Concept Publisher module is available to define, test and manage releases of rules and content for sales configuration and pricing models. A client application, Concept Compass, is available to support offline quoting and configuration tasks by field sales forces. Concept Enterprise Configurator is written in Java, runs on Microsoft SQL Server and Oracle databases, and is commonly deployed on-premises.

In addition, a hosted option is available, with clients receiving their own application instance, database and hardware, as well as latitude in deciding the timing of upgrades. Configure One offers the Concept Connect module to manage integrations, with the option of using staging tables, Web services or FTP functionality. Standard integrations have been established with CRM vendors such as Microsoft Dynamics CRM, NetSuite and salesforce.com, as well as various ERP vendors, including SAP, Oracle Manufacturing and JD Edwards. The vendor has also integrated with CAD systems, with standard integrations available for Pro/E, Dassault Systemes' SolidWorks and Autodesk Inventor.

Prospects and clients have characterized Configure One as cost-competitive and responsive in sales cycles. References reported relatively rapid implementation cycles, with 75% claiming to have delivered projects into live production within eight months and, in certain cases, as little as two months. References felt that implementations were relatively streamlined with respect to staffing, with 75% requiring only two to four internal personnel, while none required more than four employees from the vendor or service partners. Configure One also received high marks from references for product flexibility.

Aside from relationships with specialist consultancies, the vendor lacks a mature partnership network to aid delivery of services. Most references (75%) reported relying on Configure One for professional services. In addition, the vendor is largely focused on North America, although it has an office in the U.K. and appeared in product evaluations in Europe. With regard to feature sets, the vendor offers a broad functional footprint, but lacks functionality for pricing analytics.

Configure One receives a Promising rating for functional breadth, experience with ATO and ETO manufacturing operations, cost-competitiveness and relatively rapid implementation cycles. However, the vendor will need to cultivate greater market visibility, service partnerships and deal flow to effectively drive expansion and compete with other CPQ vendors.

Rating: Promising

In 2009, FPX, an affiliate of the Acclaim Financial Group, acquired the assets of Firepond, a longstanding vendor of sales configuration solutions. The original Firepond organization dated back to 1983, but the acquisition provided new capital and management, as well as a rebranding of the company (the acquired Firepond organization assumed the FPX name). Based in Mankato, Minnesota, FPX is privately held, and estimated by Gartner to have generated between $8 million and $10 million in revenue in 2010. FPX management maintained a focus on a SaaS-based CPQ application strategy that originated under Firepond in 2006 to achieve market differentiation. The vendor aspires to market sophisticated, SaaS-based configuration technologies that are more accessible and easy to insert into clients' application ecosystems and business processes, while mitigating application deployment and management burdens.

The FPX CPQ offering consists of three main products that the vendor is actively selling:

• CPQ OnDemand — The configuration application and embedded pricing engine, quoting module and associated workflow functionality

• Product Data Manager — The administrative environment for managing product information, associated sales content, and configuration and pricing rules and calculations

• Configuration and Pricing as a Service (CPaaS) — A Web services development environment and a library of application components (i.e., a stand-alone pricing component) for extending CPQ OnDemand functionality (i.e., rendering price discounting practices)

CPQ OnDemand is written in Java, supports Java EE, and runs on Microsoft SQL Server. Web services are based on Simple Object Access Protocol (SOAP) and representational state transfer (REST) methods. The SaaS delivery model has clients share application instances, but provides each client with its own database instance. All SaaS clients are upgraded at the same time to new versions. A new offline module called CPQ OnDemand Offline Edition is also available for quoting from disconnected devices, such as laptops. In addition, FPX has worked on enabling clients to expose CPQ OnDemand functionality to partners, to manage accounts and opportunities, or generate quotes or proposals.

FPX's CPQ solutions have been deployed for a range of manufacturing approaches, including sophisticated ATO implementations, as well as ETO for transportation. The vendor is focused on manufacturing (it originally started with heavy equipment in the construction, agriculture and transportation sectors), high-technology (both software and hardware) and medical equipment; and is also pursuing opportunities in financial services and communications equipment.

Extensive nested configuration capabilities are provided to ensure compatibility across a range of product hierarchies. Pricing functionality includes support for mass changes and complex pricing schemas and approaches, to accommodate complex variations based on factors such as region, customer, margin or product combinations and effective dates.

Customers gave positive feedback on the UIs, as well as the combination of configuration engine, quoting and proposal generation capabilities, characterizing them as easy to use and flexible at meeting business process requirements. More specifically, references awarded FPX some of the highest positive scores for satisfaction with the overall product offering, product flexibility and usability, in comparison with competitors' references.

As a key sales and marketing initiative, FPX partners with salesforce.com, participates in the AppExchange program and offers a standard integration. There are also reseller relationships with software vendors that embed or host the CPQ and Product Data Manager products, including Intelliquip and Kozo Keikaku Engineering (KKE). In addition, the vendor partners with Pervasive Software for integration tools, as well as with Astadia to deliver on-demand system integration services.

FPX still needs greater visibility with CPQ prospects interested in SaaS-based solutions, in comparison with competitors. The past two years have been transitional for FPX, and momentum with new client acquisitions has been relatively slow. At the same time, FPX possesses a legacy on-premises installed base comprising more than 20% of clients that will require resources to service. Integrations with SAP have not been standardized for CPQ OnDemand, although the vendor has experience extracting product and pricing data from SAP systems.

FPX receives a Positive rating, because of its experience in the sales configuration space, positive feedback from references, breadth of functionality, product usability, strategy for delivering a SaaS-based solution and investments made to bolster organizational viability.

Rating: Positive

Founded in 2000, Intelliquip is a privately-held company that specializes in fluid handling equipment for different industry verticals, primarily industrial manufacturing, oil and gas, building trades, food processing and chemical industries. The CPQ solution is particularly suited for consultative, project- or solution-based selling practices requiring a substantial degree of customization of elements, spanning complex ATO and ETO requirements. Based in Bethlehem, Pennsylvania, Intelliquip is a modestly sized organization that relies on SaaS delivery models for provisioning functionality, but has acquired a disproportionately large international business, which represents approximately 40% of its clientele. Gartner estimates that Intelliquip generated less than $5 million in revenue in 2010. The vendor stated it is profitable, indicating commendable financial discipline, but higher growth is a leading corporate objective that will require more investment.

The flagship product line, Intelligent Front-End (IFE), consists of three main components:

• Intelliquip Selector for needs assessments exercises, to search items based on conditions-of-service requirements in an iterative manner employing user defined criteria and to model modifications to parameters to establish new performance characteristics

• Intelliquip Configurator for providing configuration and pricing functionality based on the core configuration engine embedded from FPX, to assemble and validate final selections of equipment and options

• Intelliquip Quote Manager for generating quotes and proposals for negotiated project-based sales, enabling frequent modifications to ETO solutions and deal parameters, tracing disposition within sales cycles and delivering guidelines for satisfying predefined pricing goals

Furthermore, tools are provided to develop two types of product knowledgebases that underpin the Selector and Configurator modules, respectively termed Selector Knowledge Builder and Configurator Knowledge Builder. The Selector Knowledge builder assembles performance and engineering data specifically. The Configurator Knowledge Builder helps users define rules, constraints, pricing, options and models. An xSheet module enables users to create transferable data sheets for communicating technical information. For visualization, configured equipment drawings can be rendered in UIs.

Intelliquip's approach to SaaS supports the sharing of applications, databases and hardware, although separate databases are provided to hold customer information, or other confidential data. A single tenant model can also be deployed at additional cost.

The applications are written using Java 1.6 and Java EE5, in compliance with Oracle's Code Conventions for the Java Programming Language, and run on Microsoft SQL Server databases. The vendor also provides for unusually extensive multilingual support. Along with Unicode support, the software has been localized to enable clients to set display interfaces in approximately 18 languages, including French, Italian, German, Spanish, Chinese and Japanese. However, the tools for the knowledge bases and help screens are only in English out-of-the-box.

References viewed Intelliquip favorably for its domain expertise in equipment for fluids and gases, and functional breadth of its product offering. Notably, many references highlighted the importance of Intelliquip's technology for reducing preparatory work for salespeople and streamlining processes. Intelliquip also received above average reviews from references for the scalability of its offering, as well as for maintenance services and managing upgrades, which is significant for ensuring a reputation for a SaaS clientele. In addition, most references revealed relatively fast deployments, with implementations completed in six months or less.

Intelliquip is relatively small, in comparison with other vendors covered in the MarketScope, and will have to address a number of issues to scale the business quickly. A partner network for consulting services needs to be established, while the incipient sales force will need to be expanded. Beforehand, sales depended on references and the personal involvement of executives in pursuing and closing deals.

With regard to the product line, the offering does not include an offline module for disconnected usage modes. Also, clients have limited latitude in determining upgrade cycles (they cannot fall further back than one major release). Finally, the vendor depends on leasing FPX's engine for basic configuration capabilities. Although the relationship has been strong between the two vendors, and FPX has improved its viability, the partnership could be subject to change in the future.

Intelliquip rates a Promising, for successfully combining quoting and needs assessment functionality with a configuration engine to streamline sales processes for complex, highly componentized solutions. In addition, the vendor has made progress in making its technology accessible to a worldwide user population via a SaaS delivery model. It is recognized for its expertise in fluid and gas management equipment, especially for sales processes that require accounting for an element of engineering.

Rating: Promising

Oracle has a substantial presence in the CPQ market with E-Business Suite (EBS), offering broad CPQ functionality for a large ERP and supply chain client base to exploit for automating selling processes. Oracle represents one of only two large application vendors credibly competing in the CPQ market (along with SAP), and has an enormous global footprint, with offices located in all major regions of the world, bolstered by extensive staffing resources for sales, professional services and customer support. As of 21 May 2010, Oracle’s total full-time head count exceeded 105,000 employees, including more than 26,000 staff in services. In addition, Oracle retains one of the largest partner and reseller networks in CPQ, which can be drawn on to assist with EBS projects.

EBS represents one of two Oracle product lines for satisfying CPQ requirements for sales and marketing (along with Siebel), while core configuration functionality is also commonly deployed in support of manufacturing and fulfillment processes. Gartner estimates that Oracle has accumulated one of the largest installed bases with its EBS product line, with approximately 800 client organizations using recent releases of the core configuration module, with less than half of installations estimated to be dedicated to supporting sales requirements.

Oracle's strategy is to provide end-to-end CPQ process automation that can be integrated with the rest of the vendor's software portfolio, particularly with back-office EBS assets. Oracle has adopted a modular approach to providing feature sets, based on three key applications:

• Oracle EBS Configurator for configuration engine functionality, as well as developing and administering models (core capabilities are based on Oracle's past acquisition of Concentra)

• Oracle EBS Advanced Pricing for pricing engine capabilities

• Oracle EBS Quoting for quote generation and management functionality

Moreover, Oracle offers a broader set of associated applications that provide clients additional value, including:

• Oracle EBS Order Management for order capture features

• Oracle EBS Proposals for generating sales proposal documents and content

• Oracle EBS Sales Contracts for assembling sell-side contract management repositories

• Oracle EBS iStore for e-commerce and Internet storefront functionality

• Oracle EBS Deal Management for enforcing pricing practices and facilitating simple deal analysis and negotiation tasks

• Oracle Pricing Analytics for analyzing the price quality of proposed and historical transactions

The CPQ applications for Oracle EBS are written in Java, C, SQL and PL/SQL, employing the Oracle Applications Framework and Oracle Forms. The products are typically deployed on-premises, although a hosted option is available for the Configurator, Quoting and Advance Pricing modules. Oracle provides some of the most extensive multilanguage support, encompassing localization of modules for many languages. Oracle does not provide a disconnected client for modules for offline usage, although wireless access is supported. Reseller relationships are in place to deliver offline capabilities, as well as more-sophisticated visualization features.

Oracle emphasizes integration with back-office EBS applications, as well as integration with other application product lines through Oracle Application Integration Architecture (AIA) and Process Integration Packs (PIPS), which are based on Java and BPEL. AIA PIPs have been developed to facilitate integration with Oracle CRM OnDemand, Agile Product Lifecycle Management and Oracle's Siebel CRM applications. However, further proof points are needed to confirm the maturity and value of Oracle's Siebel CRM and Oracle CRM OnDemand integrations from clients.

Oracle supports a wide range of customers and business models, but is targeting the high-technology, industrial manufacturing, professional services and automotive industries for EBS. Although there are customers engaged in ETO manufacturing styles, the weight of experience and focus of client initiatives is on ATO requirements. EBS is well-positioned to compete for multichannel sales opportunities in high tech, communications and discrete manufacturing, due to the sophistication of the configuration and pricing engines and modeling environment. Oracle Configurator Developer is provided for creating and maintaining models, rules, constraints and UIs, and includes graphical administrative interfaces, workflow and debugging, and migration tools.

Oracle's attention is split between sales and production configuration. A significant proportion of the Oracle Configurator installed base is still on Oracle EBS 11i10, and will need to be carefully managed. This is a significant issue because EBS CPQ references have given Oracle below average ratings for services for upgrades and maintenance, in comparison with competing CPQ vendors.

Oracle EBS receives a Strong Positive rating because of the vendor's financial viability, large client base relative to other CPQ vendors, global footprint, vision for end-to-end CPQ process support and multichannel sales, as well as for functional breadth and strength of the core modeling and rules maintenance environment for the configurator, and the underlying strength of the configuration and pricing engines. Oracle EBS is well-suited for high technology and discrete manufacturing. Support for multichannel selling will resonate with the communications vertical.

Rating: Strong Positive

Oracle's Siebel offering, which is focused solely on the CRM domain, retains the leading on-premises sales automation installed base, and is entrenched in many Fortune 2000 enterprises worldwide. Prior to Oracle's announced acquisition of the organization in 2005, Siebel pursued considerable investments in assembling a competitive set of CPQ software assets to support the requirements of direct, Web-based and indirect sales. The Siebel division continued efforts to deliver broad process automation capabilities for CPQ requirements for different sales channels, in particular for B2B sales models. In addition, Siebel benefits from the stability and strong viability of the parent Oracle organization, and possesses its own global infrastructure of sales channels, servicing resources and partners. Siebel still has one of the more mature and substantial implementation partner networks, encompassing Deloitte, Accenture, Wipro and Infosys, as well as boutique firms such as CRMantra.

The product segment of the vendor's considerable CRM application suite pertaining to CPQ processes is packaged and marketed under the branding of Oracle's Siebel CRM Customer Order Management (COM). Within this offering, a variety of applications may be employed to support specific client requirements. The three bellwether modules that commonly receive consideration in evaluations are:

• Siebel Configurator for modeling environments, configuration engines, rules and constraints libraries, product and pricing information management, and administration tools

• Siebel Dynamic Pricer for pricing engine and price administration functionality

• Siebel Quote and Order Capture for generating quotes and automating the submission of orders

There are three other notable packages available for deployment with core CPQ applications:

• Siebel Deal Management for enforcing pricing practices and facilitating simple deal analysis and negotiation tasks

• Price Performance Analytics for multidimensional analysis of pricing histories and current price quality indicators

• Siebel Proposals and Presentations for sales content repositories and tools to generate sales proposals

An offline client for disconnected usage modes is available for configuration and pricing feature sets. To further extend the business value of the COM application solution, Siebel also offers:

• Siebel Sales and Service Contracts for providing repositories and tools for storing agreements and sell-side contract management

• Siebel CRM Self-Service for eCommerce for Web-based storefront functionality and Internet access

• Siebel Partner Portal for delivering Web-based functionality for exposing CPQ capabilities to indirect channels

The COM applications are written in C++, JavaScript and Java, and include a scripting language for simple customizations called eScript. Siebel has also developed Web services supporting common formats such as XML, HTTP, COM and CORBA, as well as invested efforts to integrate with IBM WebSphere MQ (formerly known as the MQSeries). Constraint libraries from IBM iLog have been embedded into the COM suite. The applications are overwhelmingly deployed on-premises, although a few clients (approximately 5%) have tried hosted options. For multinational deployments, language packs have been developed to enable users to select approximately 19 different languages as defaults for UIs. Unicode standards are also supported.

In contrast with the CPQ clientele of EBS, many Siebel clients integrate with SAP back-office applications, as well as with other third-party ERP installations. In addition, Oracle's Application Integration Architecture (AIA) is increasingly being used by clients to deploy PIPs to accomplish integrations between Siebel and EBS applications, JD Edwards, SAP as well as with CRM On Demand. However, clients have found the solutions to be expensive, and have indicated that further proof points on ease of integration are needed in live production environments.

Siebel Configurator provides extensive functionality, such as product attribute and classification, procedural rule support, configurator UI themes, upsell/cross-sell messaging, promotions and external rule validation. Recent enhancements focused on improving usability for the self-service end-user interfaces and administrative interfaces. Although Siebel has supported ETO projects, implementations tend to focus on addressing ATO requirements.

Client are becoming interested in straightforward, easy-to-deploy analytics for pricing and deal management. Overall, clients report positively on Dynamic Pricer for managing price lists and tailoring offers for specific products and product lines, including the ability to validate offers based on eligibility and the compatibility of products.

Gartner estimates that Siebel has more than 800 customers on more recent, major releases of software modules (specifically 8.x and 7.8) specific to automating core sales configuration, pricing, quoting and proposal functions as an integrated process. Siebel is strong in communications and high tech, possesses an extensive clientele in discrete manufacturing, and is targeting retail and financial services. The bulk of Siebel's clientele is almost split evenly between North America and EMEA.

A sizeable portion of Siebel's client base remains on 7.x versions of its software and will need to be shepherded through upgrades to reinforce retention, reduce support costs and mitigate the propensity for aged installations to consider competitors. In addition, implementation projects tend to be long, with most references indicating time spans of nine months to more than 18 months. As the Fusion initiatives progress, Oracle needs to define clear road maps for Siebel to reassure clients on product commitment. Moreover, although Siebel supports relatively large installations — several thousand users and similar numbers of configuration sessions a day — clients are still concerned about enhancements to improve system performance and response times. Overall, clients have hinted they would like to see more-aggressive investment in Siebel Configurator than they've perceived during the past two years.

Oracle-Siebel receives a Strong Positive rating because of its deep sales configuration functionality and breadth of CPQ capabilities, including pricing analytics, as well as due to the organization's strong focus on CRM and CPQ concerns, vision for supporting multiple sales channels, and focus on the needs of sales and marketing organizations. In addition, Siebel benefits from its position as the leading on-premises provider of sales automation, and overall viability and global coverage enjoyed by the parent Oracle organization.

Rating: Strong Positive

SAP is one of the largest business application vendors and has competed in the sales configuration market for about 10 years. However, SAP's strategy, commitment and actual accomplishments have been uneven, yielding incremental gains in the past four years in delivering an offering for SAP CRM. Notably, SAP has offered two configuration solutions to address client requirements:

• Internet Pricing and Configurator (IPC) for supporting CRM 7 and STO and ATO practices

• Variant Configurator (VC) for SAP ERP (originating from R/3), which supports sophisticated project-based sales and clients with ETO requirements.

VC is suited for product configuration involving BOMs and ensuring the integrity of manufacturing and fulfillment processes. The product is often deemed too complex for nontechnical sales staff. Business analysts, IT staff, subject matter experts and engineers are typically needed to effectively employ VC in a sales support role, and for complex sales processes that conclude with the generation of BOMs for execution in SAP ERP. Manufacturing clients often use VC's Product Modeling Environment to develop sophisticated models in support of IPC installations, when the two products are deployed in tandem.

However, the focus of this MarketScope is on CPQ solutions that aid sales channels and can ideally be used directly by selling personnel or by staff directly supporting sales teams. Hence, this MarketScope focuses on IPC and ancillary software packaged under the current branding of SAP Quotation and Order Management.

SAP intended to enhance IPC functionality sufficiently to enable it to equal VC at addressing most sales and marketing use cases. To date, IPC functionality has been viewed by clients and prospects as more appropriate for STO and simpler ATO requirements (i.e., products sets with more-limited variation of configurable components). In more-complex manufacturing environments, clients have deployed IPC for sales and marketing support, while delegating to VC advanced ATO and ETO modeling responsibilities, BOM management and fulfillment functions. Because of past shortcomings in functional maturity, some customers have encountered challenges in ensuring compatibility between IPC and VC model environments.

SAP remains a threatening competitor, because of its substantial financial and human resources, as well as its global presence. SAP enjoys a credible partner network for providing sales and servicing channels, as well as a large client base with which to pursue cross-sales. For sales configuration, SAP is estimated to have approximately 1,800 to more than 2,100 client corporations on recent releases of software in live production, of which an overwhelming majority are VC installations. Fewer than 30 of the configuration clients are estimated to have installed IPC, presenting opportunities for further sales of IPC to front-end VC deployments and to bundle it in CRM 7 deals. In fact, most references stated that SAP was ultimately selected because of established relationships. Although the vendor targets manufacturing, high technology, consumer goods and automotive industry verticals, SAP has acquired mind share in machinery as well.

SAP's IPC has benefited from improvements to the UI from SAP CRM 2007, in terms of gaining client attention, incorporating enhancements such as drag-and-drop placement on a screen and enabling users to personalize desktops. IPC also offers a wizard-like configuration process for product and services within one session. Moreover, SAP has been integrating pricing analytics from Vendavo with IPC's quoting functionality to deliver in-line analytics for CPQ processes. The vendor is also exploring integrations between Business Objects and IPC. Clients report good performance with the pricing and quoting functionality, with some able to generate more than 50,000 quotes a week for fairly sophisticated transactions in high technology and manufacturing.

IPC is written in Advanced Business Application Programming (ABAP) and Java, and built on SAP NetWeaver technology. Extensive multilingual and multicurrency support is provided. SAP supports only an on-premises delivery model. Both quotation and pricing functionality are built into IPC, and cannot be deployed as stand-alone modules. Customers do not normally purchase and deploy IPC as a stand-alone offering, independent of a CRM 7 installation.

SAP does not provide functionality for generating sales proposals; has not invested recently in the available, disconnected offline client; and has been slow to market sophisticated visualization capabilities. SAP developed SOA interfaces to facilitate integration with software partners for specific capabilities, including intelligence and Sybit for graphical configuration features, as well as Cincom for guided selling and proposal generation.

References gave SAP below average scores for product flexibility (in comparison with feedback from competitors' references), as well as lukewarm reviews on usability for business users, while demonstrations of IPC in sales cycles often fail to resonate with prospects (who have characterized the software as not showing well in demos).

SAP receives a Promising rating due to the gradual uptake of IPC among its considerable application installed base, as well as gradual functional maturation, notably with usability issues and integrating pricing analytics with quoting processes. However, IPC and VC will continue to be offered for CPQ solutions into the near future, which will complicate issues around positioning and functional equivalency for clients. Moreover, further enhancements are needed on UI design and the development and management of models.

Rating: Promising

Based in Dublin, Ohio, Sterling Commerce was a wholly owned subsidiary of AT&T that was acquired by IBM in 2010. The Sterling organization has been integrated into the newly created Industry Solutions organization in the IBM Software Group. With approximately 2,500 employees and an estimated $550 million in revenue for 2009, Sterling Commerce markets an array of software products and services for B2B commercial requirements in e-commerce, middleware, integration, collaboration and business applications. Only a small portion of Sterling's business addressed CPQ concerns for selling channels. The relevant offering, IBM Sterling CPQ, is part of a larger suite called IBM Sterling Selling and Fulfillment Suite, which is focused on delivering end-to-end process support for order management, particularly for e-commerce environments and partner channels. IBM Sterling CPQ is estimated to have generated between $15 million and more than $20 million in revenue in 2010.

IBM Sterling CPQ represents a good addition to the WebSphere Commerce portfolio, because it introduces the B2B functionality that IBM lacked. IBM WebSphere Commerce gains new capabilities that enable users to configure products and/or services online. Easing integration efforts, IBM Sterling CPQ was already certified for WebSphere Application Server and the DB2 database. In addition, there are opportunities for leveraging complementary IBM assets to enhance IBM Sterling CPQ, such as optimization and rules technologies from iLog, analytics from Cognos or integration capabilities from CastIron. IBM Sterling CPQ is part of IBM's Smarter Commerce application suite, and will be the CPQ solution for that suite.

Sterling's target industry verticals in CPQ are manufacturing, communications (including media and entertainment) and retail, with a focus on supporting requirements for STO and ATO processes, particularly with managing product bundles. The vendor has concentrated on selling into markets in North America and EMEA and has developed a strong presence in communications, as well as gained a foothold in high technology.

IBM Sterling CPQ encompasses four major products that can be licensed:

• IBM Sterling Configurator for core configuration engine functionality, modeling environment and administrative features

• IBM Sterling Pricing for pricing engine functionality and pricing administration tools that are integrated with Sterling Configurator

• IBM Sterling Quotes for providing quoting functionality, proposal generation and associated workflow management that can be deployed as a stand-alone module (i.e., approval processes)

• IBM Sterling Catalog for defining product data and classifications, as well as managing product catalogues

In addition, the vendor offers Sterling CPQ-as-a-Service, which is hosted by Sterling in its own data centers, providing clients their own application and database instances, and hardware, as well as allowing discretion on update cycles. Sterling has established relationships with salesforce.com and RightNow Technology to penetrate SaaS markets. IBM Sterling CPQ does not participate in salesforce.com's AppExchange program, but a standard integration has been developed, and there are plans to pursue certification and enter the program in the August 2011 time frame. An integration framework has been developed for RightNow, accompanied by a mutual referral partnership.

IBM Sterling CPQ is written in Java, JEE and Ajax and supports JSP, XML, XSLT, SOAP, WSDL and JDBC. Along with DB2, the software also supports Oracle 11g. All functionality is managed with a common set of administrative tools (called Business Center) that is accessible through a browser. It has been designed to facilitate the definition and management of product data, pricing, promotions, and the organization of catalogues. No disconnected client for offline usage modes is available, but wireless access for devices is supported, providing views of products, inventory availability, order taking and order status checks. Sterling provides tools to localize versions of its software, and references have reported successfully deploying applications with UIs in various languages, including Japanese, Thai, Chinese, German, French, Italian and Swedish.

Customers have commented favorably on the simplicity of the maintenance environment for administering product configuration rules. Moreover, clients viewed Sterling's configurator as flexible in handling many types of complex configurations for STO and ATO requirements, including product bundles of combinations of products and services and subscription-based sales. Because of better-than-expected system usability, references have exposed administrative capabilities to subject matter experts in business units to manage product configuration models, with limited IT support. In addition, price administration features and support for partner channels have also been positively highlighted by clients, which found functionality to handle promotions and pricing bundles particularly attractive. Moreover, Sterling's configurator has been deployed for high-scalability and high-transaction-volume environments.

Sterling Commerce still has a significant number (approximately 30 to 40%) of clients on versions older than two major releases, which will require resources to migrate. However, reference feedback gave below-average ratings for Sterling Commerce in the areas of maintenance and upgrade support services, in comparison with references of other CPQ vendors. Moreover, deal volume for net new clients had been relatively modest prior to the IBM acquisition. Although Sterling Commerce enjoys a relatively substantial partner network of consultancies for CPQ, (including Deloitte, Accenture, Infosys and HCL), relationships may fray due to the IBM acquisition and Sterling becoming viewed as a competitor.

This vendor is going through a transition phase, and it remains to be seen whether the number of sales cycles and client wins appreciate significantly as part of IBM in the near term. Historically, Sterling CPQ was viewed as one of the more expensive solutions in the market, focused on winning multimillion-dollar deals. In addition, Sterling Commerce had not traditionally focused on ETO requirements, although it does partner with AutoCad for CAD visualization.

Sterling Commerce receives a Positive rating because of the viability and backing of IBM, the complementary addition of other Sterling assets to support Internet sales with fulfillment capabilities, experience in communications and supporting partner sales channels, and strong core configuration and pricing administrative capabilities.

Rating: Positive

Based in Stockholm, Sweden, Tacton Systems arose from the Swedish Institute of Computer Science, and has been privately held since 1998. Tacton specializes in delivering solutions for equipment manufacturers with ATO and ETO requirements, including support for customizing product designs and/or underlying components. The vendor has targeted industrial equipment manufacturing, as well as producers of life sciences and high-technology equipment. Tacton has a modest size organization, which Gartner estimates earned less than $10 million in revenue in 2010. The vendor has focused on opportunities in Europe, but has won clients in the U.S. and elsewhere (e.g., Japan). In addition, references have reported supporting global deployments across EMEA, the Americas and the APAC region.

The flagship software suite is called Tacton Configurator, which comprises two products specific to configuration functions, as well as a quoting application that can be employed online or offline as a front end to the configuration engine:

• The Tacton Configurator Server (TCserver) provides the core constraint-based configuration engine, which includes support for the execution of pricing rules and calculations, as well as standard APIs for integrating with other applications

• The Tacton Configurator Studio (TCstudio) provides a graphical modeling and maintenance environment for defining and managing rules on products, components, relationships, dependencies, pricing rules and calculations

• The Tacton Configurator Site (TCsite) provides a Web-based quoting tool that integrates with Tacton Configurator Server

• The Tacton Configurator Site Offline (TCsite Offline) provides a version of Tacton Configurator Site for disconnected use on laptop PCs

The vendor also offers TactonWorks for generating and managing common changes to product designs. This capability represents an add-in from SolidWorks, and is integrated with Tacton Configurator.

The Tacton Configurator suite supports Java, Java EE, .NET and XML, with the constraint engine written in C. Along with integrating SolidWorks for CAD, the software suite offers standard integrations with Dassault Systemes ENOVIA PLM, salesforce.com and WebSphere Commerce (the Tacton Configurator Server can be embedded in WebSphere Commerce). The suite is usually deployed on-premises, although the quoting application called Tacton Configurator Site and integration component to salesforce.com are also hosted by Tacton. English is the only language available out-of-the-box; however, the software supports Unicode and has been localized for Japanese, Spanish, German and Italian in implementation projects.

The usability of the modeling environment in defining and managing product configuration rules, as well as the ability to perform complex configurations for industrial businesses, is appealing to Tacton's installed base. References gave Tacton above-average scores for ease of use for non-technical users, as well as for scalability, in comparison with reference feedback on competitors. In addition, prospects have characterized the integrations to Solidworks and ENOVIA PLM as attractive and valid, especially for sales processes requiring sophisticated visualization capabilities. More than 60% of references cited technological innovation as the primary reason for selecting Tacton.

Tacton is pursuing a three-pronged sales strategy: Employing a direct sales model in Sweden, the U.K., the U.S., and Germany; leveraging sales partnerships with product divisions of vendors such as IBM WebSphere Commerce and Dassault Systemes ENOVIA Product Lifecycle Management (PLM) for other regions of the world; and working with resellers of SolidWorks, IBM Japan and other vendors for worldwide coverage.

However, Tacton's service partner network is immature, with no major consultancy firms listed as partners, although Capgemini has performed implementation work for one reference in the past. In addition, the IBM sales relationship could weaken, due to IBM's acquisition of Sterling Commerce, although Tacton could still resonate for both ETO and rich visualization support.

Similarly, Tacton's sales team is small, and coverage still maturing. Tacton's sales organization will have to be diligent in surfacing and developing opportunities, because most client evaluation cycles range from six months to more than 12 months.

Tacton receives a Promising rating due to the ease of use of the suite for modeling and executing complex configurations, support for ETO requirements, integration with CAD and favorable feedback from references on the vendor's technology.

Rating: Promising

Headquartered in Columbus, Ohio, TDCI is an application software and service provider, with core businesses in product configuration, sales technologies, ERP applications, CAD and system integration. Founded in 1992, TDCI originally developed a MAC-PAC customer support and maintenance business, which included gaining experience servicing the MAC-PAC Expert Configurator installed base. TDCI subsequently launched the BuyDesign Configurator in 2004, which it sells to a general market, typically in manufacturing and distribution industry verticals. More specifically, the target vertical markets for TDCI are building products, industrial equipment, high technology, electronics manufacturer, medical devices, specialty vehicles and water craft. Gartner estimates TDCI revenue from CPQ-related sales was less than $10 million in 2010. TDCI has stated it is profitable and free of debt.

TDCI's flagship offering for CPQ is called BuyDesign, and encompasses the following key modules:

• BuyDesign Configurator for providing the configuration engine, managing rules and constraints, and generating pricing

• BuyDesign Studio for providing a graphical modeling and test environment

• BuyDesign InTouch for publishing configuration models and content updates

• BuyDesign Flex2D for providing a native tool that generates two-dimensional images and drawings, leveraging AutoCad Inventor for the design environment

• BuyDesign Flex3D for generating three-dimensional models of configurations, leveraging underlying capabilities from SolidWorks and Pro/Engineer

• BuyDesign FlexDocs for generating proposals, sales content, and warranty and installation documentation

TDCI also markets a solution called BuyDesign Guided Selling, which includes:

• BuyDesign Build-Your-Own for supporting self-service, online visualization environments that enable users to review combinations or variations of products

• BuyDesign Channel Sales for supporting needs assessments, quoting, bidding or proposal processes, for online and offline usage modes for direct and indirect sales forces

• BuyDesign Storefront for supporting e-commerce storefronts for self-service buying cycles

BuyDesign is based on Microsoft technology, including Microsoft Visual Studio .NET, C#, VB.NET and C++. For the presentation layer, the software also leverages the Microsoft Model, View, Controller (MVC) framework and Microsoft Patterns and Practices standards. Along with BuyDesign Channel Sales, the Configurator, Flex2D and FlexDocs modules can be deployed as disconnected clients for offline usage modes. Although most clients deploy BuyDesign on-premises, TDCI does host its applications, provisioning separate application instances and databases for each client, with the hardware shared.

TDCI sells BuyDesign directly to accounts, but is also pursuing an aggressive partnership strategy contingent on integrating the configurator with select ERP and CRM products. TDCI and Infor long had OEM agreements in place for Infor to embed modules of the BuyDesign suite as integrated components of Infor ERP SyteLine, Infor ERP SX.enterprise, Infor ERP XA, Infor eStorefront, and more recently Infor ERP LN. In addition, through Microsoft resellers, the BuyDesign Configurator has been embedded in Microsoft Dynamics NAV, Microsoft Dynamics AX, Microsoft Dynamics GP and more recently Microsoft Dynamics CRM. BuyDesign continues to be the embedded configurator for MAC-PAC XE ERP.

Prospects in the building supplies and equipment space have found TDCI's capabilities for supporting guided selling, and the real-time generation of designs and quotes to be attractive, especially for salespeople of limited technical skills. In addition, the investment required for TDCI had been viewed as very economical and cost competitive. In a number of cases, references indicated that BuyDesign was deployed for ETO requirements.

TDCI's CPQ business is fairly modest; however, it is rebounding from the recession. The vendor suffers from relatively low name recognition in the market. In addition, the consulting partner network for CRM-driven engagements is relatively immature, although the vendor has been nurturing ties with Microsoft partner organizations such as Tectura and Hitachi. In addition, the vendor is largely focused on the North American market. TDCI should work to build closer relations directly with the Microsoft organization, especially with Microsoft Dynamics CRM, which does not yet have an established sales configuration software partner.

TDCI receives a Promising rating for its partnering strategy, cost-competitiveness, functional breadth for CPQ, focus on guided selling, product usability in generating quotes and strong visualization capabilities — including two-dimensional drawings, three-dimensional models and photorealistic images at various points in the configuration.

Rating: Promising

Founded in 1998, Webcom has focused on marketing SaaS-based CPQ capabilities, with an emphasis on simplicity and relatively rapid implementation cycles. Based in Milwaukee, Wisconsin, Webcom's target vertical industries are industrial equipment, automation and controls, and high-technology hardware and software. Gartner estimates Webcom revenue at approximately $5 million for 2010.

Webcom's offering, WebSource CPQ, is a Microsoft .NET application that is delivered through a SaaS model, where clients share application instances, but discrete databases are provisioned. Subscriptions are priced on a per-user, per-month basis, while updates and new features are released on a monthly basis. A disconnected, mobile client is also provided to support offline usage modes, based on Microsoft SQL Express. Although Webcom once had an on-premises clientele, more than 98% of customers are now deployed as SaaS. References awarded Webcom above-average scores for its maintenance and upgrade services, which are important for SaaS business models that depend on recurring revenue, subscriptions and expectations of frequent enhancements.

WebSource CPQ has both the pricing engine, proposal generation and quoting functionality built into the same software with the core configuration engine. Two primary bundles are available to customers:

• QuickQuote Edition for catalog, quoting, proposal, order management, approvals and basic pricing functionality

• Full CPQ for including the configurator with the components provided with the QuickQuote Edition

A forward chaining rule engine underpins the configuration functionality. Webcom CPQ not only supports configuration sessions for new sales, but also supports the handling of add-on sales/upgrades to as-built/installed products. Moreover, WebSource CPQ supports functionality for partial order generation from master quotes, document generation via XML to Microsoft Word, offline synchronization of data and workflow triggers, product aliases, and quantity in bulk validation.

Webcom partners with salesforce.com, and participates in that AppExchange program, and is an Oracle On Demand-certified partner as well. Integrations have been developed for both sales force automation SaaS offerings. Webcom is also a Microsoft partner and offers a connector to Microsoft CRM Dynamics online.

Interestingly, Webcom has invested significant effort in software localization, supporting approximately 11 languages, including French, Italian, German, Spanish, Japanese, Chinese and Russian. Webcom has offices in the U.K. and Belgrade, Serbia, and partner sales agents in Australia and Japan.

Clients and prospects have found WebSource to be cost-competitive in comparison with other SaaS-based CPQ vendors. References reported employing WebSource for STO, ATO and ETO practices, as well as using quoting and proposals with the standard configuration and pricing functionality. Half of references stated that implementations cycles lasted four months or less, while almost all references estimated that only one to four internal resources were needed for their projects.

Webcom remains a relatively modest-size vendor, and its partner network is immature. Although it has gained visibility as a SaaS-based CPQ provider from its relationship with salesforce.com, to remain as viable alternative to BigMachines, it will need to continue to build recognition, as more CPQ vendors compete with SaaS offerings.

Webcom receives a Promising rating because of its strategy to delivery CPQ applications via a SaaS model, its breadth of functionality and its cost-competitiveness. Midsize or larger divisions of industrial manufacturing companies interested in SaaS-based CPQ offerings should consider Webcom.

Rating: Promising