Market Guide for Configure, Price and Quote Application Suites

CPQ application suites enable sales organizations to automate and optimize the creation of quotes and capture of orders, and streamline the communication of customer intent. This Market Guide provides application leaders with an overview of the market and a representative list of CPQ vendors.

Key Findings

• There are more than 50 vendors offering configure, price and quote (CPQ) solutions today. There is low market penetration and no clear market leader. Expect the market to consolidate over the next three years. One or two vendors will emerge as leaders.
• Most vendors are investing heavily in their SaaS, cloud solutions. This is where innovation is happening and vendors are seeing revenue growth.
• Vendors will merge or be acquired to deliver end-to-end offerings that streamline the complete lead-to-cash process.
• The market is expected to grow as companies implement CPQ for the first time, or they replace their legacy on-premises CPQ applications and ERP quoting and ordering modules with modern SaaS software that is tightly integrated with other front-office processes such as sales force automation and incentive compensation.

Recommendations

• Evaluate existing business processes to determine whether a CPQ application could improve close rates, margins, revenue or order accuracy, or reduce the cost of back-office proposal creation, sales operations and bid desks.
• Review the effectiveness and cost of maintaining existing CPQ applications. Determine whether this is the right time to transition to a cloud-based solution.

Market Definition

This document was revised on 2 November 2016. The document you are viewing is the corrected version. For more information, see the Corrections page on gartner.com.

CPQ is part of the larger quote-to-cash business process. Some vendors are building or acquiring CPQ, contract life cycle management (CLM), order management (OM) and billing capabilities to offer a one-stop solution for the entire process. Leading CPQ solutions support the creation of quotes and capturing of orders across multiple channels of customer interaction (such as direct sales, contact center, resellers and self-service).

CPQ solutions have demonstrable, bottom-line impacts that justify the investment in software, implementation and ongoing management:

• Sales representatives can create high-quality quotes quickly. The first quote a customer receives has the highest probability of winning the deal. Implementing a CPQ solution results in faster quotes, a higher close rate and greater revenue.
• Intelligent discounting guidance, enforcement of discounting guidelines and linking sales representative compensation to margin result in higher margins.
• Guided upsells and cross-sells drive additional revenue and higher margins.
• Automated proposal and contract generation improve sales productivity.
• Organizations that capture complete and accurate orders at the point of customer interaction can eliminate the need for back-office order entry staff and reduce costs.
• Comprehensive validation of orders at the time of capture results in fewer delayed and rejected orders, thus improving customer satisfaction and reducing waste.

A CPQ application suite should provide the following capabilities:

Select Products/Offers: The first step of CPQ is to help the customer identify the products and offers that best match their requirements. At the most basic level, this comprises an SKU or name-based product search (sometimes referred to as "rapid order entry" or "part search"). Many solutions also provide a commerce-like graphical sales catalog with free text and faceted search and product comparisons. "Needs analysis" or "guided selling" asks the customer a series of questions about their business requirements and then recommends a set of products that best meet those needs. Today, these solutions are implemented by administered rules or custom scripts. This will be one of the first aspects of CPQ to benefit from machine learning. Increasingly, quotes and orders are created to modify services or upgrade goods that the customer already owns. This requires easy identification of the products that the customer already owns, and rapid recall of the current configuration and pricing (even if the product was sold by a different CPQ system).

Configure: Some products and offers have selectable options. A "configurator" enables the customer to understand and select those options and features. It ensures that only valid combinations of options and features are selected. More sophisticated configurators will provide advice and guidance during the configuration process and inform the customer of the pricing implications of their choices in real time. A configurator provides a user interface that is specific to each product to optimize capturing an order for that product. Real-time 2D or 3D rendering is sometimes used to help the customer visualize what they have ordered. Building these product-specific configurators is one of the most expensive and risky parts of implementing a CPQ solution. It is crucial to select a tool that is easy to administer (both initially and ongoing) and that supports the breadth of your product complexity (such as reusable subassemblies and networks). Vendors differ considerably in their ability to support modifications to existing configured products.

Price: The pricing engine of a CPQ solution calculates the list and net prices for the products selected in a transaction. Pricing requirements vary significantly across businesses. The best pricing engines provide common pricing mechanisms out-of-the-box (for example, list price, cost plus, volume discounts, attribute-based pricing, customer-specific contract pricing and promotions) and also provide extensibility, so that companies can implement their own unique requirements. Vendors differ considerably in their support for recurring and usage-based pricing. Pricing rules are often administered in another system, so easy integration is important. Surprisingly, few CPQ solutions provide out-of-the-box support for calculating shipping charges and sales taxes. These are usually ignored in the quote and added during invoicing, or implemented through customization or custom integrations.

Propose and Negotiate: A CPQ tool enables you to quickly generate professional-looking quotes and proposals. It may be possible to present multiple different scenarios to the customer. B2B transactions offers require discounting or preferential terms to close the deal. The CPQ tool ensures that discounting remains within the guidelines or is approved by management. Machine-learning algorithms will soon suggest the optimum discounts and terms based on prior history and corporate goals.

Order/Contract: Once a customer has agreed to a proposal, you close the deal by signing a contract. Sometimes the order itself is an implied contract. In other scenarios, a complex contract document has to be generated, negotiated by the legal teams and signed (often electronically). The order includes when and where fulfillment occurs (including scheduling appointments), and how the customer will pay for the new goods and services. The contract may define special pricing and terms that apply to future transactions (a "sales agreement"). The captured order is transmitted to a back-end system where it is fulfilled and billed.

Track/Change Order: The CPQ solution is a one-stop destination for the sales representative to interact with sales transactions. After an order is placed, it is possible to see and track the progress of orders. If the customer changes their mind, it is possible to revise the order and resubmit it to the back end (with appropriate controls in place for the cost and feasibility of the requested changes).

Analyze/Report: Quote and order data is analyzed using built-in or external reporting tools.

Market Direction

The CPQ solutions market demonstrated a 20% year-on-year growth between 2014 and 2015. In 2015, Gartner estimates that the CPQ application suites market was approximately $570 million. It is expected to exhibit strong growth, as companies continue to look for ways to improve their selling and customer experience.

The major market trends are:

Sustained growth: The market has experienced sustained, double-digit growth over the last five years. Gartner estimates a 20% annual growth rate through to 2020. Cloud solutions will drive almost all of that growth. Gartner estimates that total cloud revenue increased to $157 million in 2015, a 46% year-on-year growth.

Consolidation to build end-to-end offerings: Further market consolidation will happen as major vendors continue to acquire CPQ application vendors in order to build end-to-end offerings to strengthen their existing portfolio of lead-to-cash solutions. The market has witnessed three major acquisitions over the past four years; BigMachines was acquired by Oracle, Salesforce acquired SteelBrick, and Cameleon Software was acquired by Pros. Megavendors such as SAP and Microsoft are likely to follow suit. Smaller CPQ vendors are likely to combine with contract life cycle management vendors, 3D rendering vendors and billing vendors to offer complete solutions.

Emergence of gorillas: History suggests that a few vendors will gain momentum and become dominant in the CPQ space. Smaller, midmarket-focused vendors on the Salesforce platform are likely to lose traction to the native Salesforce CPQ offering and disappear.

Shift to SaaS model by on-premises vendors: Almost all new product innovation and investment is going into SaaS solutions. Vendors that have not yet made the shift to the cloud are expected to do so soon. Companies are now comfortable with the SaaS software delivery model, and are ready to migrate their existing on-premises CPQ applications (such as Siebel Order Management) to the cloud.

Omnichannel: As companies look to improve selling and customer experience across multiple customer-facing channels, more CPQ application suites will add digital commerce offerings. Initially, these will be targeted at B2B selling, but vendors will also integrate into leading B2C commerce solutions to support advanced, self-service configuration. Today, only a few notable vendors such as Apttus, Oracle CPQ Cloud and SAP have a robust digital commerce offering.

Better support for selling services: Most vendors started out supporting the selling of tangible goods. Selling services and solutions that are composed of goods and services adds complexity around pricing (for example, recurring and usage prices) and modifying services over time (often referred to as "subscription ordering" or "asset-based ordering"). Vendors such as Apttus, Accenture (bit2win) and Oracle CPQ Cloud do a good job of this today.

Product innovation: Expect rapid innovation as vendors try to differentiate themselves in a crowded market. New and emerging capabilities include: intelligent guided-selling, improved visualization and 3D modeling, intelligent negotiation guidance, mobile configuration support, estimated compensation, verticalization, and deeper integration with back-end fulfillment systems.

Representative Vendors

The vendors listed in this Market Guide do not imply an exhaustive list. This section is intended to provide more understanding of the market and its offerings.

Accenture bit2win Sales

Profile: bit2win is a small, SaaS CPQ vendor with core strength in the telecommunications, utilities and business services industries. It has about 10 large deployments, mostly in Italy and Southern Europe, and is native on Salesforce1, but runs its rule engines on Heroku. Accenture announced the acquisition of New Energy Group in September 2016 to bolster its Salesforce/cloud consulting capabilities in Italy and Spain. Along with 450 consultants, it also acquired the bit2win CPQ product.

Product Suite: bit2win Sales, bit2win Store, bit2win Publish, bit2win eSignature, bit2win eCatalog, bit2win eCommerce, bit2win Loyalty, bit2win Performance

HQ Location: Rome, Italy

Notable Customers: Telefónica, Vodafone Automotive, Enel, Fastweb

CRM Integrations: Salesforce

Apparound Configure Price Quote

Profile: Apparound CPQ runs disconnected on iOS, Android and Windows 10, as well as in a web browser. It has been successful in the Italian telecommunications industry with both B2B and B2B2C capabilities, but also has customers in the manufacturing, auto and travel industries. Transactions captured offline are synchronized with Salesforce, Microsoft Dynamics or Oracle Siebel CRM. The native iOS UI is fast and easy to use.

Product Suite: CPQ, Digital Content Distribution, Sales Performance Analytics

HQ Location: Pisa, Italy

Notable Customers: Vodafone Italia, Vodafone Group

CRM Integrations: Salesforce, Microsoft Dynamics, Siebel

Apttus Configure Price Quote

Profile: Apttus has one of the most popular and complete SaaS CPQ products. It offers a full quote-to-cash solution with strong contract life cycle management. Its X-Author technology provides integration with Microsoft's Excel and Word. Its configurator now runs in the browser to avoid Salesforce governor limits. Apttus' pricing and rules framework is rich and easy to administer, with support for reusable subassemblies and multiple charges per line. Apttus was originally built on the Salesforce platform. It released on Microsoft Azure in 2016 and can now integrate with Microsoft Dynamics.

Product Suite: E-Commerce, CPQ, Contract Management, Billing Management, Order Management, Revenue Management, Apttus Incentives, Quote-to-Cash Intelligence

HQ Location: San Mateo, California, U.S.

Notable Customers: Adobe, Akamai, Citrix and Olympus

CRM Integrations: Salesforce, Microsoft Dynamics

Autodesk Configure One

Profile: An on-premises/cloud product configurator with bill-of-materials, routing, and 2D/3D visualization capability. Targets manufacturing companies. Has a wide range of CRM and ERP integrations.

Product Suite: E-Catalog, E-Commerce

HQ Location: Chicago, Illinois, U.S.

Notable Customers: Haas Door, BMC, Niehaus

CRM Integrations: Salesforce, Microsoft Dynamics, Oracle Sales Cloud

Axonom Powertrak

Profile: Axonom is a small SaaS CPQ vendor that specializes in interactive, visual configuration. It has interesting capabilities for handling complex technical problems such as racking and cabling, two functions which are notoriously difficult to do with most other configurators.

Product Suite: Powertrak CPQ, Powertrak Product Configurator, Powertrak 2D Product Configurator, Powertrak 3D Product Configurator, Powertrak VR Product Configurator, Powertrak Customer Portal, Powertrak Partner Portal, Powertrak Recurring Revenue Management

HQ Location: Minneapolis, U.S.

Notable Customers: Dell Compellent, Flex, Middle Atlantic Products, Wallenius Wilhelmsen Logistics, Shimadzu Scientific Instruments

CRM Integrations: Salesforce, Microsoft Dynamics, NetSuite, Exact Macola Cincom CPQ

Profile: Cincom CPQ can be deployed stand-alone or integrated with Microsoft Dynamics. It has a mature product configurator that can support the requirements of complex manufacturing companies.

Product Suite: Cincom CPQ Sales Portal, Cincom Solution Configurator, Cincom CPQ for Microsoft Dynamics CRM

HQ Location: Cincinnati, Ohio, U.S.

Notable Customers: Eaton, Xylem, Penske, Rev, Hempel

CRM Integrations: Microsoft Dynamics

CloudSense Configure Price Quote

Profile: CloudSense CPQ is a Salesforce native CPQ solution that is sold primarily to telecommunications, utilities and media companies. It is integrated into a broader platform that includes e-commerce, field sales, subscription management, contract management and order management.

Product suite: CPQ, eCommerce, Contract Management, Mobile, Order Management, Advertising Sales

HQ Location: London, U.K.

Notable Customers: British Gas, Telefonica O2, CoreSite, Spotify, News Corp

CRM Integrations: Salesforce

Configit Quote

Profile: Configit's on-premises CPQ solution is targeted at organizations that sell complex configurable products. Its configuration life cycle management product solves the problem of managing complex, configurable products from design through order, fulfill, service and sunset.

Product Suite: Configit Quote (CPQ for SAP or stand-alone), Configit Ace (enterprise configuration management), Configit Model (configuration modeling environment), Configit Build (visual solutions configuration)

HQ Location: Copenhagen, Denmark

Notable Customers: ABB, Danfoss, Jaguar Land Rover, John Deere, CNH Industrial, Philips

CRM Integrations: Salesforce, Microsoft Dynamics (provided by eLogic)

EndeavorCPQ

Profile: EndeavorCPQ runs in Microsoft's Azure cloud and is pre-integrated with leading CRM applications. It provides a complete CPQ footprint for small or midsize companies without locking into a particular CRM vendor's technology stack.

HQ Location: Dallas, Texas, U.S.

Notable Customers: Coverall, Lutronic, Hartwig

CRM Integrations: Salesforce, SugarCRM, Microsoft Dynamics, Infor

Experlogix

Profile: Experlogix is the CPQ gorilla in the Microsoft ecosystem with hundreds of customers. It also has a much smaller NetSuite business. Its software runs on-premises and in the Azure cloud. It has been deployed in a wide range of industries. Supports interactive 2D and 3D visualizations.

HQ Location: South Jordan, Utah, U.S.

Notable Customers: Allegion, General Dynamics, Mitsubishi Caterpillar Forklift America (MCFA), Teradata

CRM Integrations: Microsoft Dynamics, NetSuite

FPX Smart CPQ

Profile: FPX Smart CPQ is a mature solution and is suitable for enterprises with complex requirements. It can be deployed in the cloud or on-premises. It is integrated with Salesforce Commerce Cloud and SAP Hybris for self-service commerce.

Product Suite: Smart CPQ, Smart Contract Management, Smart Renewal Management, Predictive Analytics, FPX Marketplace (digital commerce)

HQ Location: Dallas, Texas, U.S.

Notable Customers: Honeywell, Hitachi, Blue Shield

CRM Integrations: Salesforce, SAP CRM, SAP C4C

IBM Configure Price Quote

Profile: IBM CPQ is used by companies in the telecom, manufacturing, retail, life sciences and services industries. It is a multichannel solution for direct sales, partners and customer self-service. It integrates with IBM's Order Management for sophisticated order decomposition and orchestration.

Product Suite: IBM CPQ, IBM Order Management, IBM Commerce on Cloud

HQ Location: Armonk, New York, U.S.

Notable Customers: Telus

CRM Integrations: Salesforce

Model N Revvy CPQ

Profile: Revvy CPQ is part of Model N's broader revenue management suite of products. It is a native Salesforce1 application. It can work with SAP Internet Pricing and Configurator (IPC) and variant configurators and pricing to avoid dual maintenance of rules. It is particularly strong in the pharma and medical technologies industries.

Product Suite: Revvy CPQ, Revvy CPQ for SAP, Revvy CPQ for MedTech, Revvy Rebate Management, Revvy Contract Management, Revvy Global Price Management

HQ Location: Redwood City, California, U.S.

Notable Customers: Johnson & Johnson, AstraZeneca, Merck, Eaton

CRM Integrations: Salesforce

Oracle CPQ Cloud

Profile: Oracle CPQ Cloud (formerly BigMachines) was one of the first pure SaaS CPQ applications. It has been deployed in hundreds of companies globally and is best-suited for enterprise-scale deployments. Oracle's own sales organization uses the tool. It is built on an Oracle technology stack and runs inside the Oracle Cloud. The tool supports direct sales, resellers and self-service (via an integration with Oracle Commerce).

Product Suite: Oracle CPQ Cloud, Oracle Marketing Cloud, Oracle Service Cloud, Oracle Retail Customer Engagement Cloud, Oracle Sales Cloud, Oracle Order Management Cloud, Oracle Commerce Cloud, Oracle ERP Cloud.

HQ Location: Redwood City, California, U.S.

Notable Customers: HP Inc./Hewlett Packard Enterprise, Schneider Electric, Flowserve, Kronos, Vodafone Group

CRM Integrations: Salesforce, Oracle Sales Cloud

Pros Smart CPQ

Profile: The Pros Smart CPQ offering is a result of the acquisition of Cameleon Software in 2014. It is part of the SellingPRO solution suite, along with Deal Desk and eCommerce. This solution integrates with PricingPRO for price and deal optimization. Pros' main strength is in manufacturing, but it also has good penetration in the travel and transportation industries.

Product Suite: SellingPRO, PricingPRO, RevenuePRO.

HQ Location: Houston, Texas, U.S.

Notable Customers: American Standard, BASF, Georgia-Pacific, Pearson, Etihad Airways, ANA, Air China.

CRM Integrations: Salesforce, Microsoft Dynamics

Salesforce Quote-to-Cash

Profile: Salesforce Quote-to-Cash (formerly SteelBrick) is the native CPQ offering on the dominant CRM platform. As such, it is expected to gain significant market traction. It is one of the earliest adopters of the Salesforce Lightning platform. It is a good solution for high-tech assemble to order (ATO) and software companies. The product includes invoicing capabilities, and can be a complete quote-to-cash solution for companies selling simple subscription products. It can run inside of the Salesforce Sales Cloud or Service Cloud. More complex engineer-to-order (ETO) manufacturing configuration requirements can be supported via an integration with Tacton Systems CPQ.

HQ Location: San Francisco, California, U.S.

Notable Customers: LinkedIn, Paychex, Mitsubishi Motors, Cloudera, Nimble Storage, Blur

CRM Integrations: Salesforce

Sigma CPQ

Profile: Sigma CPQ is designed specifically for communications service providers. It is part of a suite of applications, including enterprisewide product and service catalog, order management, service provisioning and device management.

Product Suite: Sigma Catalog, Sigma CPQ, Sigma Order Management, Sigma Provisioning, Sigma Cloud ServiceBroker, Sigma Device Provisioning

HQ Location: Toronto, Canada

Notable Customers: Orange Belgium, Vodafone Germany, Suddenlink Communications

CRM Integrations: Salesforce, Microsoft Dynamics

Tacton Systems CPQ

Profile: Tacton Systems CPQ is a mature, industrial-strength CPQ solution that can handle complex ETO configurations. The solution includes 3D visualization and optimization capabilities. It offers computer-aided design and manufacturing, and ERP integrations.

Product Suite: Tacton Systems CPQ, Tacton Systems Studio (configuration modelling), Tacton Systems Extension CPQ for Salesforce CPQ, Tacton Design Automation for SolidWorks, Tacton Design Automation for Inventor

HQ Location: Stockholm, Sweden

Notable Customers: Siemens, Yaskawa Electric, GE Healthcare, Alfa Laval, Caterpillar Propulsion, ABB, Toshiba

CRM Integrations: Salesforce

Market Recommendations

IT leaders should evaluate their current quote-to-cash processes and determine whether a CPQ suite could:

• Improve close rates and sales representative productivity by generating quotes faster
• Improve margins by recommending and enforcing optimum discounts
• Increase revenue and margins by guided upsells and cross-sells
• Eliminate back-office order entry staff, improve time-to-cash and reduce costs by flowing orders directly to fulfillment from sales
• Reduce waste and improve customer satisfaction by ensuring that all orders are accurate and able to be fulfilled

There is considerable evidence indicating that replacing existing spreadsheets and custom quoting systems can deliver significant business benefits, with project pay-back often within a year.

IT leaders should evaluate the cost of maintaining their existing on-premises CPQ solutions (either stand-alone or embedded within their ERP system). Is the vendor continuing to enhance the product? Is it on limited release for new customers? Is the sales team happy with the existing tool? This may be a good time to consider switching to a new cloud, SaaS CPQ system.

When selecting a new CPQ application, be cautious of exaggerated claims and canned demos. Insist on seeing a custom demo, give the vendor minimal setup time and insist on a full demonstration of the admin required to set up the demo. Ensure that your organization will be capable of maintaining the solution moving forwards and quantify the ongoing costs.