Configure Price Quote (CPQ) software is a term used in the business-to-business (B2B) industry to describe software systems that help sellers quote complex and configurable products.
"Configure, Price, Quote, or CPQ, is software that helps companies accurately define the price of goods across a huge and constantly changing spectrum of variables. CPQ software aggregates these variables, which in turn allows companies to configure products or services in the most optimal way (i.e. bundling, upsells, etc.), price them according to costs, competition and local economic factors, and quote a customer the absolute best price possible in accordance with all of the above factors."
An example could be a maker of heavy trucks. If the customer chooses a certain chassis (the base frame of a motor vehicle), the choice of engines may be limited, because certain engines might not fit a certain chassis. Given a certain choice of engine, the choice of trailer may be limited (e.g. a heavy trailer requires a stronger engine), and so on. If the product is highly configurable, the user may face combinatorial explosion, which means the rapid growth of the complexity of a problem. Thus a configuration engine is employed to alleviate this problem.
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Configuration engines
The "Configure" in CPQ deals with the complex challenges of combining components and parts into a sellable product.
There are three main approaches used to alleviate the problem of combinatorial explosion:
- Rule-based truth-maintenance systems: These systems were the first generation of configuration engines, launched in the 1970s based on research results in artificial intelligence going back to the 1960s. Notable implementations are XCON and SAP's Variant Configuration Module in SAP ERP and Oracle's Cloud CPQ integration with Salesforce.
- Constraint solving engines: These engines were developed in the 1980s and 1990s. They can handle the full set of configuration rules to alleviate the problem of combinatorial explosion but can be complex and difficult to maintain as rules have to be written to accommodate the intended use.
- Compile-based configurators: These configurators build upon constraint-based engines and research in Binary Decision Diagrams. This approach compiles all possible combinations in a single distributable file and is agnostic to how rules are expressed by the author. This enables businesses to import rules from legacy systems and handle increasingly more complex sets of rules and constraints tied to increasingly more customizable products. The concept of Configuration Lifecycle Management (CLM), of which CPQ is a component, describes how compile-based configuration can further be leveraged to address most of the problems related to product configuration for business employing Mass Customization.
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Benefits of CPQ
CPQ software simplifies & speeds up the configuration, pricing and quotation of complex & customized products. The software helps sales teams come up with optimal product configurations based on customer requirements.
The process of performing engineering calculations, evaluating suitable product alternatives & finally generating the necessary commercial documentation is fully automated in CPQ software. This process reduces errors & boosts sales productivity. Risk of missed opportunities due to insufficient time to respond is reduced. Quotes become more accurate. Knowledge about product configuration is captured in the form of rules assisting the retention of crucial product & process knowledge, mitigating the risk of knowledge drain.
Benefits to CPQ software also include:
- Increased sales & engineering productivity
- Guided selling
- Sales efficiency
- Accurate quotations
- Higher customer satisfaction
- Reduced operational costs
- Standardized processes
- Streamlined production & procurement
- Sharper business intelligence
- Distinctive branding, competitive differentiation
- Knowledge management
- Analytics
Industry
The CPQ industry has many vendors including Accenture bit2win Sales, Configure One, Axonom Powertrak, IBM Configure Price Quote, Navetti PricePoint, Salesforce CPQ, Showefy CPQ, Vendavo CPQ, and more. Some vendors focus more on one of the components in a CPQ solution, so that for example a price optimization provider may integrate their pricing software with another provider's configuration engine - and vice versa.
The IT research and advisory firm Gartner estimated that the CPQ market was $570 million in 2015, representing a 20 percent year-on-year growth from 2014. Of that $570 million, cloud-based CPQ revenue was $157 million that same year. "Gartner predicts CPQ will continue to be one of the hottest enterprise apps for the foreseeable future, predicting a 20% annual growth rate through 2020 with the majority being from cloud-based solutions."
External links
- Top Product Configurator Software Products
- Reviewed CPQ Solutions
References
Source of the article : Wikipedia
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