In the previous blog, we have discussed the course charted by the key contenders from growth to maturity, market consolidation, and future opportunities. In this one I present my view about the path ahead gaps and opportunity to survive and evolve.
Path ahead gaps and opportunities to survive and evolve
The lifecycle of companies from brick and mortar to tech has become compressed. While it took GE several decades to mature as a company, tech companies mature faster. Whether startups leveraging IaaS and PaaS in the cloud era have a further compressed lifecycle or not is another topic for valuation based on staging.
Every technology-based company goes through a lifecycle that involves innovation, positioning, packaging, and ultimately pricing their solutions based on the business value delivered. The ultimate goal for these companies is to remain profitable for their shareholders. For example, Oracle’s CPQ suite, which is a natural progression from Big Machines architecture conceived couple of decades back, continues to sell based on its value proposition to its ideal customer profile. Every other company producing various products – from telecom to medical devices – must also go through the lifecycle stages and remain relevant as they mature. As a startup, growth is about expanding market share. For core software, such as a new cloud-based CRM, the perceived value, and hence the price, can be easily linked with per user login. This way, larger customers with higher willingness to pay could be charged differently than, say, a startup. As startups mature and become market leaders, the quotes they generate for their larger customers become more complex, similar to the enterprise application giants of the past like SAP, Oracle, and IBM. These quotes include newer capabilities for different departments such as front office, middle office, back office, and verticals like healthcare, telecom, and insurance. Additional capabilities are also available as add-ons, some of which are consumption-based, Change Data Capture (CDC), pub-sub events, storage, analytics, and AI co-pilot.
Enterprise customers seeking predictable billing often purchase a base package with add-ons and metered overages, providing a combination of capability and consumption-based models that offer some amount of predictability along with flexibility and choice to enterprises. With the increasing shift towards software being offered as a service by newer entrants leveraging cloud platforms, it is crucial for established companies to remain competitive against the influx of newer challengers with newer technology stacks and more compelling offerings. This requires a focus on innovation, positioning, packaging, and pricing of their services. There is a good probability that they do it by continuously innovating and targeting either a new niche where they perceive a gap to play on their strengths, or tap untapped newer markets or by repositioning, re-packaging and re-pricing.
Targeting an Ideal Customer Profile with positioning and packaging
Probably one size might not fit all and even on a single platform like Salesforce they continue to maintain and support multiple CPQ stacks available other than the SteelBrick derived Salesforce CPQ. The prominent ones are Salesforce’s own Industries CME CPQ, which was derived from Vlocity. This is more telecom industry-focused, and offers features such as complex product Catalog design, technical product breakdown, order processing and provisioning aligned features. There are also forks of this stack that have been created for Energy Utilities and Insurance industries.
Commerce Cloud, derived from the Cloud Craze, has B2B commerce-aligned CPQ functionality, including cart/basket and ordering. Meanwhile, Demandware-derived B2C Cloud of Salesforce, which is a separate platform, has its own high-volume retail B2C-focused CPQ functionality.
Partners have used Salesforce platform to build and maintain CPQ stacks for specific segments, apart from Salesforce themselves. FinancialForce ERP cloud (Certinia) has a CPQ functionality that is more aligned with Order to Cash processes. CloudSense targets complex options and telecom domain players. It remains to be seen which companies will succeed and what strategies they will adopt, as there are various factors and niches that will continue to exist. It’s possible to overlook potential disruptions due to our personal preference for a particular solution.
Moore’s Law, which used to predict a doubling of computer processing speed every two years, has slowed down considerably since 2010 to a modest 15% using smaller gates. Meanwhile, Salesforce’s core platform has been subject to strict governor limits, which have mostly stayed put for some time now.
Veloce identified an opportunity to improve starting from its experience in the integration of the Salesforce and CPQ sales systems with the backend ERP. It recognized an opportunity in the Salesforce CPQ quoting process, so it built bridges to its externalized engine. The engine remains compatible with configuration metadata, allowing them to compute constraints and pricing rules in a predictable time frame. This improved performance can handle large quotes with thousands of line items in the cart.
PROS positioned themselves towards performance quoting for B2B sales and decided to address it with their own platform, experience layer and system of record. Additionally, they provided integrations to other leading system of record CRM, ERP.
Experlogix and Tacton CPQ identified a gap in traditional B2B industrial ordering, specifically in bespoke made-to-order manufacturing industries that have complex quote-to-engineer processes. They realized that quoting could benefit from pixel-perfect visualization, both in 3D and 2D formats.
Provus has positioned its CPQ offering to target Services sale, where the personnel’s billable time and effort are plotted, and billing rates are negotiated to arrive at a price point and timeline with a what if analysis for the quote.
All opportunities for innovation are not yet capitalized; there are complex areas of collaborative quoting and protecting the visibility of pricing and discounting between collaborators while collaborating on the same quote for the same customer. There are gaps in helping to strategize about positioning, finding ideal customer profile and packaging. During business transformations, transitioning from older sunset packages and products to newer ones may result in issues related to price protection and contractual commitments. There are challenges in maintaining the configuration and pricing.
In the future, we are going to see further innovation on an off-platform and more ecosystems play with external configurators, pricing plugins, and other snap-ins for performance or targeting any other niche that is unique to the industry.
Read the other blogs in the series: Part 1 Advent of CPQ , Part 2 The Evolution of CPQ on Salesforce and Beyond, Part 3 The Evolution of CPQ on Salesforce and Beyond.
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