OMG heresy from a Configure/Price/Quote (CPQ) advisor right? Or is it?

Before we go ahead and clarify the headline above let’s look at this statement from a startup company point of view.

Imagine that you just founded a new Software company and you (and maybe some partners) do all the necessary work yourself to build the business. You do Business Development, Marketing, Sales, Product Development, HR, Accounting etc. . Your main goal is to build up a sustainable business by selling your Software to new customers. At that point you probably don’t have the budget to buy all the software tools that you may need and to integrate them. Furthermore you don’t have the time to learn how to use all these tools anyway. That is exactly the time when you look for some shortcuts to save time and money. You may look for free versions of CRM tools (e.g. ZoHo), a free version for web meetings (e.g. FreeConferenceCall.com), low cost tools for accounting (e.g. QuickBooks) and you try to use the Software Packages that you need on a daily basis (e.g. MS Office, Google Apps, Apple iWork) for as many functions as possible. Because at that point

  • it is important that the “tools” you use are cheap, reliable, easily accessible and familiar to all (or almost all) users.
  • you probably don’t care too much about what systems (e.g. CRM, CPQ, ERP) you use and
  • a CPQ tool is NOT a priority, because your quote & order volume is not a big concern (yet). All the quotes you provide can and will be happily processed manually

Many businesses, that have up to several thousand employees, have used the Excel approach, successfully (for some time!) and hence the headline that Excel can be a CPQ solution is correct. There are still many companies who use Excel for CPQ purposes today.

Now let’s fast forward and assume your Software company was successful and has grown considerably. Congratulations! At that point you can be almost 100% certain that your Excel solution no longer works. Here are some concerns that show why Excel as a CPQ solution is seriously flawed and hence not a good and scalable solution

1. You notice that multiple versions of the configuration spreadsheet are used

  • In the beginning your sales team may have just one spreadsheet on a Sharepoint or on a Dropbox but over time various sales reps have created their own versions
  • Once they use their own version they are running the risk of keep selling obsolete parts, keep selling at the old price, don’t sell new parts and don’t sell at the new price
  • This will not only confuse the sales reps but also your customers. In the worst case they could stop buying from you or buy non-working products from you at the wrong price

2. The Excel expert who used to maintain the Master Spreadsheet wants to leave the company

  • Who maintains the spreadsheet now?

3. The Excel configuration file gets very big ! (FYI I have seen files > 9MB!)

  • These files may contain a lot of business logic and have a tendency to grow!
  • A large number of formulas is used and that makes it very hard to keep track of who was requesting what changes, when and why
  • this in turn may lead Sales Reps and Channel Partners to not regularly download or use the latest file since it takes too much time!

There are obviously more disadvantages like

  • lack of integration with your other systems (they may need to change as well. This is a key point to make any CPQ solution more powerful!)
  • very limited visibility for Sales Managers to see what their Sales Team is actually quoting
  • human errors when typing information manually into the spreadsheet

and many more.

In any case the conclusion here is that Excel can be a short term CPQ solution. While the business volume is small and everyone is excited to be part of a startup and hopefully a success story, with a financial reward at the end, you just do it.

But once your business is growing Excel becomes cost prohibitive and it doesn’t even provide your sales team the information they need when they need it. Therefore I suggest that you look at switching to a CPQ tool early on, before the change becomes very painful. If you wait too long you will have to setup a more costly Business Transformation Project at a later point to address this issue.