This time of year provides a good opportunity to determine where the CPQ (and Quote-to-Cash) market is and where it may go over the coming calendar year. Through the Salesforce acquisition of Steelbrick* and the M&A Rumor that Oracle may acquire NetSuite** it becomes very interesting to see where the market may turn this year because it opens a number of fundamental questions.

Let’s first look at some questions regarding the Salesforce acquisition of Steelbrick

Do CRM and CPQ become one category?

While I expect that the relationship between CRM and CPQ becomes closer through this acquisition I do not foresee that the two categories become one anytime soon. Here are the reasons why I say that

  • There are already a number of vendors on the market that offer complete CRM/CPQ/ERP solutions (e.g. Infor, SAP, Oracle) out of one hand but they do not dominate the market and don’t appear to be doing that in 2016. Granted Salesforce has a great Marketing Team and a lot of market influence which may change that but I think more people will become wary of Salesforce as it grows to the likes of Google, Microsoft, Oracle, SAP etc.
  • Many customers ask for integrated solutions which do not necessarily need to come from one vendor. In fact it may be good to distribute the risk among a couple of vendors instead of fully relying and depending on one vendor
  • One solution (in this case Steelbrick CPQ) does not fit everyone’s need. While I expect that the Steelbrick solution will be a strong offering for the SMB market it does not cover the whole CPQ category like Enterprise, complex manufacturing etc.

Conclusion: Since Salesforce is the CRM leader in the US I expect that the Steelbrick acquisition will put considerable pressure on other CPQ SMB vendors on the AppExchange (especially the ones that are native to Salesforce) to explain why their solutions are better than Salesforce’ (Steelbrick) solution. Nevertheless I expect that CPQ vendors with specialized skills will still flourish as the overall CPQ market is expected to grow by a total of ~50%+ over the next 3 years.

What happens with Apttus?

  • This will be interesting to monitor because Salesforce also invested into Apttus. In addition to that Apttus has currently the largest market share in the US and it appears as if Apttus is heading straight for an IPO (Initial Public Offering)
  • In general it seems that it would make sense for Salesforce to also acquire Apttus (or parts of their solution) in order to offer a complete (Salesforce owned) CPQ solution (SMB + Enterprise) on their platform
  • If the two systems offer a smooth transition to each other (e.g. a clear path for a customer who outgrows Steelbrick and wants to move to Apttus) this may be an interesting option for Salesforce CRM customers.
  • In any case if anything should happen here I would expect that to happen rather quickly otherwise it may become cost prohibitive

Conclusion: Keep monitoring this closely

What is the impact to other CPQ solutions offered on the Salesforce AppExchange?

  • There are currently 62 apps listed under CPQ. I expect that many customers will ask for two things
  1. What is the advantage of the Salesforce/Steelbrick solution? (Price/Capabilities)
  2. What can a non Salesforce/Steelbrick solution do that the Salesforce/Steelbrick solution can’t do (Price/Capabilities)?

Conclusion: SMB CPQ Vendors will need to refine their value message and/or add capabilities in order to communicate the value of their solution effectively. Expected Pricing, Capabilities Development and Marketing Effort from Salesforce/Steelbrick will put considerable pressure on smaller CPQ vendors.

What does this mean for Partners in the Integration and Consulting Space?

  • I expect that big Consulting Partners (e.g. Accenture, Deloitte) as well as larger second tier Partners (e.g. CapGemini, Slalom) will all add Steelbrick Consulting Practices to their Salesforce Practice (if they don’t already have one)
  • This means that smaller Steelbrick focused Consulting Firms get more competition
  • For Customers it probably means it becomes more difficult to find the right consultant. While I expect that big Consulting Partners get all their Consultants quickly certified I also expect that hands on Steelbrick Consulting Skills will remain with smaller Consulting Firms for the next 12 months (e.g. the current Steelbrick Partners)
  • In the long term it will provide Customers more choice

Second let’s look at the M&A Rumor that Oracle may acquire NetSuite*

  1. There are a number of CPQ vendors that offer solutions integrated with NetSuite ( e.g ConfigureOne, CallidusCloud, Experlogix, Quosal, Selectica, Verenia, Axonom). If that rumor should turn out to be true it will be interesting to see if and how that affects the CPQ space
  2. While Salesforce and Oracle partner*** the two firms also compete. An example from the CPQ space is Oracle CPQ Cloud (the former BigMachines) vs. Steelbrick
  3. It will be interesting to see if and how the various CPQ vendors mentioned above will compete with Oracle’s CPQ solution if the speculation turns out to be true

Note that this is all speculation on my side but it promises to be an interesting year for CPQ!

http://diginomica.com/2015/12/28/crm-swallows-cpq-as-salesforce-buys-steelbrick/#.VoVqtTbEzjN

** http://news.investors.com/technology/123015-787410-microsoft-ibm-hpe-lead-software-firm-acquisitions.htm

*** http://www.salesforce.com/company/oracle.jsp