Segmenting Solutions that improve the Quote-to-Cash Process

In the first Blog Post of this Series I provided an overview of the different Quote-to-Cash Process Steps and the capabilities that the Front Office and Back Office Systems offer. In the second Blog Post we looked at key considerations for a seamless flow of business information between Front Office and Back Office Systems.

As a reminder Front Office Systems consist of

  • CRM – Customer Relationship Management
  • CPQ – Configure – Price – Quote
  • QTC – Quote to Cash Systems

Back Office Systems consist of ERP (Enterprise Resource Planning) Systems.

In this Blog Post I will look at various segments in the market for Solutions to improve the end-to-end Quote-to-Cash Process. This may help to simplify the selection of Solution Providers for a Front Office Solution before we investigate Front Office System features and capabilities in detail in Blog Post 4.

Here is a list of five Market Segments any company should consider before selecting a Front Office (CPQ, QTC) Solution

1.Leveraging ERP for a Quote to Cash Solution

Interplay of Business Logic, Data and Process between Front Office and Back Office

For every company that is using an Enterprise Resource Planning (ERP) System (e.g. SAP, Oracle, Infor) it is important to evaluate the depth at which the Front Office System, to be selected, has to work with the existing Back Office System.

This is important because

  • Most companies with Order Management in the ERP have developed rigorous processes covering order lifecycle management, materials planning and manufacturing, fulfillment and financials. Often companies will want to leverage these capabilities as part of an overall Quote to Cash solution.
  • Many companies have setup their Business Logic and Data in their Back Office Solution(s) and do not plan to make changes to that Solution. It is worth noting that the Back Office Solution(s) development was often done long before CPQ and QTC Solutions were implemented, and that duplication of the data and business logic may raise challenges that some companies are better off avoiding as noted in Blog Post 2.
  • Entire Business Units may be organized around ERP Solutions and any change to that Solution can trigger subsequent changes (e.g. Business Unit Re-Organization, Change Management effort) that need to be addressed. These changes have the potential to be expensive and hence it is only done when real and measurable value is added for the company

Read also Blog 2 to see considerations for the interplay of Front Office and Back Office Solutions.

While this Market Segment does not apply to every company that is looking for a Front Office Solution it applies to many if not most medium to large size companies. Remember that some Front Office Solutions will incorporate the ERP Solution for the Quote to Cash Process while others will move parts of the Order to Cash Process to the Front Office.

2.Level of Industry Specialization

Some Solution Providers have taken an Industry approach to the market because Products and Services of different industries may require different features and capabilities or may need to align with upstream and downstream applications.

It is important to make sure that a Front Office Solution supports the features and capabilities that your company cares about. In addition to that every Industry has some specific features and capabilities that a Front Office Solution Provider needs to support.

Here three examples

  • Manufacturing
    • Whatever a company sells (Front Office) also needs to be manufactured (Back Office). This means Production Planning related Business Logic and Data flows are required between Front Office and Back Office. In some cases also CAD and 2D/3D visualization for engineer to order business models.
  • Furniture
    • Augmented Reality (AR) is quickly becoming a quasi standard in the Furniture Industry and hence any potential Front Office Solutions probably need to support this capability
  • Software
    • Software Users subscribe to a Software Product and renew their subscription on an annual basis. Hence a Renewal capability is required

Understand if a (CPQ/QTC) Solution Provider is specialized in your Industry.

Note: While many solutions can be used across industries it is worth checking that a Solution Provider has done successful implementations in your industry or a closely related industry!

3.Required Complexity

The business requirements for CPQ and QTC Solutions can be very different and hence it is important to determine what level of complexity your company and your business processes require. Different solutions are optimized to handle different levels of complexity along a variety of aspects in the Quote to Cash process.

Note: Just because a business process works a certain way in the current Front Office Solution doesn’t mean that a business process has to be transferred 1-to-1 into the new Front Office Solution. The goal is to develop the best possible Business Process. To achieve this goal it is helpful to review and adjust the end-to-end business process as needed and where needed before the actual CPQ/QTC System selection starts.

The complexity of CPQ and QTC Solutions is determined based on business requirements for Product Configuration, Pricing, Approval Processing, Quoting, Renewals and Billing

  • Product Complexity
    • Determine what kind of Product Configuration capability is required. Are you going to configure very complex products with many thousands of parts or will it be simple products with a handful of parts?
  • Pricing Complexity
    • Determine what kind of pricing capabilities you need. Do you want to offer static prices or do you want to offer dynamic pricing that uses Artificial Intelligence/Machine Learning?
  • Approval Processing
    • Determine what kinds of approvals are required. Example: Sequential and/or Parallel approvals? Are they different per region (e.g. North America, Europe, Asia)
  • Quoting
    • Determine what capabilities a User requires for each Route to Market Example: Do Channel Partners use your Front Office Solution to issue Quotes with their letterhead?
  • Renewals and Billing
    • Determine if Renewals are required and how the Renewal Process is expected to work between Front Office and Back Office Systems
    • Determine how the ecommerce Process is expected to work. See also Segment 1 above

Remember when reviewing complexity pay close attention to the capabilities and interfaces provided for managing a Front Office Solution. Example: Look for a flexible product catalog, product modeling and robust versioning capabilities.

4.Breadth of Solution: CPQ vs. QTC

Companies will have a variety of choices among solutions when it comes to breadth of coverage of the Quote to Cash process. Some solutions are focused on the Configure, Price, Quote aspect, while others may offer broader solutions incorporating price optimization, CLM, Rebate Management, Invoicing and Order Management. Depending on the needs of the business and its blueprint for an end-to-end Quote to cash process, see Blog Post #2, companies may choose to evaluate CPQ only solutions or solutions with a more expansive set of functionality.

In my opinion CPQ and QTC Projects can face similar business challenges due to their broad scope. They can become very complex very quickly and therefore I think it is generally advisable to run these Projects in steps or waves.

Basic questions that need to be addressed include

  • What is the difference between CPQ and QTC? Read the first Blog Post or this Blog Post for more information
  • What kind of project can your company successfully execute in a given timeframe?

My recommendation is to focus first on the CPQ Process since the broader Quote-to-Cash process includes more functionality.

5.B2B vs. B2C

If your company does mostly business with other companies (B2B = Business to Business) then you need to make sure that the CPQ / QTC Solution to be selected offers a solution for your

  • Sales Team and
  • Channel Partners

This is the standard offering (B2B) that is supported by all CPQ and QTC Solutions. While this is the standard offering it does not mean the features and capabilities required are simple.

Example: The Channel Partner offering typically has a number of complex Requirements like allowing a Channel Partner to create a Channel Partner branded Quote with a Channel Partner specific Product Offering and Pricing in your System. If your company offers Products and/or Services via an ecommerce website (B2C = Business to Consumer) then the Solution needs to support this capability. Here it is important to notice that many CPQ and QTC Solutions do not offer a B2C Solution yet.

Summary of Market Segment suggestions:

  1. Determine which Market Segments are important for your company as a guide to identifying solutions that will support your Quote to Cash process
  2. Develop a prioritized list of considerations for each relevant Market Segment

This information will be used when we get to the Vendor Selection Process.