What Salesforce is doing with CPQ & RLM – and implications for leading CRMs

SALESFORCE CPQ & RLM

Salesforce is not only the largest CRM vendor but also boasts the most CPQ customers. Their recent announcement of Revenue Lifecycle Management (RLM) has the potential to significantly impact, if not reshape, the CRM and CPQ market.

A key question is why Salesforce is expanding into RLM. The answer for me lies in their desire to offer customers the ability to configure omni-channel deals. This means customers can seamlessly utilize one-time sales, subscriptions, or usage-based products and services across all sales channels. RLM supports single, recurring, and consumption-based models, enabling an enterprise customer’s different constituents – e.g., sales teams, partners (distributors, resellers), and end-users (via website or webstore) – to purchase products and services from that enterprise using a single solution. With RLM, Salesforce aims to deliver a modern end-to-end selling experience, simplifying complex configuration and bundling through advanced product configuration capabilities on a unified platform.

Now that I explained my understanding of Salesforce’s motivation, let’s delve deeper into RLM to comprehend its components.

First is the Product Catalog and Pricing component. These fundamental elements aim to streamline quote creation and ensure accuracy.

Second, we have Transaction Management and CPQ. While CPQ focuses on the front-end sales process to generate precise quotes quickly, Transaction Management handles the back-end operations, encompassing order management, billing, and revenue recognition.

Third is Contract Lifecycle Management, which oversees the entire contract journey, from inception to renewal. Its purpose is to enhance efficiency, minimize errors, and mitigate risks.

Fourth is Ordering and Decomposition, enabling the management of complex orders and fulfillment processes. By breaking down complex orders into simpler components, this function streamlines fulfillment, improves efficiency, and ensures timely and accurate order delivery.

Lastly, Billing and Invoicing, anticipated for release around Dreamforce 2024, is designed to automate and streamline revenue generation. This module aims to reduce errors and accelerate cash flow.

Salesforce RLM is a headless and composable solution. This means it can be connected to any frontend or digital channel through APIs, offering flexibility and scalability. Its composable or modular architecture allows for the use of individual components, such as the configuration or pricing engine, independently. This empowers customers to create best-of-breed solutions by combining different components. Furthermore, RLM is built on the Einstein platform, enhancing flexibility through native integration and providing advanced AI capabilities out of the box. While the maturity level of these components varies, the overall solution direction is clear for customers and that is an end-to-end solution from one vendor.

Having outlined Salesforce’s RLM strategy as I understand it, it’s essential to examine the competitive landscape.

MICROSOFT DYNAMICS

Microsoft Dynamics, the second most popular CRM for CPQ integrations, lacks a dedicated Revenue Lifecycle Management or CPQ solution. Instead, it relies on various components within Dynamics 365, such as Customer Service for post-sales activities and Power BI for data analysis. For CPQ, Microsoft partners with third-party vendors like PROS and Experlogix. This partnership model extends to other areas like contract management and billing.

A key distinction between Salesforce CRM and Microsoft Dynamics 365 customers is their integration needs. Microsoft customers often require multiple software integrations to achieve the same end-to-end functionality offered by Salesforce RLM. These integrations can be time-consuming and costly, presenting challenges for some organizations.

HUBSPOT SALES HUB

Another emerging CRM solution is HubSpot with its Sales Hub CRM. Let’s take a closer look. While HubSpot does not have a dedicated RLM solution, it does offer a very basic CPQ and quoting solution. But for larger companies and more complex use cases involving configurable products and services, HubSpot partners with CPQ vendors like Mobileforce Software, DealHub, and others.

However, in this article, HubSpot outlines its vision to “move and win upmarket” and consistently succeed with larger customers. To achieve this, they will need to address several key areas that Salesforce has already tackled with its RLM solution, including finding a way to offer an enterprise CPQ plus order management, billing, invoicing, contract lifecycle management, and more. In other words, HubSpot must create – or more seamlessly partner with – a comprehensive platform that meets these business needs of larger customers, similar to Salesforce RLM, to compete effectively in this upmarket.

IMPLICATIONS FOR OTHERS

This raises the question of how Salesforce RLM will influence Microsoft, HubSpot and other CRM vendors. Will they respond by creating a similar comprehensive platform, or will they maintain their current strategy of partnering with third-party solutions?

If competitors opt for a full-platform approach like Salesforce RLM, it could be very costly and disruptive to their existing customer base. Conversely, continuing to rely on partnerships might require customers to invest in more integrations, which may or may not be desirable.

I believe very few of the larger CRM vendors have all the resources to build, launch and support a comprehensive platform like Salesforce RLM. Many will likely partner with specialized vendors to offer a complete end-to-end solution. What are your thoughts on this?