CPQ and Quote-to-Cash – a five-minute overview

Today’s marketplace offers abundance of products and services for Quote-to-Cash (QTC or QTC) and Configure, Price, Quote (CPQ).

With the multitude of offerings (including Nextian), potential buyers struggle to navigate this complex space.

The objective of this post is to clarify the terms, concepts and elements / building blocks of QTC and CPQ in an easy to understand, five-minute overview.

CPQ vs. QTC

While these terms are sometimes used interchangeably, they mean two distinct things:

While CPQ is usually associated and implemented within CRM systems, this does not have to be the case.

While CPQ may be a tactical project, QTC is a strategic activity with a broader perspective embracing multiple IT systems, architecture, transformation roadmap, etc.

CPQ — Key Functions Overview

CPQ is the front-end of QTC allowing sales reps to:

• Configure: select customer-facing product offering for the quote (products, services, options, terms, etc.)
• Price: select price books, retrieve list pricing, choose quantities, apply markups and discounts
• Quote: request approval, generate quote document and obtain customer signature

While all of these seem straightforward, the following must be considered:

• Product catalog cleanup. While CPQ implementations are often focused on sales reps (who are the end-users), the project brunt is often on product management teams: cleaning up products and pricing, consolidating Excel spreadsheets, getting rid of obsolete products, reviewing SKUs, etc. These activities make up a huge chunk of any CPQ project.
• Considering additional quoting parameters (a.k.a. dimensions). Most CPQ products will do fine for quoting new widget products. The challenge arises when additional dimensions are added such as subscription term length, renewal-type, SLA commitments, etc.
• Dealing with subscriptions and operations during their lifecycle (e.g., re-term, re-rate, replace, upgrade etc.) — while they can be treated as additional dimensions, they also require current subscription information which may not be available in the CRM.

QTC — Adding More Systems

Once quoting is in place, additional pieces of the puzzle kick in:

• Contracts management — supervise customer contract life cycle for master (general T&Cs) and individual service (start of service, term, renewal) agreements.
• Order management, fulfillment & delivery — convert an ordered quote into a subscription service or product delivery.
• Customer support — ensure customer support for products (e.g., warranty for a widget depending on a date of sale) and subscriptions (availability and SLA-levels).
• Billing & invoicing — collect usage information and produce invoices.
• Payment processing — ensure that customers can pay for product and services both traditionally (mailed check) and on-line (credit card, ACH, wire transfer, etc.).
• Self-care portals — enable customer self-service.

All of these are usually complemented by ‘operational’ systems like reporting, data warehouses or domain specific ones such as network and infrastructure monitoring.

It is easy to notice that this picture may get complicated very quickly — and indeed, designing a business QTC architecture is usually a complicated undertaking.

Key Elements of QTC

All the above can be quite overwhelming. However, no matter what systems are used, QTC can be somewhat abstracted into elements that make it.

Product & Pricing

The relationship between price books, products and price book entries can be visualized as follows:

Quoting and Opportunity Management

The relationship between opportunities, quotes, quote line items and price books can be visualized as follows:

Order Management

So far, the QTC process can be visualized as follows:

Integrating Billing

Up to this point (quote to subscription), the items described above are more or less common across multiple systems and CRM/CPQ vendors.

Things get complicated when billing is brought into the picture. Billing is usually a separate system.

The separation creates the following questions:

• Where does the product catalog reside?
• How is CRM/Quoting synchronized with billing?
• Where is the cut-off between CRM and billing in delivery?

Conclusions

While tactical CPQ projects are relatively easy, the challenges arise when incorporating CPQ into a larger QTC continuum.

Nextian is a vendor of Quote-to-Cash (QTC) software for cloud and communications helping providers accelerate growth and increase customer lifetime value.

Contact us today to find out how we can help you!