CPQ is powerful as a standalone product. With its automation features, sales teams no longer need to spend hours assembling, tracking, and managing quotes, pricing estimates, and specially-configured products for their customers.
But it isn’t the only product required for a fully managed sales process. If anything, CPQ underscores a significant gap in sales efficiency: contracting.
60% to 80% of a company’s business transactions are governed by contracts, with nearly 20% of the sales cycle dedicated to creating, negotiating, and approving contracts. Between version control, compliance checks, and redlining, simply getting contracts in place can take several weeks.
With manually-created contracts, the relatively high probability of errors is another concern — the average company loses 9% of its revenue to poor contracting practices.
So why are the majority of businesses missing an effective contract management system?
And why are just 22% of companies confident in their contract tracking and management capabilities?
Integrating CPQ with contract lifecycle management (CLM) provides companies with a single platform to streamline every step of the sales process.
CPQ vs. CLM: What’s the Difference?
To better understand the distinct roles of CPQ and CLM in the sales process, it helps to define and differentiate each system.
What is CPQ?
CPQ (configure, price, quote) software is a sales tool that helps businesses sell customizable products. It consists of a customer-facing product configurator and price estimator, an internal tool sales teams use to assemble quotes and price estimates, or both.
Using a company’s product and pricing data, CPQ generates single- or multi-line quotes and provides sales teams with upsell, cross-sell, and pricing recommendations based on the chosen product configuration.
What is CLM?
Contract lifecycle management (CLM) is a comprehensive solution that manages a contract’s entire “lifecycle” from creation through negotiation, execution, and renewal.
Businesses use CLM software to centralize and organize their contracts and automate manual processes, such as creating documents with embedded data from a company’s customer relationship management (CRM) system.
CLM also helps companies manage contract redlining with an intuitive online editor that tracks changes, sends notifications for approval, and ensures accuracy across multiple versions.
Differences Between CPQ and CLM
Although CPQ and CLM both help sellers create a more transparent and frictionless customer experience for their buyers (and a more efficient selling experience for themselves), the two serve distinct roles in deals.
- Focus: CPQ focuses on the quoting process, which includes assessing customer needs, creating product bundles to fit their criteria, and delivering professional and accurate quotes that help them understand what they’re buying. The contracting process begins once the buyer accepts the quote and begins to negotiate terms with the vendor.
- Scope: CPQ is a relatively narrow solution that only applies to customers who are buying configurable products. CLM supports any contract regardless of size, type, or complexity. Given its scope, CLM also plays a role in legal management, risk, and compliance.
- Functionality: CPQ automates the configuration, pricing, and quoting process by using pre-defined rules, algorithms, and company data. CLM streamlines contract management through document generation (including turning quotes from CPQ into contracts), automated workflows, templates, and approval processes.
In short: CPQ handles an earlier part of the sales cycle, which takes a prospect from interest through evaluation and consideration. CLM comes into the picture once the buyer is ready to make a deal and plays a critical role for as long as they do business together.
Exploring CPQ and CLM Integration
CPQ and CLM integration refers to the seamless connection of these two distinct systems, allowing them to create a fluid sell-side quote-to-contract process.
Briefly, CPQ and CLM integration is essential to an efficient quote-to-contract process for the following reasons:
- End-to-end process automation
- Data consistency
- Improved sales collaboration
- Easier communication with multiple stakeholders
- Fewer compliance risks
- Enhanced analytics and insights across the organization
CLM is the logical next step for sales teams once the quoting process is complete and a deal moves through the pipeline. Without integrating the two systems, sales teams would need to manually re-enter product configurations and pricing information without the assurance of accuracy.
CPQ and CLM: Uniting All Departments for Streamlined Quote-to-Cash
All companies lose some of their revenue to issues with the contracting process, and most companies can’t even find some of their contracts to begin with.
Here’s how CPQ and CLM integration helps:
Standardize Contract Creation
A standardized contract management process saves time and money while making it easier to comply with legal requirements. Automatically generated contracts from CPQ and CLM integration ensure data accuracy, shorten contract generation time, and simplify version control and compliance checks.
CPQ’s rules engine and product bundles offer an excellent foundation for contract creation. By integrating CLM, businesses can create contract templates for each type of product bundle.
For instance, if a customer opts for a certain bundle, the corresponding contract template can be automatically selected and filled out with the necessary details — product information, pricing, and terms and conditions.
Maximize Sales and Contract Efficiency
Integrating CPQ and CLM mitigates some of CPQ’s most glaring limitations (e.g., the inability to reformat tables or change currency for negotiation purposes).
CLM enables additional quote customization, providing a digestible and personalized quote for prospective buyers. It also helps generate other necessary sales documents along with the quote, creating a comprehensive sales package with just a click from the CRM platform.
The result is a more efficient and accurate sales process. Sellers can present their customers with clean, customized quotes and supporting documents.
Sales and legal teams, by the very nature of their work, often have differing perspectives.
Sales teams are primarily concerned with increasing sales volumes, speeding up the sales process, and improving customer relationships. Legal teams, by contrast, focus on mitigating risk and ensuring the company’s compliance with various laws and regulations.
CPQ helps sellers do what they do best, but its data feeds into CLM, which focuses on the legal side of things.
CLM provides a comprehensive layer of protection, minimizing the risk of non-compliance and contractual disputes. In the event a customer, partner, or vendor does not comply with the terms of the contract, CLM ensures contracts are readily accessible and provides an audit trail to identify discrepancies.
With CLM’s legal and regulatory oversight, sales teams can operate knowing their contracts are compliant, reducing the risk of legal issues.
At the same time, the legal team can rest assured that contract creation, negotiation, and management are following the correct procedures, mitigating the company’s risk exposure.
Help Deal Desk
Together, CPQ and CLM do more than just make the deal desk’s lives easier — they enhance their ability to work with the sales team.
The deal desk (which comprises legal, accounting, and finance experts) works closely with sales to manage and negotiate sales contracts. The main goal is to ensure that all agreements align with the company’s policies and standards, are legally sound, and financially advantageous.
When sales team members present their prospects with quotes developed by CPQ, this process is off to a good start. Since CPQ already contains product data and bases its quotes on predefined rules, the data is already validated and accurate.
Integrating CPQ with CLM further streamlines the process: It automates the contract creation workflow, provides visibility to all stakeholders involved, reduces negotiation time, and eliminates manual errors.
Between sales leadership and the deal desk, most sales contracts require multiple approvals. Putting new contracts up for review in an email thread or Slack channel and hoping they’re passed off in time won’t cut it when prospects are preparing to sign.
While CPQ systems are excellent at handling pricing and other authorizations related to creating a quote, CLM enables complete document authorizations and workflows.
Automating approvals through CPQ and CLM integration saves significant time in this otherwise cumbersome process by facilitating internal collaboration.
In CLM, automated, parallel workflows can be triggered based on predefined criteria, helping sales teams obtain approvals quickly while ensuring all reviews are done adequately. Every stakeholder receives real-time updates in CRM, allowing them to track approval status.
Contract Reporting and Analysis
When all teams can track contract views, signatures, shares, and other customer engagement activities, sales enhances the buyer’s journey with faster response times.
Especially during the negotiation phase, where quotes and accompanying MSAs are sent back and forth between the customer, their decision-makers, and the sales team, it’s helpful to have a single source of truth.
Integrating CPQ with CLM provides reporting insights on pricing, discounts, exceptions, and renewal opportunities at both an individual contract level and across the entire organization.
Close Deals Faster
To close a deal, it is important to obtain a signature on a quote quickly after it has been agreed upon and approved. E-signature is a feature native to CLM that can be integrated into a CPQ system. This method of signature makes it faster and easier for the seller to receive reliable signatures.
CPQ and CLM Integration: A Better Customer and Seller Experience
CPQ and CLM are critical elements of any sales tech stack, but one without the other is like a car without an engine.
Integrating CPQ and CLM makes the sales process simpler, faster, and more efficient for both buyers and sellers. It helps streamline the quote-to-cash process, minimize compliance risk, and close deals faster.
With an integrated solution and central repository, businesses can close the sell-side contract gap in quote-to-cash once and for all.