The Evolution of CPQ: From On-Premise to SaaS

When it comes to the sales process, no tool is as critical as CPQ.

CPQ (configure, price, quote) software helps sales teams create accurate, personalized quotes for customers in a timely and efficient manner. It guides them through configuring products and bundles, automates pricing calculations, and streamlines the quoting process.

Plenty of CPQ tools even have contract management, e-signature, and billing capabilities for full quote-to-cash automation.

All of these functionalities ultimately lead to shorter sales cycles, increased revenue, and a better experience for both sellers and buyers.

But modern CPQ has come a long way. What used to be a tedious, manual process has evolved into a dynamic and intuitive solution that is continuously updated and improved on the cloud.

CPQ software in its infancy

The history of CPQ begins in the 1980s with the advent of product configurators. Businesses would use their configurator to manage customer specifications in sales while ensuring compatibility with enterprise resource planning (ERP) systems.

These early configurators were primarily back-office tools designed to prevent conflicts and streamline complex product configurations in sales processes.

During the 1990s, the rise of sales force automation (SFA) saw configurators move from the back office to the front office. This shift allowed for greater integration with customer relationship management (CRM) systems, enhancing the efficiency and accuracy of sales processes.

As ecommerce started to take off in the late 1990s, configurators became essential for interactive selling, enabling sales teams to automate labor-intensive tasks and provide detailed, accurate quotes.

The on-premise era of CPQ, its challenges, and its limitations 

Like any legacy software, on-premise CPQ solutions had their fair share of challenges.

As businesses grew and product catalogs expanded, these tools became increasingly complex to manage and maintain. Updates were often slow and costly. Customizations were limited, making it challenging to keep up with changing market trends and customer needs.

Additionally, on-premise solutions lacked the scalability and flexibility needed to accommodate growing businesses.

Above all, IT dependency was a real issue for businesses using CPQ. Since it’s hard to maintain, the needed an in-house IT team for maintenance, updates, troubleshooting, and general support.

Not to mention, data security was a top concern due to the storage of sensitive information on-premise. When security measures fall entirely on the organization, any breach can be potentially catastrophic.

The rise of SaaS CPQ: a game-changer for sales operations

In 1999, Salesforce CRM was released as the world’s first major SaaS platform. This marked the beginning of a new era for software, and CPQ was not exempt.

The early 2000s marked a significant evolution as configurators transitioned into fully-fledged CPQ systems. This period saw the integration of CPQ tools with e-commerce platforms and the broader CRM ecosystem, making them central to the sales process.

By 2010, CPQ systems had become mainstream, driven by Gartner’s influential report highlighting their features and benefits. In addition to product configuration, these included pricing engines, proposal generators, and approval workflows.

At this point, CPQ is a comprehensive SaaS platform. And with cloud-based software comes tremendous advantages:

• Predictable costs and minimal (if any) upfront investment, thanks to the subscription model
• Increased business agility, since the vendor handles maintenance and ships updates
• Greater scalability for growing businesses that need additional features and user licenses
• Better security measures to prevent data breaches
• Integration capabilities with other software systems, such as CRM, ERP, and e-commerce platforms, for a completely integrated sales workflow

In recent years, CPQ software has continued to evolve with advancements in technology. Modern CPQ solutions incorporate artificial intelligence (AI) and machine learning to enhance automation and predictive capabilities.

2D and 3D visual configurators, which allow customers to visualize complex products in real-time, are also commonplace. And plenty of modern tools are specialized in one industry or another, such as SaaS CPQ software that automates subscription billing, controls renewals, and automatically recognizes recurring revenue.

Added benefits of SaaS CPQ

Besides the fact that cloud-hosted CPQ systems are more agile and easier to scale, there are plenty of other advantages of the SaaS software delivery model:

Faster implementation

Deploying a SaaS is as easy as creating an account and logging in. With no need for complex and lengthy installations, businesses can start using CPQ quickly and efficiently. Since other business systems are cloud-based, integration is easy as well.

Team collaboration features

SaaS CPQ tools come with real-time collaboration features that enable sales team and deal desk members to work together on quotes, proposals, and contracts. Some tools, like DealHub, even offer digital sales rooms, where the prospect, sales rep, and legal team can collaborate on a deal in one central location.

Centralized data and analytics

With SaaS CPQ, all data is stored in the cloud, making it easy to access and analyze. These tools come with built-in reporting capabilities that provide sales leaders with real-time, visualized insights into their team’s performance, sales pipeline data, and customer interactions.

Seamless updates and support

SaaS CPQ vendors are responsible for maintaining, updating, and troubleshooting their software. Teams can focus on using the system instead of worrying about maintenance or technical issues. With automatic updates and continuous improvements, users don’t have to wait for the next full version before seeing a bug fix or feature improvement.

Flexibility for remote work

In today’s world, remote work has become more important than ever before. SaaS CPQ software enables sales teams to work from anywhere, at any time, without being tied down to a physical office or on-premise solution.

On-premise CPQ still has a place.

While most CPQ systems are hosted on the cloud these days, there are some, like Infor CPQ, that still offer an on-premise deployment option. Businesses in highly regulated industries like healthcare, finance, and government sometimes prefer on-premise CPQ solutions over cloud-based ones.

For those types of companies, there are a few advantages to having an on-premises solution:

• Full control over data security. Companies that handle sensitive information may feel more comfortable keeping it within their own networks and under their own security measures.
• Customization capabilities. On-premise software allows for greater customization, as businesses can tailor the system to fit their unique processes and needs (though many enterprise SaaS platforms also offer this).
• One-time purchase cost. With an on-premise solution, there may be a significant upfront investment. But there are no ongoing subscription fees.
• Compliance. Certain regulations and standards require data to be housed on-premise. Other times, managing compliance on an ongoing basis makes an already-compliant on-premises tool the better option.

In these cases, the cost of implementing an on-premise CPQ system may be outweighed by the peace of mind and control it provides.

Key considerations when moving to cloud-based CPQ 

Since most CPQ solutions are already cloud-based, it’s unlikely you’ll accidentally deploy an on-premise tool. But if you want to maximize the ROI from your investment in CPQ software, there are a few things you should know before such a significant digital transformation.

Start by evaluating your needs and sales process.

This is what will guide your decision-making process as you evaluate different vendors. Consider your business goals, current pain points, and integration needs to determine which features are most important to you.

You’ll also want to consider the types of products you sell. SaaS sales cycles are much different from manufacturing ones, for example. And they necessitate different CPQ functions (e.g., co-terming and ramp schedules vs. visual configuration and volume discounts).

It’s important that you select a CPQ software designed for your industry and sales workflow.

Ensure seamless integration with other systems.

CPQ never acts alone in the sales tech stack. It’s integrated with CRM, ERP, ecommerce platforms, and customer/vendor portals. If any of these systems can’t share information with your CPQ, you’ll have errors and lags that compromise the entire sales cycle.

Only look at CPQ systems that offer native integration with your other essential systems.

Devise a strategy for data migration ahead of time.

You’ll have to transfer all your existing sales, customer, and product data from your legacy platforms to the new CPQ system. This gives sales teams immediate access to product configurations, pricing tables, customer info, and historical sales data.

A smooth CPQ implementation typically entails the following key steps:

1. Data assessment (thorough analysis of the existing data sources to identify which data sets you have to migrate)
2. Data cleansing (removing duplicates, correcting inaccuracies, and ensuring consistency in formatting)
3. Data mapping (establishing how data from the old system corresponds to fields in the new CPQ software)
4. Migration execution (using the tools or scripts provided by the CPQ vendor)
5. Validation and testing (validating that the data has been accurately transferred)
6. User training (providing training for users on how to access and utilize the migrated data within the new CPQ system)

Properly executing these steps ensures a seamless transition to the new CPQ system, allowing teams to leverage the new platform effectively without disruption to sales activities.

If you have a larger team, take a phased approach.

Phased implementation means rolling out your new solution to parts of your organization in stages, rather than all at once. This approach mitigates some risks (e.g., low adoption rates, limited training personnel) and minimizes disruption to the sales process.

It also allows for a gradual learning curve for team members and provides time to troubleshoot issues as they arise. This is especially important because you’ll have to redesign your sales and pricing process.

What’s in store for the future of CPQ software?

Customer expectations are only getting higher, and technology continues to evolve at a rapid pace. To stay competitive, you have to continually improve your pricing, quoting, and configuration process. And that starts with the right software.

A few innovations on the horizon:

• AI and machine learning to predict optimal pricing, recommend configurations based on past trends, and automate routine quoting processes
• Big data and advanced analytics for customer behavior, pricing trends, and market dynamics
• Personalization for end products and the CPQ process itself, making it more intuitive and aligned with individual user preferences and workflows
• Visual configuration, including 3D and augmented reality (AR) capabilities for more immersive buying experiences
• Features to ensure products meet environmental standards and comply with industry regulations
• Improved integration with sales, finance, and other enterprise systems
• Chatbots, virtual assistants, and other AI tools that help businesses better understand and anticipate customer needs

It’s exciting, to say the least.

Ready to invest in CPQ software? Check out my tips for selecting the right CPQ software. Also take a look at our CPQ software reviews and product comparisons.