The News

SAP has recently announced the completion of the acquisition of Callidus Software, Inc. Unsurprisingly, CallidusCloud’s assets shall get consolidated under the umbrella of SAP Hybris leveraging the customer relationships that the existing leadership team, which shall continue to lead their team, has built. CallidusCloud is a leader in sales performance management and in the CPQ area and also has some more interesting assets, notably their contract lifecycle management offering, which ties nicely into the CPQ piece. The CPQ software has a (first) working integration into SAP’s Cloud for Sales, which got announced in September 2017 and that gets continuously improved. One seemingly simple, yet powerful feature of the CPQ software is the indicator for margin health that gets updated as a sales representative works upon a quote. The software’s ability to generate multi-level workflows based upon changes of prices or contract clauses creates an efficient workflow, which includes the customer when using the portal based delivery of documents during negotiations. All in all the software is geared towards making the sales process efficient. CallidusCloud’s solutions shall be sold standalone as well as integrated into SAP solutions and a roadmap shall get announced at SAPPHIRENOW in June 2018. I have done a brief initial analysis of this acquisition right after the plan got announced and followed up with some musings about how CPQ can be delivered in a customer experience fashion.

The Bigger Picture

With CallidusCloud’s CPQ SAP now has at minimum three configuration engines that can get used by customers:

• ERP Variant Configurator
• SAP Hybris CPQ
• CallidusCloud CPQ

A fourth one comes into the picture if I add the Internet Pricing Configurator, IPC, a Java engine which runs embedded in SAP CRM and that is, using ‘condition technique’, mostly compatible to the configuration engine within ERP. For tech aficionados: The user exits that are available to manipulate how the access sequences are used, are working differently, and require Java skills, as opposed to ABAP skills. SAP Hybris CPQ can be seen as an advanced version of IPC, which got moved under the Hybris umbrella as SAP correctly sees CPQ as an important part of the glue between frontoffice and backoffice. Still, although being a Java engine, it is deployed on premise only – as far as I know, while CallidusCloud is, of course, a web based system. To my best knowledge SAP has about 3,000 customers that are using the ERP Variant Configurator and/or SAP Hybris CPQ and/or IPC. I am more than happy to get corrected on both of these two pieces of information. On top of SAP’s own configuration engines there are partner engines, for me most notably, In Mind. In Mind is a cloud based CPQ engine  with a focus on the manufacturing industry. It is built on top of the SAP Cloud Platform. The company got founded by former SAP people with significant experience in the manufacturing industry and configuration. One could say that one of their objectives is to close the gaps in the configuration area that SAP did not address. I had the pleasure of working with some members of their team and am still impressed about their knowledge and dedication. Then there are of course more third parties. In summary, customers have choice. But, they have choice. Which means a challenge: Which software to look at in which situations? Of course the different products have different strengths and weaknesses. The usual conundrum of software selection. And right now there is little advice on what to do, at least up to and until SAPPHIRE NOW.

My PoV and Advice

One thing is for sure: Going forward, CallidusCloud will be strategic for SAP; maybe not to the extent as Hybris E-Commerce was back when it was acquired, but CallidusCloud will make up an important pillar in SAP’s strategy. SAP Hybris CPQ and the Variant Configurator are on premise products. They are particularly strong when it comes to heavy duty configuration and to Solution Configuration. They also work well within the SAP ERP (and supposedly S/4HANA) ecosystem. With graphical user interfaces that can get bolted on top of them, companies that have complex configuration requirements and that do not need or want a cloud based engine get one of the more powerful tools that are around. Being a Java engine, SAP Hybris CPQ can also be integrated into a Hybris Commerce environment. If CPQ shall be used web based and out of offices by salespersons then the first choice for an SAP customer is CallidusCloud. Doing the whole process, including the initial contract generation piece and keeping an overview on the state of negotiations, is a huge benefit. CallidusCloud also may continue to be a good choice for non-SAP customers. Being a long standing Salesforce partner the integration into Salesforce at this point is rather better than the integration into SAP Hybris – although this is likely to change. Additionally, I have heard mixed accounts about Steelbrick, Salesforce’s own CPQ solution. However, CallidusCloud CPQ is far less about solution configuration as SAP Hybris CPQ, although I have seen some prototype functionality that suggests a move into this direction. If a cloud solution with stronger configuration capabilities than CallidusCloud currently offers is needed, then there is In Mind. With or without CallidusCloud CPQ it is worthwhile for customers to have a look at their CLM solution, which can be implemented standalone.

Advice for Customers

This leads me to the following recommendations for SAP customers:

• If you already run SAP Hybris CPQ, continue using it until you realized a meaningful ROI, as it will stay around. There are too many customers for SAP to abandon it.
• If you do not yet have a CPQ and are at least initially not too heavy on the configuration then CallidusCloud is the first option to look at – unless you are cloud averse, in which case it is SAP Hybris CPQ. But be aware that the setup of CallidusCloud is, and will likely continue to be, easier than the setup of SAP Hybris CPQ.
• If you are heavy on configuration and solution configuration, want a cloud based CPQ solution, and ideally are in the manufacturing industry, then have a good look at In Mind. The caveat that I, sadly, need to make here is that the position of In Mind as a company got somewhat weakened although they are still on SAP’s price list.

Advice for SAP

It is good that SAP intends to provide a roadmap already at SAPPHIRE NOW. In order to alleviate fears and mitigate the FUD that the competition doubtless creates, it should be pretty precise, aggressive, yet credible. The roadmap should especially consider guidance to customers on when to choose which of the existing solutions. It is almost inevitable that there is an overlap of use cases that cannot get resolved; still this is a much needed piece of advice. The second important part is, of course, detailing how especially the integrations into SAP Hybris Cloud for Sales and SAP Hybris Commerce will develop. Tight integration is a key asset. Third, I’d hope to hear about an easy-to-implement license conversion program for those customers who have just bought in to SAP Hybris CPQ, knowing that they will not need its full powers, and wish to migrate. While this might not be a great number of clients, it would show an immense customer orientation, help against the still existing image of SAP being hard to deal with, and be a quick and easy way into reference implementations. Lastly, and knowing that this is a difficult proposition, the announcement of an easy migration path from SAP Hybris CPQ to CallidusCloud would be the icing on the cake.

In all likelihood you know that CPQ stands for Configure, Price, Quote. CPQ software helps mainly B2B companies to more efficiently sell highly configurable products. As the name suggests, the software helps sales people during the three steps of configuring the product, getting and agreeing a price for it, and finally initiating the quotation process. The more variables, or parts, a final product has the more advantage a CPQ tool offers to both, sellers and buyers. It is geared for streamlining and accelerating the sales process while reducing errors. A CPQ system typically ties into CRM- and ERP systems and, apart from being made available to channel partners, is often also exposed through an e-commerce system (have you ever configured your car online?). CPQ currently being a hot topic (and not only since the planned acquisition of CallidusCloud by SAP) there is a good number of companies offering this functionality. But in many scenarios CPQ also needs a CLM. Now I hear you asking: what is CLM? After all there are many possible long terms for this abbreviation. Why does it connect to CPQ? And why does this combination make an appearance in a blog that distinctly focuses on CRM, customer engagement and ultimately an improved customer experience? Starting from the end: CPQ, and by extension CLM, is more and more becoming a link between the front office and the back office and therefore has considerable impact on the customer engagement process, and hence influences the customer experience.

So, what is CLM?

CLM is an abbreviation for Contract Lifecycle Management. As such it deals with the creation of contracts, mostly from a set of predefined clauses, the negotiation of the contract, its ultimate approval and acceptance, and of course, with its renewal. According to Wikipedia it is the “proactive, methodical management of a contract from initiation toward award, compliance and renewal.” While there is some competition in this niche, too, there are fewer players with high visibility. The obvious link between CPQ and CLM comes from the fact that a part of the result of a successful quote is usually a written contract between the two involved parties that lays down the agreed upon relationship. Less obvious, but at least as interesting, is the fact that a contract in itself can be treated as a configurable product.

How’s that?

A contract consists of a number of clauses. Some clauses are mandatory and some are not. Some clauses can get changed while others are fixed. Those changes can get done automatically, based upon underlying rules, by pulling data into them, or manually. There are dependencies between clauses. There is a need to track the history of the changes to the clauses used during the creation of a contract. Clauses themselves change over time. And changing clauses can lead into an approval workflow. Contracts are largely built electronically. Signature is often managed via services offered by the likes of DocuSign, EchoSign, Authentisign, … or similar platforms. G2Crowd offers a good list of e-signature platforms. Exchange contract with product and clause with part then you are with me. To be sure, the underlying technologies and even the representations do change. But then, requesting a change in a clause can lead to a change in the price and vice versa. The user groups have an overlap although sales reps do tend to deal less with legal frameworks than corporate lawyers. However, what it boils down to is that users and customers need and want an efficient way of navigating the process of a complex sale, in an environment that requires the alignment of many different variables. A sales quote at an end needs both, a finalized bill of material along with an offer letter that contains descriptions, pricing, terms and conditions, and more. Yet, while CPQ gets firmly there are only few vendors that are successfully offering both, CPQ and CLM. And then the solutions are not always well integrated into each other. Microsoft and Salesforce do not have own CLM solutions that address the sales side of the market but rely on partnerships, while SAP will have one via the CallidusCloud acquisition. Oracle offers a “contract management feature” as a part of its CPQ Cloud, which at least offers triggering the generation and reviewing of contract documents out of the quote. This lack of integration makes it more difficult than necessary for their customers to offer the seamless and efficient engagement that an orchestrated triplet of CLM, CPQ, and CRM can accomplish.

CPQ – The Customer Experience Way

Targeting experiences requires tight integration. To deliver that CPQ needs a CRM, an order management system, and a CLM that seamlessly cooperate throughout the quoting process and then into contract renewal processes. The overall process gets orchestrated by the CRM- or CEM system, depending on the moniker that this system gets. The opportunity, or the quote itself, is the leading entity. Apart from staple features like workflows, electronic delivery and review of a contract document draft and corresponding redlining, the CPQ-CLM combo needs to fulfill a number of requirements. As far as I know none of the solutions mentioned above can truly deliver them at this time:

• The contract document is treated like a configurable product, with the clauses defining the variables
• Even if the CLM stays a separate system it must be possible to formulate rules that link contract clauses to prices and vice versa. This helps in the case of regular subscription payments, to take a very simple example, but in a nutshell product configuration- or –pricing changes need to possibly link contract changes, like using a different set of clauses
• The CLM itself needs to be able to work on its own document storage as well as on document management systems that are already available in a company, at least supporting the most important ones out of the box
• Clauses, if changed for a contract, need to trigger customer specific versions of these changed clauses that can be maintained independently from their originals. This way it can get decided whether a customer specific clause or the (current version of the) general one is used for a renewal contract
• A renewal opportunity/quote can get created by triggering the CPQ in one atomic operation from the CRM and not by triggering both engines and then linking the outputs
• Contract analytics, including ‘what if’ scenarios that help to intelligently identify contracts that are adversely affected by a clause change will get increasingly important
• The CPQ-CLM system needs to be tightly linked into the order fulfillment and billing systems, so that everyone involved has an accurate status on billing cycles and timely inflow of customer payments

To me it looks like Oracle is closest to delivering on the front part of the process, followed by the SAP-CallidusCloud system. SAP seems to be stronger on the back side of the process, covering the order management and billing processes, although contract renewals need to be improved, too. Salesforce is able to line up a smooth story on the front part of the process but seems to lack overall integration. And then there is Microsoft, showing … ooops, what do they show? At this time Microsoft seems to fully rely on its ecosystem. I’d say that the race is on and that there are quite some developments that we should expect in the converging areas of CPQ and CLM.