Configure, Price, Quote (CPQ) software tools market consolidating in US

11 October 2018 5 min. read

The market for Configure, Price, Quote (CPQ) software tools is consolidating in the US, with industry leader Simplus having made five acquisitions since the beginning of 2016. On the back of projected double-digit market growth in the coming years – and with the cloud and artificial intelligence segments booming – mergers & acquisition activity in the CPQ arena is set to spike.

Configure, Price, Quote solutions (CPQ) are digital sales tools used by firms to quickly create goods and services packages, and then provide optimized price quotes to customers. CPQ solutions work with and draw on the data from customer relationship management (CRM) and enterprise resource planning (ERP) software systems. Prices and quotes are automated from rules considering variables like customer relationship, economic conditions, and volume purchased.

Meanwhile, the tools can make sure the product package elements are compatible with each other or dependent on prior purchases, while scanning for regulatory or company policy issues with the package combination sold.

First emerging in the 1980s, CPQ software has been enhanced in recent years by cloud computing and machine learning – which have spurred on the lion’s share of growth in the market. Firms are in the process of replacing old, on-premises systems with new cloud-based and automated CPQ solutions.

The advanced tools offer businesses a raft of benefits. For one, sales teams’ productivity is boosted by automating routine back office admin tasks. Furthermore, those CPQ tasks are done better through machine learning, optimizing quotes and discounts to improve profit margins. They can also increase revenue from guiding sales towards cross-selling opportunities, while creating a more efficient and accurate sales process. CPQ tools also ensure that sales teams follow company and regulatory regulations.CPQ Market Landscape

The market is now relatively mature. According to a new report on the market from global investment bank Equiteq, there are over 110 companies worldwide providing CPQ solutions – many of which encompass internet software and services. 60% of CPQ firms are located in the US, with 6% in the UK and 5% in the Netherlands.

Estimates from Gartner place the size of the Configure, Price, Quote software market at just over $1 billion this year. According to Accenture, a full 83% of companies are now using some form of Configure, Price, Quote.

Analysts at Equiteq say that the growing uptake of CPQ software has led to heightened M&A activity, and a consolidating market. Simplus has been a major acquirer, having bought CirrusOne, CRM Manager, Basati, EDL Consulting, and BaldPeak Consulting since the start of 2016. Meanwhile, technology and consulting giant Cognizant’s purchase of Advanced Technology Group highlights strong client demand for CPQ at large professional services firms.

The CPQ market leaders are currently Salesforce, Apttus, and Oracle. In 2016, Salesforce acquired CPQ provider SteelBrick, rapidly increasing its customer base and becoming one of the most prominent cloud-based CPQ vendors. Previously, the cloud services giant had used partner vendors like Apttus.

California-based Apttus – which had $150 million in revenues and grew by 60% in 2016 – was itself acquired by US private equity firm Thoma Bravo earlier this year. The leading platform has served over 600 organizations, and has received attention for its AI innovation and immersive technologies.


Gartner Magic Quadrant

Oracle, meanwhile, has the most established CPQ offering, expanding into the industry through its acquisition of BigMachines in 2013. Like its competitors, Oracle's products are integrated with Microsoft Dynamics and Salesforce Sales Cloud.

Globally, the CPQ market has also been heating up. In April 2018, German ERP giant SAP bought California’s Callidus Software – a leading CPQ vendor which had been growing rapidly through acquisitions. The $2.4 billion deal is part of SAP’s strategy to provide more customer-facing solutions as opposed to its previous focus on back office processes.

Other deals in the space included Swedish firm Tacton Systems’ acquisition of German Lumo Graphics, and German firms FCM and MXL’s investment in Singapore company In Mind Cloud.

Looking to the future, research consultancy Gartner expects the CPQ market will continue to grow at a CAGR of 20% through 2020, and at a higher rate for cloud-based solutions. The robust market growth will continue to drive M&A activity, says Equiteq.

According to the report, four emerging trends to look out for in the market are AI-based solutions, self-service options, low and no-touch fulfilment, and multi-cloud approaches. As mentioned before, AI in CPQ solutions reduces the need for manual interventions, while providing data-driven insights. It also enables accurate predictive pricing that incorporates complex discounting rules and customer data.

Self-service options are also gaining in popularity, as clients demand the ability to get quotes and configurations on their own. The development means improved sales agent productivity, as well as reduced customer service costs.

Low and no-touch fulfilment and invoicing entail those process that need little to no interaction with sales teams. This development also increases sales team productivity, though it requires very strong integration of CPQ tools with the client’s CRM systems. Finally, multi-cloud approaches recognize firms’ usage of multiple cloud services, and the importance of integrating designs to create a seamless user experience.