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Quote-to-Order: An Overlooked Software Application
Quote-to-Order: An Overlooked Software Application
April 9 2010
Last year, I met an analyst from another firm, and asked him what he thought about quote-to-order (Q2O) solutions, given the relevance between Q2O and the conference that I was attending. Not quite surprisingly, the answer I got was, “this kind of application doesn’t have a future.” The conversation didn’t go any further due to limited time but I could imagine that his reasoning might have sounded like this: even though activities from quoting to ordering may be taken care of by multiple systems, there’s no need to have another system (if there’s good integration in place), which makes the already complicated enterprise information landscape even more complicated. Certainly, this statement can be true if there is good integration in place. However, the truth is that today’s integration amongst various information systems is far from perfection. Let’s take a look at the reality of many companies’ Q2O process.
In a real working environment, sales professionals may have existing tools (independently or as a part of a customer relationship management [CRM] system) to support their quoting activities. These tools may be quite handy in generating a beautiful quotation document. However, what really counts in the quality of a quotation is the accuracy of the information provided to potential clients. More specifically, a good quotation has to present the correct product/service configuration based on a client’s requirements and what a company is willing to offer. Most of the time, product information is mainly produced by another group of people (usually called a product development department or something similar) using different systems. Given today’s fast-paced product development, relying on printed handbook, spreadsheet, or even batched update as the source of product information risks the inaccuracy in quoting.
Inaccurate product information is not the only problem in the Q2O process. Even though a quotation presents what is “technically perfect” (i.e., correct product configuration), it may not present what is commercially and operationally feasible to be delivered. In theory, production, purchasing, and inventory information should all play a role in generating a deliverable quotation. However, in practice, delivery terms are often determined based on experience or rule of thumb. As a matter of fact, in many organizations, only a few individuals know the so-called “tribal knowledge” of all the rules, constraints, etc., about what can or cannot be manufactured and delivered with what difficulties.
Disconnected data flow between quoting and ordering is another issue in the Q2O process. When quoting and ordering are handled by different groups of people, a finalized quotation often has to be re-entered (or in a better case, imported) to systems that control production and delivery. This non-value-added activity not only consumes resources but also opens the door for errors.
In the case that companies sell via distributors and resellers, the situation can only become more complicated.
Undoubtedly, integrating one system to another pair by pair (e.g., product lifecycle management [PLM] and CRM, CRM and enterprise resource planning [ERP], and PLM and ERP) is a method to address the above mentioned issues. However, there is a small group of software applications (titled Q2O or configure, price, quote [CPQ] solutions) taking a more focused approach (click
to see the list of Q2O solutions). Q2O solutions use the Q2O process as a main thread to integrate all relevant activities and needed information in one place. In addition, some solutions also provide functionality such as quotation documentation, product information management (PIM) (also called master data management [MDM] for product information), and e-commerce capabilities (e.g., shopping carts, checkouts, save for later, etc.) that are often not the case associated with ERP or CRM systems.
Although the voice of Q2O solutions is relatively weak in the overall business software market, I do believe that these solutions have a space to grow due to the approach they take and the utilities they offer. “
FPX (formerly Firepond)
are all SaaS Q2O vendors and they have been growing up to 50 percent annually, which shows its need in the market. Surely, Q2O functionality will eventually be subsumed by ERP, CRM, or PLM vendors, but the need and market potential is there. The next frontier for Q2O solutions would be verticalization (e.g., Q2O for retailers, insurers, etc.) as well as harnessing business intelligence (BI) and predictive analytics to discern which product variants/options are the most profitable, what sells the best in which demographic segments, rationalization of SKUs and components, etc.”, says TEC Principal Analyst P.J. Jakovljevic.
For more information about the market needs and landscape of Q2O solutions, you can read the article
The Complexities of Quote-to-order and Possible Solutions
, and explore more from there.
In order to help users evaluate Q2O solutions, TEC recently launched a Q2O evaluation model with detailed criteria developed by P.J. Click the
TEC Q2O Evaluation Center
if you are interested in improving your Q2O performance.
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