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The CPQ Customer JourneyBEFORE AND AFTER THE CPQ INVESTMENTInterviewed OrganizationFor this study, Forrester interviewed a Cincom CPQ customer that:› Is a multinational vehicle manufacturing company with a set ofcomplex products.› Sells directly and via its dealer network in North America andexclusively through a dealer network outside of the United States.Forrester interviewed one division of this multinational company. Withinthis division, three companies are using Cincom CPQ. The analysis willreflect the numbers and business model from that organization.› The business unit has just under 1 billion in net sales.› The interviewed division sells primarily through a dealer network.Key Challenges before Cincom CPQBefore the investment in Cincom CPQ, the organization describedchallenges that slowed the speed of its sales and contributed tounprofitable deals. The application manager lamented: “The dealer isresponsible for putting together the specifications [for each quote]. Thequote would go back and forth to the customer, with no visibility to thefactory about what was being pitched. This would lead to a lot ofguessing about how long things would take to manufacture and howmuch it would cost.”› A cumbersome quoting process lengthened sales cycles. Theinterviewed organization sells a highly configurable product thatpreviously had little pre-engineering. Product specialists, who areresponsible for collaborating with sales, worked to build manual quotesfrom often outdated product sheets. These quotes were built with littleinteraction from the factory about manufacturing timelines or actualcosts, requiring many revisions and lengthening the sales process.› The quoting process provided little factory visibility, losingopportunity to maximize production processes. The quotingprocess lacked clear communication between the dealer and thefactory, providing little visibility about how to plan the mainmanufacturing pipeline. In many cases, the applications managerreported, the factory may have been completely unaware of an orderuntil it was ready to be built.5 The Total Economic Impact of Cincom CPQ“Best-case scenario, they mighthave an application withcanned descriptions with theproduct. Worst-case scenario,they would write everythingdown on the back of a napkin,then figure it out over dinner.”Applications manager,manufacturer

› Out-of-date information caused costly errors. The organization’sbusiness partners often had no quoting system. Those that hadprogressed beyond paper were using some form of a spreadsheet or ahomegrown tool that required manual processes to keep the productdescriptions and pricing current. When configuration requirements andpricing are not kept up to date, salespeople are predisposed tobuilding a vehicle riddled with errors, leaving both the dealer andmanufacturer open for financial exposure. The applications managerstated: “There was a high level of risk that sales would quotesomething that we physically could not build. If you are quoting a halfmillion-dollar product, correcting one or two errors can take you intothe red for that deal.”› There was high risk of sales turnover, putting the dealers’businesses in jeopardy. Salespeople in this industry are highlyspecialized, and there is a steep learning curve before they areproductive. Further, there may only be one person in a dealer who hasthe knowledge to respond to a request for proposal (RFP). Theinterviewed organization experienced its dealers going out of business,in part because of frustrated salespeople leaving. This had a materialimpact on the sales numbers in each dealer’s territory. The applicationmanager said, “If a dealer can’t recover from the salesperson leaving,we have to go through the long process of finding a new dealership inthat territory.”“I am of the belief that anycompany that has a complexconfigurable product shouldhave a CPQ applicationbecause the alternative isgoing back to paper.”Applications manager,manufacturerKey ResultsThe interview revealed that key results from the Cincom CPQ investmentinclude:› Automation of the quoting process. The business previouslyworked under the premise that each vehicle manufactured wascustom. Implementing Cincom CPQ allowed the business to forcesome rigor around its product configuration requirements,documentation, and pricing information to create visibility into neworders being quoted and ultimately purchased. This createdefficiencies for the factory production processes. The applicationmanager said: “We discovered we actually had about 80% repeatablecontent from every order that comes through Cincom CPQ. Thisenabled us to create an engineering configurator. Engineers are now,in an automated fashion, able to map their processes and build somematerials knowing that they’re going to get some repeatable data. It’sstill a customized, specialty vehicle, but it does save engineering timebecause 80% of that unit is preconfigured or can be automated. That’stime that they would have had to spend touching it in the past.”› Improved accuracy. Cincom CPQ significantly reduces the number oferrors, or change orders, required by the factory. The applicationmanager told Forrester, “In the past, the final quote cycle might havehad a 14-day review window, and we’ve pushed that so when theorder is received, it’s almost immediately bookable because we havepushed all of that review out in front of the order receipt.”› Simplified solution management. Implementing Cincom CPQsolutions forces organizations to take a hard look at their pricingpolicies, engineering configurations, and product descriptions to createan effective quote-to-cash set of repeatable processes. But, once thishard work is done, the team required to run and manage the CincomCPQ solution is lean.6 The Total Economic Impact of Cincom CPQ“We’ve used our CPQapplication as a recruitmenttool when we bring on newdealerships. It’s helped usexpand our dealer channel orrecruit more qualitydealerships based on havingthose applications in place.”Applications manager,manufacturer

Analysis Of BenefitsQUANTIFIED BENEFIT DATATotal BenefitsBENEFITYEAR 1YEAR 2YEAR 3TOTALPRESENTVALUECosts saved from improvedorder accuracy 1,764,000 2,910,600 2,910,600 7,585,200 6,195,868Engineer productivity 400,400 800,800 800,800 2,002,000 1,627,471Reduction in developer timemanaging the previoussolution 266,085 266,085 266,085 798,255 661,714Time savings on quoteprocess 143,873 215,809 215,809 575,491 471,289Total benefits (risk-adjusted) 2,574,358 4,193,294 4,193,294 10,960,946 8,956,342Cost Saved From Improved Order AccuracyThe interviewed organization hoped that deploying Cincom CPQ wouldeliminate costly errors and change orders. Before CPQ, the manualquoting process left the company at risk for mistakes because proposalswere built using out-of-date pricing and product specs. The organizationreported a 33% decline in change orders after implementing CincomCPQ.The table above shows the total of allbenefits across the areas listed below,as well as present values (PVs)discounted at 10%. Over three years,the interviewed organization expectsrisk-adjusted total benefits to be a PVof nearly 8.9 million.Said the applications manager: “We had a unit that made it all the way tothe factory without a front axle, which wasn’t accounted for in thefinancials or procurement process. That one component is enough tomake a profitable unit red. Errors would happen regularly simply becausethere was no oversight making sure the order was properly configured.They were relying on a person going through and catching it.”From the interview, Forrester assumes:› Each error costs an average of 20,000, based on the average dealvolume and the price range of product components. (The interviewedorganization sells parts ranging from a small vehicle part to a 35,000chassis.)› Based on revenues disclosed in the annual report and the averagecosts for the vehicles produced, the annual number of vehicles sold is1,175.› Only half (588) of the orders had errors for each year of the three-yearanalysis.› There was a 33% reduction in change orders due to the engineeringconfigurator that the Cincom CPQ system enabled, according to theapplications manager.› In Year 1, the company added a second business running CincomCPQ. In Year 2, the organization began using Cincom CPQ in a thirdbusiness unit, which accounts for the increase in benefits beginning inYear 2.7 The Total Economic Impact of Cincom CPQ 6.2 millionthree-yearbenefit PV70%Costs saved fromimproved orderaccuracy: 70% of totalbenefits

Because order sizes can vary and some vehicle models are moreexpensive than others, Forrester risk-adjusted the results downward by25%, yielding a three-year risk-adjusted total PV of 6,195,868.Costs Saved From Improved Order Accuracy: Calculation TableREF.METRICCALC.YEAR 1YEAR 2YEAR 3A1Cost of an error 20,000 20,000 20,000 20,000A2Number of errors588588588588A3Cumulative error costsA1*A2 11,760,000 11,760,000 11,760,000A4Reduction in errors20% in Year1, 33% inYears 2 and320%33%33%AtCosts saved from improved order accuracyA6*A7 2,352,000 3,880,800 3,880,800Risk adjustment 25% 1,764,000 2,910,600 2,910,600AtrCosts saved from improved order accuracy(risk-adjusted)Engineer ProductivityPrior to CPQ, the interviewed organization custom-built each vehicle.After the CPQ deployment, the organization analyzed its componenthistory data and discovered that 80% of the orders had repeatableparts. According to the applications manager, the engineersexperienced a 20% time savings in prebuild engineering because theycould now leverage these repeatable builds. He said: “We baseengineering improvements on this data. We have a larger teamsupporting sales engineering and contract administration. But, on a perunit basis, there’s less touch on engineering, planning, andmanufacturing. We can move much more quickly to the factory thanwe’re used to be able to.”Forrester assumes that:› The organization has 100 engineers earning 55 per hour. They work2,080 hours during the year.› The organization added a company in the second year. To account forthis, Forrester modeled a 10% reduced effort in the first year and 20%in the second and third years.› There is a 50% reduction to productivity benefits to account for thepercentage of time saved applied to additional work.The amount of productivity savings will vary based on:› The amount of repeatable builds and/or customization acrossproducts.› The number of engineers in the organization.› The fully loaded compensation of engineers by tenure andgeographical region.To account for these risks, Forrester adjusted this benefit downward by30%, yielding a three-year risk-adjusted total PV of 1.6 million.8 The Total Economic Impact of Cincom CPQBecause of Cincom CPQ,engineers discovered that80% of their orders hadrepeatable builds, savingtime on the factory floor.

Engineer Productivity: Calculation TableREF.METRICCALC.YEAR 1YEAR 2YEAR 3B1Number of engineers100100100100B2Hourly rate per person 55 55 55 55B3Annual hours worked2,0802,0802,0802,080B4Reduced effort by engineers10% in Year 1,20% in Years 2and 310%20%20%B5Productivity recapture50%50%50%50%BtEngineer productivityB1*B2*B3*B4*B5 572,000 1,144,000 1,144,000Risk adjustment 30% 400,400 800,800 800,800BtrEngineer productivity (risk-adjusted)Reduction In Developer Time Managing ThePrevious SolutionBecause of the functionality built into the tools, organizations can reducethe support needed to keep the CPQ application and the correspondingconfigurations current and running optimally. The applications managersaid, “Prior to CPQ, we had several people at every company supportingthese applications, and now we are able to manage these applicationswith a really small team.”› The organization had at least two people managing the CPQapplications for each of the three companies Forrester discussed.› The interviewee reported that the organization could reduce the teamto a core unit of four developers running and managing the CPQsolution.The dollars saved will vary depending on the following factors:› Salaries may be different across companies and geographies.› Organizations may not move at the same pace as the companyForrester interviewed, thereby taking longer to be positioned to reduceheadcount.To account for these risks, Forrester adjusted this benefit downward by10%, yielding a three-year, risk-adjusted total PV of 661,714.9 The Total Economic Impact of Cincom CPQ7% 661,714three-yearbenefit PV

Reduction In Developer Time Managing The Previous Solution: Calculation TableREF.METRICCALC.YEAR 1YEAR 2YEAR 3C1Number of workers (saved)3333C2Fully burdened developer salary 98,550 98,550 98,550 98,550CtReduction in developer time managing theprevious solutionC1*C2 295,650 295,650 295,650Risk adjustment 10% 266,085 266,085 266,085CtrReduction in developer time managing theprevious solutionTime Savings On Quote ProcessIn addition to improved order accuracy, a major driver for deploying CPQis getting quotes in the hands of customers faster. Before CPQ, a dealermight have needed several cycles of communication and weeks tocreate a quote. Worse, it might have chosen to pass on a bid if it provedtoo difficult to respond. After deploying Cincom CPQ, the applicationsmanager reported saving 34 days in the quote process.5% 471,289three-yearbenefit PV› The time to produce a quote decreased from 48 days, which includedfour revision cycles, to 14 days with two revision cycles. This saved atotal of 68 days in Year 1 and 102 days in the second and third years,with the addition of another company ramped on Cincom CPQ.› Both product managers and engineers are involved in the quotingprocess, and Forrester assumes 10% of their time is spent working onquotes.› The manufacturer has 90 dealers, and Forrester assumes one quoteper year from half of the dealers.› Forrester applies a 50% reduction to productivity benefits to accountfor the percentage of time saved applied to additional work.The amount of productivity savings will vary based on:› The complexity of the quoting process and inefficiencies prior toimplementing CPQ.› The fully loaded compensation of product managers and engineers bytenure and geographical region.› The number of dealers and proposals created.To account for these risks, Forrester adjusted this benefit downward by10%, yielding a three-year risk-adjusted total PV of 471,289.10 The Total Economic Impact of Cincom CPQTime savings on quoteprocess: 5% of totalbenefits

Time Savings On Quote Process: Calculation TableREF.METRICCALC.YEAR 1YEAR 2YEAR 3D1Days in quote process and number of cyclesbefore Cincom12 days*4 cycles484848D2Days in quote process and number of cyclesafter Cincom7 days*2 cycles141414D3Number of brands using Cincom CPQ233D4Days saved in new quote process(D1-D2)*D368102102D5Fully burdened product manager annualsalary( 157,950/261)*D4 41,152.72 61,728.59 61,728.59D6Fully burdened engineer annual salary( 114,750/261)*D4 29,897.55 44,845.83 44,845.83D7Number of proposals per year (90 dealers)45454545D8Average percentage of time spent doingquote-related work10%10%10%10%D9Productivity recapture50%50%50%50%DtTime savings on quote process(D5 D6)*D7*D8*D9 159,858 239,787 239,787Risk adjustment 10% 143,873 215,809 215,809DtrTime savings on quote process (riskadjusted)Unquantified BenefitsThe interviewed customer identified the following additional benefits ofusing Cincom CPQ but were not able to quantify the benefits at thepresent time.› Reduced risk from sales turnover. Dealers make large investmentsfinding and training specialized salespeople. The knowledge that nichesalespeople gain is often only in their heads and not documented.Cincom CPQ mitigates this risk by capturing important product andprocess information, which can be leveraged by future sellers. Theapplications manager reported: “A huge amount of our productknowledge was tribal, so it would be held in the heads of engineersand product managers. We are at a high amount of risk based on theproficiency of a dealership for specific territory. You couldn’t hire ageneric salesperson to sell one of these products; the learning curve isdeep. CPQ allows you to more easily staff the sales department ofdealerships. We institutionalized product and configuration informationwhich reduced the risk that if you lost a very knowledgeable sales repin a specific region, you may not be able to replace them.”11 The Total Economic Impact of Cincom CPQCincom CPQ has beenused as a recruitmenttool to bring on morequality dealerships.

› Enabled “getting in front of the RFP” and increased sales. Sales isa volume game, and any roadblocks that stop sellers from competingmight as well be detour signs. Successful companies win morebusiness by enabling sales to quickly and easily create and deliveraccurate proposals. “Salespeople will tell you the most critical thing ina bid situation is getting that specification in front of the bid committeewhile they are still forming their product requirements. You want to bein as early as possible when that bid opens and as close to the marketrate as possible.” The application manager continued: “Depending onthe workload, or what the dealership thought its chances to win were,you might have situations where they would just pass. CPQ easestheir ability to generate a quality specification. It means that we aregetting our spec in front of more customers.”› Improved order to cash cycle time. By providing improved productdescriptions, configuration rules, and current pricing information, theaccuracy of the orders improved, and the product was ready to buildfaster. Ultimately, this allowed the manufacturer to shorten its cyclefrom order to cash. The applications manager said, “Every timesomething would change, they would basically have to review theentire configuration repeatedly because they couldn’t tell what theimpact was. When the business could say, ‘We’re done; we’re ready toinvoice this,’ this is when the impact was made to order cycle time.”The applications manager reported a 30% improvement in order tocash.FlexibilityThe value of flexibility is clearly unique to each customer, and themeasure of its value varies from organization to organization. There aremultiple scenarios in which a customer might choose to implement CPQand later realize additional uses and business opportunities, including:› Improved dealer experience. In this industry, manufacturer-dealercontracts are usually exclusive, which puts increased burden on themanufacturer to optimize its relationship with the dealer. Theapplication manager described the value specifically to increasing thecompany’s channel: “Dealers are making a pretty big choice when theydecide to hook up with us.” He continued, “During dealershiponboarding, I’ve had dealers say, ‘You know, this is what we’ve be

5 The Total Economic Impact of Cincom CPQ The CPQ Customer Journey BEFORE AND AFTER THE CPQ INVESTMENT Interviewed Organization For this study, Forrester interviewed a Cincom CPQ customer that: › Is a multinational vehicle manufacturing company with a set of complex products. › Sells directly and via its dealer network in North America and