Commercial Platforms in Cloud Advantages

Commercial Platforms in Cloud Advantages

Have you seen ‘Floppy Disk’?

Folks who have been around in IT for more than a decade, may still remember the old day ‘floppy disks’. During my early years in university, I developed a passion for programming. After a month or so of hardcore coding, one evening, I typed a wrong command ‘Format C:\’ instead of ‘Format D:\’ in a PC with floppy disks! Even though I took the floppy disk out immediately, but the damage was done and I lost all of my months’ worth of codes.

Copy 500MB of images to where?

While being part of international Commercial Excellence team, I was sent to Jakarta to prepare responses to a complex RFP (Proposal/Bid), with 10 or so of my colleagues. During the preparation, we had to get hundreds of pages of diagrams ready for a Telecom client. Now, those diagrams were big and sitting in a server in China and we were sitting in Jakarta; we ended up in spending 48+ hours of continuous copy and paste from one server in China to another PC in Jakarta! If we had cloud then, we could have saved our common library in cloud and get those from there. We’re actually doing it now, by building up our Commercial Library in a Cloud-based Proposal Platform called, ‘TinderBox’.

The Cloud Advantage

I have been reading this interesting article from GE, ‘The Cloud Advantage’, and then I could relate a common question from our clients regarding Commercial Platforms and CPQ (Configure, Price, Quote). Almost in all cases, our clients will ask ‘Is it available offline?’, and we will always answer that our proposed platform will be cloud-based. In addition to availability, reliability and security, what other advantages do we see from moving to the Cloud?

Click here to download the complete document from GE.

[Ping me if you need a copy]

“With the advent of the Industrial Internet come the challenges of scale and speed. Scale is required to consolidate and manage massive volumes and varieties of dynamic and time-series machine data. Speed is needed to leverage this data with analytics in real-time. The imperative for industrial IOT is a secured environment with capacity to grow at the speed of machine data and the technical infrastructure to apply sophisticated analytics that drive insights for more profitable business decisions for industrial companies.

According to Gartner, the uptake in the use of cloud services is accelerating rapidly. Gartner forecasts that total annual spending on public cloud services will nearly double within four years — from $152 billion at year end 2014 to over $282 billion in 2018.According to the International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker, for the five-year forecast period, IDC expects that cloud IT infrastructure spending will grow at a compound annual growth rate (CAGR) of 15.1% and will reach $53.1 billion by 2019 accounting for 46% of the total spending on enterprise IT infrastructure. At the same time, spending on non-cloud IT infrastructure will decline at -1.7% CAGR.”

Let me quickly explain how the advantages mentioned in that document (copied here) relate to our Commercial Platforms/CPQ.

1.     Speed to Implementation and Innovation: Cloud architecture delivers the ability to rapidly develop and deploy Commercial Platforms/CPQ platforms.  It achieves this speed by providing standardized approach and self-service options.

2.     Security: Security for Cloud-based CPQ/Commercial platforms can be really robust as those Cloud providers make investment in security software, capabilities, facilities and expertise.

3.     Lower costs: Without going to Cloud, in-house Commercial/CPQ platforms would have needed huge investment in enterprise infrastructure to enable the users fast and reliable access to the platforms. Speed & performance become a bigger problem over time, as the investment in servers tends to go up with the increase in capacity demand.

4.     Ability to scale: It is much easier to scale the Cloud-based Commercial/CPQ platforms to meet growing business demand, without being restricted by hardware capabilities of the computer servers. For one implementation of CPQ, we ran 3 parallel projects on the same CPQ platform, without slowing each other down.

5.     Global access: With the global user base, for Commercial/CPQ Platforms, global access has become a critical success factors. With good Cloud providers, we can provide faster access to non-North American users, especially in other continents.

Important Financial Terms Simplified for Commercial/CPQ Platforms

In today’s market, for each commercial/CPQ projects we work on, we need to show business benefit of such projects. We all know that such calculation of business benefit needs to be clear and transparent, with minimum uncertain assumptions and measurable. Especially for CPQ projects & other commercial projects, it has been a challenging tasks for sure, when the most of the benefits are qualitative in nature, only some are quantifiable. I have seen benefit claims of 10mm/year for a CPQ project, but they did have to lower it to 1mm/year when challenged on the ability of being measurable and quantifiable for the next 3-5 years.

 Now, in most cases, our clients can ‘define’ such benefit, and manage to prove, with reasonable certainty, that we will realize such benefits and we can show such in our pro forma cash flow for next few years, as well as in the balance sheet. However, that alone might not be enough to sway the CFO or the finance leader. Questions will be raised on the timeline of payback, compared value of today or the cost of investment/loan to invest in this project.

Let’s look at the 3 financial terms that we should all use while we evaluate such benefit stories:

1. Payback period: tells us how many years we have to wait to recover the investment, assuming the benefits are measurable and can be claimed in pro forma statements (balance sheet, cash flow form)
2. Net present value (NPV): tells us the present worth of future benefits, extremely helpful in determining which project to invest in
3. Internal rate of return (IRR): tells us the rate of return on investment compared with the rate of borrowing capital (Weighted Average Cost of Capital or WACC)

Payback period: The payback period method simple computes the time required to recoup the initial investment. For example, for a given CPQ/Commercial project, we’d need to invest 1mm over next 3 years, and the project should provide us with 800k/year measurable and verifiable benefit. How many years would it take to get our money back? We get the answer by dividing 1mm by 800k, which is 2 years. In other words, after we go live with this project, benefit $ from the first two years will only contribute to recovering the investment; business will realize incremental benefit after cost is collected, which is after 2 years.

 Net present value (NPV): The net present value (NPV) of an investment discounts all the cash inflows over the life of investment to determine whether they equal or exceed the required investment. If the present value of the inflows less the initial capital outflow is positive, value is added to the firm. Let’s use a scenario for this one, assume that we have to choose one of the two CPQ/Commercial Platforms, Platform A and Platform B.

For Platform A, it’ll cost us 500k initially, then it will give us yearly benefit of 400k for the next 3 years. If the current market discount rate is 10%, we can break up the scenario like this:

CPQ: Integral Part of Commercial Digital Thread

CPQ or Configure, Price and Quote tools are mostly cloud-based platforms to enable the business automate their commercial activities like responding to customer inquiries and RFPs. The success of such CPQ platforms depends a lot on the Functional Leaders who can ensure these platforms meet business need and deliver business requirements as well as on the business sponsors for long-term sustainment. The most common benefits of rolling out & sustaining a CPQ platform include:

1. Productivity savings (Shorter cycle time, commercial throughput increase etc., less keystrokes/quote)
2. Improved winning ratio (more purchase orders, more closed deals)
3. Quality of our proposals/documents (configuration accuracy, pricing integrity, marketing materials etc.)
4. More revenue (may not be directly, but definite impact on revenue)

Now, with all the benefits of a CPQ, big question comes up is that where does CPQ fit in the world of Commercial Digital Thread?

CPQ belongs to the Supply Chain Network of digital thread. CPQ is an integral part of digital thread, for:

1. CPQ enables the digital data transfer between CRM (Or Customer network) & CPQ, CPQ & ERP and CPQ & Analytics engines; eliminating duplication of data entry, improving accuracy of data and taking advantage of existing digitized platforms
2. CPQ streamlines the configuration & pricing across the globe, and can tap into Industrial Internet to make the digital thread even more robust
3. CPQ standardizes proposal (customer facing document) & contract management (may need different platform integration) across the globe, while keeping the sales forecasting always up to date

However, the success of CPQ platform’s ability to deliver fully digital commercial systems depends on several factors:

1. Getting the right CPQ platform to meet specific business need (key for CPQ success itself)
2. Integrating the CPQ with all other digital platforms (key for digital thread success)
3. Design the digital thread with CPQ in it (key for enterprises’ digital journey)

As we move more and more towards industrial internet, value of data transfer digitally is crucial for our success and CPQ can help us out for sure!

CPQ Success Factors-Infographics

CPQ Platforms: Configure, Price & Quotation platforms designed to help Sales & Commercial Teams with quotations and proposal generation.

When so many CPQ implementations are facing adoption challenges, we have achieved big success in not only deploying CPQ, but also proving to the business that CPQ actually delivers the benefits. Here are the factors which helped us with achieving success in CPQ projects.

CPQ and Big Data

While working on my MBA for Business Analytics Leadership, I’ve come across a lot of analytics and big data stuff, platforms (Knime, Tableau….), business analysis etc. CPQ, when used properly, can also help with the business analytics and here’s how.