by Robert Desisto | January 6, 2016 | Comments Off on Configure, Price, Quote: The market that won’t go away and makes investors millions in the process
The recent salesforce acquisition of Steelbrick is just the latest in what has been a boon for investors, founders, and employees with equity stakes of acquired CPQ companies. CPQ acquisitions have spanned over 18 years and an astounding $1.5 billion. The $1.5 billion dollars does not seem like a lot in the grand scam of major tech acquisitions but when you consider most of these CPQ vendors had revenues between $5 and $40 million dollars during their equity event, speculation has weighed more heavily versus current business performance in their evaluations.
Here are a summary of some of the major CPQ equity events in the past 18 years:
- Oracle buys Concentra for $43 million in cash
- Siebel buys Onlink for $609 million
- Selectica goes public a day before stock market crash and raises $115 million
- Oracle buys Big Machines for $400 million
- Salesforce buys Steelbrick for $360 million
A bit of historical reference is important, I was the product manager for SellingPoint from Concentra in the mid-90s. I remember saying all the same things new CPQ vendors in this market say now: “We have a better performance”, “a better way to maintain configuration rules”, and “the ability to model more than just configured products and support quote to cash”. Looking past the claims the fact is the fundamental technology approach (other than cloud computing which should not be trivialized) of solving configuration problems has not changed that much in 20 years. You still may find key technology architects from the CPQ provider go through mind numbing descriptions of their solver algorithms or how they developed a technical breakthrough that had not previously existed in the market. Even if true, what is often not explained many of these breakthroughs only apply to the top 1-5% of the addressable market that have very complex problems. A couple of the key reasons CPQ vendors hit a sandbar is because it is more difficult to justify the cost of solution for simpler problems which limits their mass market appeal and/or they bump into entrenched ERP vendors that limit their ability to execute on their “Quote to Cash” message. Yet if a CPQ provider can get a potential investor to buy in that they have the next best CPQ “mouse trap”, the CPQ provider can turn that solver algorithm or “Quote to Cash” message into millions of dollars, even if the revenue from that algorithm or message never turns out like promised.
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