Salesforce is reportedly negotiating to pay up to $600 million for CPQ (configure, price, quote) vendor Steelbrick, in a move that—if it happens—underscores the growing importance of CPQ software for today's digital economy. The possible acquisition would be paid for mostly in stock, according to The Information, which broke the story.
CPQ software helps salespeople create customized pricing quotes and sales proposals faster, coming in particularly handy for companies with very large numbers of product SKUs and global operations involving varied pricing conditions, depending on the market.
"CPQ is key as it provides the basis for recommendation engines in the future," notes Constellation Research founder R "Ray" Wang. "It's what enables commerce and ties together transactional systems and systems of engagement."
Why Steelbrick?
Salesforce Ventures previously invested in Steelbrick, which focuses on small and medium-sized businesses.
There are a variety of CPQ suites available for Salesforce, but one clear advantage held by Steelbrick is the fact it's natively built on the Salesforce platform. However, so is Apttus, in which Salesforce's venture arm has also invested. Apttus's target market is larger enterprises, however.
Until recently, Apttus held one advantage over Steelbrick in that it also offered a billing module. Steelbrick filled that gap in September, acquiring a small vendor called Invoice IT, whose product is also natively developed on the Salesforce platform.
The Bottom Line
Assuming the Steelbrick deal becomes official, it will be a somewhat unusual case of Salesforce coming late to an emerging product category that has already seen a wave of consolidation in recent years. In 2013, Oracle picked up BigMachines—which was led by now-Steelbrick CEO Godard Abel—and PROS bought Camelon. More recently, Autodesk bought Configure One.
If Salesforce pulls the trigger on the Steelbrick acquisition, it could (predictably) spark competitive responses and additional acquisitions. There remains a large number of CPQ product options on offer, but if the market rolls up smaller vendors could see themselves edged out, unable to compete with the R&D resources and perceived higher stability of larger providers.
Customers who have yet to significantly invest in CPQ software therefore have a tricky procurement process ahead of them. On the other side, customers with an array of CPQ software may find opportunities to consolidate their portfolios.
For Salesforce, "the big hole has been analytics and commerce," Wang adds. "Should Steelbrick be acquired, it takes Salesforce one step closer to commerce."
Last year, Salesforce launched the Wave Analytics Cloud. It and commerce are two sides of a coin, Wang notes. [Read Constellation VP and principal analyst Doug Henschen's in-depth Wave coverage here.]
"The commerce piece is key to filling the analytics story as well, and with Bob Stutz's arrival as the Chief Analytics Officer at Salesforce, customers can expect more traction in this arena," he adds.
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