Stephen Hurrell's Analyst Perspectives

In a previous role I was actively involved with identifying and implementing dashboards and reports tracking key sales department metrics and KPIs for enterprise-size customers as well as high-tech growth companies. These included recognizable examples such as opportunity conversion rate, average deal size and sales velocity (length of time to close, won or lost). Wind the clock forward and in my role as an industry analyst I now talk to customers and have a wider view of the market.

While those above-mentioned metrics are in common use, they measure the outcome, not the activities and events that drive the results. When discussing and thinking about the drivers of key metrics such as sales velocity, focus tends to be on activities such as qualification, discovery and demos. Activities such as configuration, pricing and quoting (CPQ) and contract management are likewise activity steps to be achieved. But for many organizations, they are treated as a “given” and, once having reached those stages, they are often viewed as activities outside of the control of sales. But with more modern approaches and technologies, these typically manual do not need to be accepted as a “given.” Many enterprises should recognize that delays in the quote approval and contract negotiation phases not only negatively impact the sales velocity metric, but in and of themselves can be a competitive disadvantage if the process is perceived by the buyer as too lengthy and inefficient. Good sales practice is to help the buyer understand how your selling process works with the prospects buying process, much will have been performed without active participation of the seller. So, the importance of how buyers perceive the smoothness of those activities that do involve the seller is magnified as part of the overall experience. And the quote-to-contract negotiation is a significant part of this. In fact, I assert that through 2026, fewer than 1 in 5 enterprises will deploy an integrated CPQ and contract management system, leading to errors and delays and resulting in lost deals or poor initial customer experience.

The activities for CPQ, come more typically towards the end of the sales process, once the buyer has satisfied themselves that the seller has a qualified set of products or services. The CPQ process is a crucial part of the sale, ensuring that whatever product or service the buyer is purchasing is fit for purpose and at an acceptable price and contact terms. The result of the CPQ process is a quote that is an important part of the purchaser's internal syndication process, ensuring that all stakeholders can buy into, and sign off on, the proposed purchase. More advanced CPQ applications have capabilities to grade the quality of the configuration at the point of sale, based on characteristics such as level of discounts, margin and revenue recognition implications and not just as part of an offline-deal desk review or worse, as an after-the-fact deal analysis. The aim is to build in guardrails at the point of sale to avoid both delays in the process and to expand on the number of deals that are actively evaluated for quality and adherence to corporate guidelines. Additionally, some CPQ technology providers are reimagining the CPQ process going from a sales-led, asynchronous process to be a more in-the-moment, collaborative process where buyer and seller can share a digital space in which the buyer is an active participant in the configuration process. This can be either a shared activity between buyer and seller, or driven by the buyer, except for setting prices!

And once the quoting process is complete, in many instances this will then the part of the opportunity moving to the contract negotiation stage. Whether this is for a new contract or an adjustment to an existing contract, such as a one governed by a Master Service Agreement, the agreed-to quote represents the basis for the definition of what is being purchased. In addition, the terms in the quote link to actual contractual language, for example as to the performance obligations, the measurement of these obligations and the remediation processes if there is some form of failure to perform. But for many organizations, this contracting step can be less than ideal as a process. Often this process is very manual and labor intensive, requiring initiation from the salesperson via email with attachments such as word documents and follow-up phone calls. Priority is often set by the equivalent of “who shouts loudest,” with every opportunity treated as unique and an exception requiring attention by lawyers. Inevitably, this again adds latency to the process, without even adding in the time that the buyer’s legal department may take to “red line” and propose amendments. But again, it does not have to be this way. Contract Lifecycle Management software providers have offerings that utilize a modern, digitized version of contracts, able to utilize analytics and artificial intelligence (AI) to propose language that can minimize the need to manually create and approve the sellers’ contracts as well as reducing the likelihood for the buyer’s legal department to require extensive changes. Standardizing contract language in conjunction with AI-assisted clause selection based on characteristics of the opportunity, quote and buyer, aided by intelligent approvals, will reduce the proportion of contracts that need to be treated as exceptions. An additional benefit can be the direct integration of final terms into an automated revenue recognition process, where performance obligations are combined with billing schedules to ensure accurate revenue recognition information is generated as part of the fulfillment and billing processes.

There are many stakeholders within an enterprise that can directly benefit from a digitized and more automated approach to quoting and contracting. I would recommend that revenue leaders and operations teams review and understand where digitization and standardization can overcome delays and inefficiencies in this last mile of the sales and renewal process. In addition, bring in the office of the CFO and the finance team as they also have a vested interest in digitized quotes and contracts to ensure that the all-important order information and terms can be updated and processed through to fulfillment and billing, ensuring both reduced time to cash and frictionless revenue recognition are achieved. Manual quoting and contracting are not a “given.” It doesn’t need to be this way!

Regards,

Stephen Hurrell