What is CPQ software?
CPQ stands for configure, price, quote. CPQ software guides sales reps through configuring a product with many variants, calculates the price from defined rules and generates the quote document from the result.
You will also see it called configure price quote software or a CPQ system. The idea is the same: the knowledge of which options fit together and what they cost lives in one place, not in a few people's heads, spreadsheets and email threads. This guide covers the three building blocks, who benefits, and how to select and roll out a system.
The three building blocks: configure, price, quote
Configure: product configuration with a rule set
The user picks a product, options and values. A rule set checks every choice: which options exclude each other, which require another, which accessories are mandatory. Invalid combinations cannot be selected. The result is a configuration that can be built and delivered.
Price: pricing
The configuration determines the price. Inputs are list prices, surcharges for options, customer-specific price lists and discounts. CPQ software recalculates with every change. If a discount exceeds a defined limit, the quote is routed to the right person for approval, which leaves a record of who approved what.
Quote: the quote document
The last step is the quote itself, usually a PDF in the company's layout. Line items, technical data and prices come straight from the configuration. When the customer changes a requirement, the system creates a new version and keeps the old one.
Who benefits from CPQ software
CPQ pays off where products come in many variants and quotes are written regularly. Three types of companies are typical:
- Machinery and plant manufacturers: product lines with many options and technical constraints, from configure-to-order to the standardized part of engineer-to-order business.
- Industrial distributors: large catalogs, customer-specific pricing and accessories that have to match the main item.
- IT solution providers and resellers: quotes that combine hardware, licenses and services, often as bundles with contract terms.
Signs that your current process has reached its limit
- Sales reps check with engineering on almost every quote to find out whether a combination is possible.
- Quotes go out with errors: wrong prices, missing accessories, combinations that cannot be built.
- Only a few people know the variants and the pricing. When they are out, quotes wait.
- Several versions of the price list are in circulation and nobody is sure which one applies.
If you sell a standard product with a handful of options, or write only a few quotes a year, you usually do not need a CPQ system. Maintaining rules and data would cost more than it saves.
CPQ vs. the ERP variant configurator vs. spreadsheets
Many companies configure in spreadsheets or use the variant configurator in their ERP system. Either can be enough. The table shows where the approaches typically differ. Details depend on the ERP system and the CPQ product in question.
| Criterion | Spreadsheet | ERP variant configurator | CPQ software |
|---|---|---|---|
| Built for | Individual calculations and price lists | Orders and production: bill of materials and routing | Quoting in sales: configuration, price and document |
| Who uses it | A few people who know the file | Inside sales and order processing | Field and inside sales, sometimes channel partners |
| Rules | Formulas and personal knowledge | In the ERP, tied to bill of materials and production | Central, geared to how sales selects options |
| Pricing | Manual, current version often unclear | Prices and conditions from the ERP | Price lists, rules, discounts and approvals |
| Quote document | Assembled by hand in a text template | Standard ERP document | Template in your own layout, with versions |
| A good fit when | few variants, few quotes, a small team | rules already live there and sales works in the ERP | many variants, many quotes, several people quoting |
CPQ and ERP are not mutually exclusive. In many companies the quote is created in the CPQ system and the order is processed in the ERP. Make sure item data, prices and rules are not maintained twice: decide up front which system is the source of truth for which data.
Guided selling and variant management
Guided selling
With guided selling, the user answers questions about what the customer needs instead of selecting technical attributes: application, capacity, operating environment. The system derives a suitable product and a starting configuration. This helps new sales reps, inside sales and channel partners who do not know the catalog in detail.
Variant management
Variant management is how a company plans and limits its product variety: which variants are offered, which modules they are built from, which are phased out. A CPQ system enforces these decisions in sales. It cannot bring order to a product range that lacks structure. If the product is not modular, the rule set will be hard to manage too.
Selection criteria for a CPQ system
- Rule set
Can it model your dependencies: exclusions, prerequisites, mandatory accessories, value ranges? And can your own product experts maintain the rules?
- Pricing logic
Does it support your price lists, customer-specific prices, volume tiers and discounts, including approvals above a threshold?
- Integration
Is there a documented API for ERP and CRM? Clarify where items and prices come from and where an accepted quote goes.
- Quote document
Is the document produced in your layout, in the languages you need and with the technical data your customers expect?
- Usability
Can field sales work with it without a week of training? Is there guided selling for users without detailed product knowledge?
- Hosting and data protection
Where is the data stored, how are roles and permissions handled, and does the vendor provide a data processing agreement?
Do not settle for a demo with the vendor's sample product. Ask to see one of your own, ideally one that gives your sales team trouble today. Then you see whether your rules can be modeled.
Rolling out CPQ step by step
The biggest risk in a CPQ rollout is trying to model the entire product range at once. Start with one product and expand from there.
- 1. Pick one product
Choose a product family that is quoted often and has manageable rules. Not the most complicated one.
- 2. Collect rules and prices
Engineering and sales write down together what fits with what and how the price is built. This often surfaces contradictions nobody had noticed.
- 3. Model it and test against real quotes
Rebuild past quotes in the system. If configuration and price match, the rule set holds.
- 4. Start with a few users
A small group of sales reps works with it first and reports what is missing or gets in the way.
- 5. Integrate and expand
Once the process works, add the interfaces to ERP and CRM and move on to the next products.
Off-the-shelf CPQ or a custom-built configurator
Off-the-shelf software comes with a rules engine, pricing, approvals and document generation. It is faster to roll out, and you do not pay to develop features that already exist. In return, your products have to fit its data model.
Custom development makes sense when the configuration itself is the unusual part: a spatial layout instead of an option list, sizing calculations, a 3D view, or a configurator your customers use inside your own portal. One example from our work: for SMS group we built a 3D configurator for industrial plants that runs in the browser and connects to ERP and CAD systems. A standard product is not designed for requirements like these. More on our page about custom product configurators.
As a rule of thumb: if your product can be described as a list of options with dependencies, look at off-the-shelf software first. One option is Onveda CPQ, our own product. It includes a rule-based configurator, pricing rules and price lists, multi-level approvals, PDF quotes in your layout and guided selling. CRM and ERP systems connect through a REST API and webhooks. If you want to know whether your product fits, send us an example. We will model it for a demo.
Frequently asked questions about CPQ software
What does CPQ stand for?
CPQ stands for configure, price, quote. It refers to software that sales teams use to configure a product, determine the price and create the quote.
What is the difference between CPQ and a product configurator?
A product configurator covers the first building block: selecting a valid variant. CPQ software adds pricing with discounts and approvals, plus the quote document.
Do we need CPQ if our ERP has a variant configurator?
Not necessarily. If your sales team works in the ERP and its pricing and quote documents are sufficient, that will do. CPQ becomes relevant when field sales or channel partners need to quote without ERP knowledge.
How long does a CPQ implementation take?
It depends mainly on how well rules and prices are documented and how many systems need to be connected. Capturing the rules often takes longer than the technical setup.
Does CPQ software replace the CRM or the ERP?
No. The CRM manages customers and opportunities, and the ERP processes orders. CPQ software sits between the two and produces the quote.
