If you’ve been following our Total Economic Impact (TEI) of FPX CPQ series, you’ll know that:
We commissioned Forrester Consulting to carry out a study on the TEI of FPX CPQ
We unearthed the key challenges organizations faced before implementing FPX CPQ
We saw how FPX CPQ helped overcome those challenges and the key results they experienced
We learned the real benefits, costs, ROI, NPV, and payback period based on Forrester’s composite organization derived from actual FPX customers
Now, in the coming posts, we’ll go one layer deeper into each benefit and cost Forrester Consulting assessed to reveal the FPX CPQ solution’s real impact.
First up: Topline growth.
How CPQ Can Help You Improve Topline Growth
You might recognize this as part of a table from our last installment of the series:
This table showed all benefits assessed by Forrester Consulting, as well as present values discounted at 10%.
Actual FPX Customers
In a further breakdown of the topline growth benefit FPX customers were enjoying, Forrester uncovered that it was due to “decreased sales cycle times, overall sales efficiency, and improved upsell and cross-sell delivered by FPX CPQ.”
One FPX customer interviewed by Forrester directly linked the time their sales team saved to FPX CPQ, and the resulting increase in time spent in front of prospective customers to an increase in sales, explaining, “the time that was saved actually translated into extra orders for us.”
Another noted the improvement in customer experience due to the FPX investment, potentially contributing to increased conversions.
Yet another FPX customer saw improvement to its average deal size:
There are two things that contributed to that. The first thing was we weren’t discounting as much—the make-it-right discount—the second thing is we started to sell more add-on stuff, and we found out that our own salespeople sometimes didn’t know that there would be other stuff that worked with the stuff they were selling.
When it came to the composite organization, Forrester made the following assumptions:
The projected revenue for regions with FPX CPQ deployed in Year 1, prior to the impact of the FPX investment, would have been $560 million, up to almost $1.8 billion by Year 3 as additional regions are deployed.
FPX CPQ drives a 2% increase in revenue initially, growing to a 4% increase by Year 3.
The average sales cycle decreases from an average of 50 days down to 38 days by the end of Year 1 and down to 15 days by the end of Year 3, a 70% reduction.
The average operating margin prior to the FPX investment is 14%. The operating margin is used to calculate the net impact of the incremental revenue once operating expenses are deducted. FPX CPQ also improves the composite organization’s margin (we’ll review that in our next post in the series).
However, Forrester Consulting noted that the following risks, known as impact risks, can affect the realization of this topline growth benefit.
An impact risk is the risk that the business or technology needs of the organization may not be met by the investment, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for benefit estimates.
Organizations’ relative digital maturity will determine the opportunity for improvement in topline growth delivered by CPQ. Organizations that have not begun or recently begun their digital transformation may experience higher incremental revenue growth.
Product and environment complexity will affect the speed of FPX CPQ deployment and resulting opportunity to impact revenue as additional users are onboarded.
To account for these risks, Forrester Consulting adjusted this benefit downward by 10%, yielding a three-year risk-adjusted total PV of $11.2 million.
And of that PV, topline growth accounted for 22% of the total benefits.
Stay tuned for our next post in the series in which we’ll take a deep dive into margin improvement achieved by FPX CPQ.