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CPQ Terminology

Cloud service
A service allowing the use of a service, program, or database over the Internet. Cloud services may be free or paid. The user needs not own the hardware required for service provision. See also ‘SaaS service’.
Configuration
The process by which the user defines the desired product and service solution with the help of a configurator, within the limits of the configurator’s system of rules. As a result of the configuration process, a product, service, or project configuration tailored to the customer’s needs is created.
Constraint-based
One of the operation principles of a CPQ tool, with the help of which a system of rules is created between sales selections and product items. Constraints apply in both directions; they establish limit values for selections and product item, the values of which may not exceed the limits.
CPQ tool
Software used to configure, price, and quote mass-customized products and services. The terms ‘product configurator’ and ‘sales configurator’ are sometimes used as well.
Data
Customer’s information on products, services, and rules or processes between them, which is represented as numbers, text, or images. Product-related data serve as basis for product model; it is fed to the CPQ tool during the tool construction stage. The data are maintained in the CPQ tool or other information systems integrated with it. See also ‘Product information’.
Document generation
A feature of CPQ tools allowing automatic creation of documents required for the offer/order process based on the sales selections made, such as various technical and commercial documents with the necessary annexes.
Dynamically generated
Refers to something automatically created as a result of sales selections, such as images illustrating a product, price information, or documents.
Interface module
A software module through which a CPQ tool can be integrated into other information systems.
Item
Every product or service or their part, component, or subassembly is a distinct item in the information system. They also have a unique item ID.
Mass-customized product
A product (or service) of modular design tailored to the customers’ needs. The different product (or service) variations allow responding to a number of different customer needs at low cost.
Master data
Refers to the data source where the original data used by the configurator is located. Depending on the needs of the customer, the master data may be contained in the CPQ tool or in an external information system, such as ERP or PDM system.
Metadata
Metadata are item-related lower level data, such as technical data, manufacturing data, or cost and price data. With the help of metadata, systems of rules are created between sales selections and items.
Modelling
A process in the course of which the configurator is built into the CPQ tool. A system of rules is created based on data received from the customer and selections made in the tool’s user interface during the modelling process. Modelling does not require programming of the tool.
Modular product
A product consisting of individual modules. The modules can be changed to meet the individual needs of the customers.
Module
A standardised part or subassembly of a product or service included under a larger product or service solution and provided with a standard interface. Different product variations can be created by changing the modules.
Operation principle
Refers to the method used by CPQ tool for creation of systems of rules between sales selections included under the configurator. The most common methods are rule-based and constraint-based. CPQ suppliers apply different operation principles in their products.
Product configuration
A customized product or service meeting the customer’s needs created through configuration. At least some level of product modularity is a precondition.
Product configurator
A tool for configuring products or services by selection of compatible product components and modules. Product configurators, including tools built on ERP systems, differ from CPQ tools for example so that the product configurators do not include the product quotation process. Thus, a product configurator is a narrower tool as compared to a CPQ tool.
Product information
All product-related information required for product design, manufacture, and sales, which may be documented or tacit by nature. Product information consists of data, which may be associated, for example, with product components, sales selections, or the systems of rules between them. The data are maintained in the CPQ tool or other information systems integrated with it. See also ‘Data’.
Product model
A product model built based on the customer’s product information in the CPQ tool’s modelling tool, to which product-related data and systems of rules between sales selections are included. A finished configurator is formed as the outcome of a product model.
Product structure
A hierarchical structure consisting of product parts and subassemblies, revealing the interrelations between parts.
Product variant
Refers to different versions of the same main product. However, every product variant is an independent product. A product variant differs from a product configuration by that it needs not be a modular product. The term ‘product variation’ is also used.
Rule-based
One of the operation principles of a CPQ tool, with the help of which a system of rules is created between sales selections and product items. Rules are unidirectional and formulated as follows: ‘If you choose A, B is allowed, denied or selected by default’.
SaaS service
SaaS stands for Software as a Service. It refers to a service provided over the Internet, which is traditionally priced as monthly rate-based SaaS service fee. In this case, the CPQ tool can be installed into the server environment of the service provider or a third party. See also ‘Cloud service’.
Sales channel
Sales channel refers to the level through which the product or service sold reaches the customer. The sales channel may include companies’ own sales personnel, dealers, partners, wholesalers, or e-commerce. A sales channel may be domestic or international.
Sales configurator
Software intended for selling, designing, and ordering of mass-customizable products or services through the making of sales selections. Sales configurators are sometimes also referred to as ‘CPQ tools’ or ‘product configurators’, although a product configurator is in fact a much narrower tool as compared to the aforementioned.
Sales selection
A selection made in the configurator’s user interface by the user, resulting in generation of the desired product configuration.
Sales structure
Refers to the parts or subassemblies of a product or service holding the key position from the viewpoint of sales. A sales structure typically includes upper level components of a product or service (such as car wheel), which in turn may include a number of lower level components (such as rim and nuts).
Software licence
A licence fee usually paid at the time of software acquisition, which grants the right to use the software over a specific period. A licence fee may be of a one-time or fixed-term nature.
System integration
Refers to integrations between the CPQ tool and other information systems, so that the CPQ tool can automatically retrieve product model data from other systems, such as ERP, PDM, CRM, CAD, and BI systems. Similarly, the CPQ tool can send data to the aforementioned systems. The user can use a single tool while benefitting from data stored in several information systems.
System of rules
Refers to a system of rules built into the product model. It is an intellect dealing with the dependencies between sales selections and product data. In case of CPQ tools, the system of rules is created mainly using rules and/or constraints.