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The State Of Automation

July 7, 2009

Recently I received the following question: 

We are looking to apply contract management software to support the full enterprise (procurement, sell-side, operational contracts etc).  As we build this vision, we want to identify the benefits and synergies of this approach over standalone system approaches.  Are there examples of a similar approach and /or any insight to the benefits achieved?

I sent this question ot IACCM’s Community of Interest for automation. Many replied, expressing their interest in the answers received. It was clear that this is a point of discussion in many organizations. Indeed, although there is clearly a growing understanding of the potential value of contract management automation, the topic still seems fraught with indecision.

Most of the detailed replies came from consultants or providers. They show enthusiasm for the concept of an enterprise-wide solution, but suggest limited traction at this point. Several corporates replied, declaring their intent to roll out cross-enterprise, but indicating that this was work in progress, or had been stalled. Our research suggests that many companies feel in principle that there should be one solution – but are skeptical about whether it can be achieved. It would appear cross-enterprise contract management automation is at present mostly restricted to organizations that are  relatively small and / or single geography and / or in industries with high levels of standardization.

After so many years (many of us recall the multi-billion dollar market predicted by Gartner back in 2003), contract management software is still struggling to develop a large and sustainable market. Certainly there were teething difficulties – the struggle to integrate with MS Word, the difficulties of handling ‘the other side’s paper’ – but these have largely been overcome. Yet still many seem unconvinced.

The reasons vary. Certainly one major challenge is the cross-functional nature of a robust solution. Even if the focus is just on buy-side or sell-side contracts, it impacts a wide array of process and policy owners – Legal, Finance, business units, Operations – and often there is no executive sponsor ready to force adoption. This is why many implementations start small and hope to expand; but often they seem to get stuck – or even worse, several competing solutions are adopted.

Another factor is resistance by the IT group. They are increasingly reluctant to accept non-core applications (as they see them) and push for answers that align with other application strategies. That is why the ERP suppliers have often succeeded in derailing acquisition plans, by suggesting that they will ‘imminently’ offer a viable CM module. Recently, this trend has played into the hands of Ariba and other spend management solutions, with their CM offering acting as an extension to the installed application.

Finally, relatively few organizations have yet grasped the significance of the contracting lifecycle. It remains a fragmented process in many corporations, despite the damage this does to trading relationship outcomes. Until executives grasp the importance of building a coherent business process to support contracting capability, it is unlikely that they will drive adoption of a quality technology solution. As a result, we will continue to see a range of tactical implementations and half-hearted answers to operational needs.

Unfortunately for the technology developers, they are often a solution for a problem that many companies do not realize they have. That realization is dawning; the impacts of poor contracting on financial results, corporate reputation, the quality of risk management are becoming more evident. Hopefully those who persevere will soon start to see some more sustainable rewards.

One Comment
  1. Tim,

    Your comments map pretty closely with our experience as a technology developer in this space.

    Certainly the silo effect in most organisational structures/cultures is a big problem; there typically isn’t a sponsor with sufficient power to ensure a thorough end-to-end analysis of existing contracting processes (which are always cross-functional).

    And without that, any attempt at a solution is doomed before it starts.

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