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Does Contracting Have A Future?

April 26, 2011

 The networked world is causing a revolution in the way we acquire knowledge and information, in the way that relationships are formed and in the way that work gets done. Since contracts and ‘terms and conditions’ are a direct reflection of those relationships and the nature of the work we do for each other, they cannot possibly be immune from the impact of these changes.

We have already observed significant innovation in the way contracts are formed and delivered. Examples include the ‘click-wrap’ agreement, or the use of ecommerce in the form of auction software or invoicing. Document exchange and redlining are typically undertaken by electonic means, as is storage and retention. Electronic signatures are steadily becoming the norm. Most negotiations today are ‘virtual’ rather than physical.

Yet these shifts are merely superficial when compared to the more radical impacts on working practices and – perhaps – the extent of need for contracts at all.

My colleague Katherine Kawamoto recently attended a presentation by the leader of an association for sales people. He spoke of the remarkable shift that is taking place in the sale of goods and services and how the sales workforce will be decimated by technology. Traditional selling was about content delivery – gaining share of hearts and minds. Today, that role is increasingly fulfilled by the internet and through interfaces such as websites or ‘apps’. Market winners are those who have superior content and better, more compelling methods for its delivery.

So if traditional Sales people disappear, what does that mean for contract and negotiation specialists, or for Procurement? Why wouldn’t our content also be delivered by electronic means?

And the debate goes further, because much contracting and negotiation today is driven by offering complexity. Yet as The Economist recently reported, many of today’s production processes will be transformed through self-service automation, allowing customers to download designs and drive their own manufacturing. In such a world, the allocation and management of risk will change fundamentally – and eliminate much of the debate that surrounds the contract.

A further influence will be regulation and the development of rules and practices that sit outside today’s legal systems. For many of us, the growth of international trade has driven an increased need for contracts and commercial expertise. Crossing cultural, linguistic, legal and ethical boundaries has obliged us to undertake careful assessment and management of risks. Yet this too is changing – not least because such uncertainties place heavy costs on business transactions. Examples of the change are all around us, as we see increasing international regulation and also projects such as the UNCITRAL work to develop new on-line dispute resolution mechanisms that would sit outside traditional legal recourse, or the EU initiative to create standard forms of cross-border contract.

Those in the world of contracting will not be immune from this content-driven world. Roadblocks will not be tolerated – and for many, traditional contracting process and practice will be seen as either a roadblock, or as something increasingly irrelevant to modern commerce.

This article is just a start to the debate we must have as a professional community. It has drawn on just a few of the ideas and trends that are affecting us and the nature of our work. Over the coming months, we will stage events, discussion groups and interviews to develop a roadmap and to ensure that the IACCM community is seen as offering a pathway to the future.

  1. Indeed, we are seeing the move toward more e-based tools and contracting activity. While this is necessary to gain the efficiencies and record-keeping business demands there is still a premium on the thought skills that go into negotiating and accommodating client-driven revisions and agreements. The more complex our servive-delivery systems become, the more we require this intellectual capital be engaged in contracting processes. True, this will continue to evolve (and should from a cost/benefit perspective), but in the near term we will continue to see the need for direct negotiation and hands-on client engagement in contracting processes. We are excited about the tools we have available to streamline processes and record retention and access but still see that intellectual capacity in complex service systems is criticial to good contract outcomes. The changes cited are indeed inevitable, but we don’t see the full integration of intellectual processes in the near term; however, the near term may be shorter than we envision. Our role is to leverage the cost-benefit of technology solutions with risk-based engagement in negotiated terms and conditions that meet both contracting parties needs and expectations – this process in large part sets the stage for the ensuing contract lifecycle and the relationship between the client and the supplier and that still requires the human touch between the parties.

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  1. The Beginning of the Relationship Economy « Commitment Matters

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