Skip to content

Contract Management Software Is Failing To Address Business Needs

January 14, 2014

Recent research into leading providers of outsourcing services found a significant contrast between companies that do what customers want, versus those that do what customers need. The differences were especially marked in levels of customer satisfaction and supplier profitability, with those who address ‘needs’ taking a very clear lead.

Many times we are asked at IACCM what we think of the contract management software market, what growth we anticipate, who are the leading suppliers. And a common question is “Why hasn’t the size of this market developed in accordance with analyst forecasts?”

The answer, I think, is that almost all the suppliers are catering to wants, not needs. They are being driven by a lack of imagination and understanding from both clients and industry consultants, who have failed to grasp the true business impact that automation could have on the contracting process and its business value.

“Wants” generally reflect the way that a customer’s internal stakeholders see the process. It tends to result in a narrow and non-threatening view of requirements which assumes what those stakeholders are doing today is valuable and necessary. Hence the focus for contract management has been on repositories, transactional review and compliance, auto-reminders and database search. The return on investment for this functionality is hard to define and is certainly not exciting; many implementations grind to a halt part way through because they are not seen as strategic.

“Needs” reflect what a customer really could be achieving as a result of more fundamental change, bringing innovation to their existing process and practices. In the case of contract management software, that would include realization of the fundamental insights that automation might bring to the business through more holistic data analysis – for example, consolidated data on risk probabilities and consequence, systems support that generates automatic alerts of potential problems, tools that enable shared data access and integrated supplier / customer risk registers.

Suppliers who address needs are thought-leaders, taking their customers to places they did not even realize they could go. I simply do not see many instances of this happening in the contract management software market.

In defense of the suppliers, the challenge they face has been especially significant because contracting is generally such a fragmented activity with no clear internal owner or champion. Therefore it has been very difficult to gain attention or establish a senior sponsor for anything that is truly innovative. But now, with the sort of data that IACCM is generating related to the potential return on investment, there is no longer a good excuse. It is time for customers to wake up to this potential and for those suppliers who want to lead this market to re-think their offerings and their marketing and to become purveyors of needs, not wants.

8 Comments
  1. Hi. I do agree with some of the points mentioned here not all. The kind of Contract Management Solution we provide, caters to the “needs” rather than “wants of our potential customers. Our Contract Management Software provides consolidated data on risk probabilities and consequence, generates automatic alerts of potential problems, dynamic reports, enables shared data access, among others.

    For more details on our Contract Management Software, please email me at: ptripathi@exigent-group.com or call me on +1-845-875-4250 OR +91-80-67 17 1901 OR +91-80-67 17 1707.

    • Piyush,
      You will note that I was careful to say that there are exceptions to this pattern. And I also highlighted that a significant part of the problem is the inability of customers to adopt these more creative solutions. If Exigent is indeed among these leaders, it would of course be great to feature the advanced capabilities you mention in a program for our IACCM members.

      Tim

      • Tim,

        We would be more than happy to showcase advanced capabilities of our Contract Management Software for IACCM Members. We are based in US, UK, Canada, Australia, South Africa & India. Do let me know how & when we can present our solution to IACCM Members.

        Piyush.

  2. Tim,

    Interesting post. I agree that most contract systems lack the capacity for holistic data analysis, and I agree this is an area of opportunity for both vendors and their customers.

    To make this a reality both the vendors and the customers will have to broaden their focus beyond the contract itself, and even beyond the contracting process.

    In my experience, many contract professionals still define the risk of a given contract as solely a function of contract terms. For example, limitation of liability and indemnification clauses are commonly negotiated and often contentious terms. Sometimes internal scoring systems are developed to rank contracts according to “risk,” as defined by the contract terms. If that’s what you’re trained on and if that’s all you have responsibility for, it may seem logical to focus on these types of things as elements of risk; but in the real world these clauses often have little to do with the real risks associated with the relationship, especially as it develops over time.

    There are many sources of relevant data that could augment the information in the contract, but that often aren’t integrated into a holistic view of the health and risks of a relationship. Internal sources could include thinks like whether a customer is paying on time or trending toward later and later payments or whether a customer is buying more or less over time. External sources could include news stories about the party or its industry, blogs, credit reports, other background checks, commodity pricing trends, stock prices (perhaps in relation to the company’s peers). This sort of information, if analyzed and presented properly, can be a source of risk prediction. Or it could lead to new business opportunities.

    To make this sort of data integration a reality, however, will be a challenge. I’ll just mention a couple of obstacles I can think of. The first is that, once you get past a company’s very largest customers and suppliers, companies often have a very hard time even identifying who they’re doing business with. Company databases tend to be very fragmented and inconsistent when it comes to naming the parties they have contracts with. This is especially a challenge for companies that have grown through acquisitions. So a process of data cleansing and maintenance is required to even get to this fundamental level of business understanding.

    Second, once you figure out who you’re doing business with, there needs to be some systematic way of obtaining, analyzing, and categorizing the information coming in, connecting it to your active relationships, and then identifying what information might signal a risk or an opportunity. This is a “big data” challenge. Given the fragmented nature of the contract management industry it’s likely to be difficult for any given vendor to develop this kind of functionality on their own.

    The real opportunity here might be for a business intelligence company with the scale and the expertise to capture this kind of non-contractual information, normalize it, and push it out in a format that many different contract management or other systems can understand and react to by, for example, creating alerts or reports that can be pushed out to the relevant users. Or maybe a CM system shouldn’t even try to be a comprehensive BI system. It may be better that the CM vendors figure out how to push their contractual data out to other systems, such as Salesforce.com, that are more flexible and more likely to be used by the people who need the information.

    David

    • David
      Thanks for this – it is an excellent addition.

      You are right about that extended data and I know a few practitioners who have tried to move down that path. But I think you will agree that even with out this, a lot more intelligence could be extracted from the core process. I listed sample questions in a blog last week – and most simply demand that systems start to look for patterns across contracts, rather than focusing only on individual deals. A simple example is around claims and disputes – their frequency and the main causes of them. This alone can generate a phenomenal insight into the wider failings you mention – but many of those can actually be tackled by improved contracting – ie instead of liabilities and indemnities, spend more time and skill on defining or managing changes to scope.

      But even the extended data on deals is very relevant. You cite one example we use – what is a customers actual payment record? But other simple records could be how often they make claims or the time taken to agree changes. This is not complex stuff; it is just basic questions that no one seems to ask, yet which businesses actually need if they are going to improve risk and performance management.

      Tim

  3. Tim,

    I cannot more agree to the statement: “The answer, I think, is that almost all the suppliers are catering to wants, not needs. They are being driven by a lack of imagination and understanding from both clients and industry consultants, who have failed to grasp the true business impact that automation could have on the contracting process and its business value.”

    We are an international award winning Cloud Contract Management supplier. The reason for this winning is that we actually replace the world’s annoying contract management tools with solutions that people love. It’s not that we do not listen to them but we see that Contract Management isn’t a complex challenge!

    We signup customers day by day, anywhere in the world. The Mochadocs Contract Management platform (www.mochadocs.com) is putting the management of contracts into the hands of any business. We love to simplify contract management. We serve companies located in more than 45 countries and we just celebrated our first anniversary!

    We are not a me too company. We are changing the marketplace, we already doing this in the Netherlands (with a whole bunch of success). We convince a lot of Contract Management Guru’s. Contract Management is a universal challenge! We recently activated our International Website (Q4 2013) so feel free to activate a Free4Ever account! There’s no user guide. It’s not needed! You’ll find your way through the application which will help all kinds of companies managing their signed contracts!

    We are also a company focusing on our internal culture. We want to make our customers successful. That absolutely not the same as building the functionality they want. We only build what we think is needed to ALL companies…..or shall I say people (instead of users)!

    Activate the free account and before judging too fast: Add contract sections to the contract (including tasks) and try to figure out why we did it the way we did it! Have fun!

    Regards

    Rob Postma

  4. How can a well planned business planning help you? It won’t give your clients a chance to complain. The most vital thing of every business is finance management and customer satisfaction.

    contract management process

  5. Nice …great work…..ROC Software

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: