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Beware the analysts peddling Contract Management software

March 11, 2019

Contracts are critical to business and society, yet it is a field that continues to be under-served and in many ways damaged by misunderstanding and ignorance. Among the most ignorant are many of the analysts who opine on contract management technology. Most have consistently misrepresented the nature of the market and their influence has frustrated the business improvements that should by now be common-place.

A recent report – which can apparently be acquired for a mere $2,000 – comes from Research & Markets (apparently ‘the world’s largest market research store’) and forecasts annual growth rates of 14% for Contract Management software, generating a $2.4bn market by 2024. I must confess that I have not forked out the money to buy this particular report. However, a quick review of its description suggests that the authors (who seem to be anonymous) have limited understanding of what they are talking about. Their list of ‘key players’ omits market leaders in this field. They seem to suggest that the primary purpose for CLM software is that it ‘helps lawyers in retrieving similar contracts from the library for reference purposes’ and, as coincident benefits, can raise efficiency and oversee compliance. Where confusion is especially evident is in the statement ‘the emergence of cloud-based CLM software …. provides seamless integration with popular CLM systems’. 

An on-going problem

If this were a one-off, I would ignore it. But for almost 20 years now, practitioners have been struggling with the ignorance of most analyst firms in this important field. For much of that time, advisory activity focused almost exclusively on procurement, as if this was the only area where contracts exist, and struggled to see (or represent) contracting as anything more than an administrative task supporting commodity acquisition. This failure in understanding drove the development and acquisition of products that simply failed to meet business needs.  It meant that commercial staff regularly found themselves battling with their colleagues in IT, who had been seduced by recommended solutions contained in the latest analyst report.

And it doesn’t end there

Adding to this past confusion, we now have the trend of referring to contract management software as ‘legaltech’ – which it patently is not. Contract management software is – like contracts themselves – a key business asset which can provide a remarkable return on investment – but only when the process of contracting is actually understood. It is a multi- functional activity. The average contract contains very little legally-determined content and, to illustrate this, contracts drive and determine operational activity throughout the business.

Contracting as a core discipline

Viewing contract management as essentially an administrative task is rather like suggesting that science is all about laboratory technicians. The fact that some elements or forms of contract can be standardized doesn’t mean that low-level automation within a source-to-pay system or an ERP bolt-on has suddenly ‘fixed’ the contracting process. Nor does the existence of a contract repository accessible by lawyers suddenly revolutionize business performance.

With today’s technology, we at last have a chance to develop an integrated lifecycle process that embraces the multiple stakeholders and allows data flows both within and between enterprises. It can also drive greater and more intelligent standardization and support informed, fact-based decision making, rather than relying on individual beliefs or preferences.

For those who prefer to continue in the dark ages of traditional contracting, I’m sure you’ll find plenty of analysts ready to take your money. For those who really wish to drive business simplification and value, make sure you seek advice from someone who really understands what contracting means.

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