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Technology sector contracting: leaders or laggards?

January 14, 2022

Yesterday saw the launch of the first in World Commerce & Contracting’s series of industry benchmark reports – and where better to start than the Technology and Software sector.

With so much emphasis now placed on the social and business impacts of technology and software, it is natural to suppose that this industry would be at the forefront in its deployment – that they would be well in the lead in streamlining and digitizing commercial and contracting processes.

That may be a reasonable supposition – but it would be wrong! Relative to cross-industry averages, commercial and contract management capabilities in the technology and software sector are among the least developed and technology deployment is among the lowest.

Without diving into the specific data (there is a wealth of that in the report), what are the reasons behind this neglect? The research suggests that many organizations in this sector simply have not adjusted to the changes in their offerings and market. In many cases, they are operating with CCM resources and systems designed to support a world of product sales and licensing. Their investments have focused on pre-award contracting, to support speed and volume. They utilize extensive offshore and outsourced resources and in many cases see contracts purely as legal or financial instruments, rather than as tools that support effective and profitable business operations. As the industry has shifted towards performance, outcome and ‘as-a-Service’ commercial models, internal capabilities in negotiating and managing these forms of relationship have not adequately developed.

The report indicates growing executive awareness of the need for improvement – 63% of respondents indicate a growth in focus and 75% highlight adoption of tools and systems as a priority, especially to support post-award value and performance. There is appreciation that technology alone will not be enough – raising current skills and retaining talent are also high on the agenda.

In summary, the industry has a pressing need for improved visibility into contracts and contract data across the lifecycle. In an environment of longer-term services and performance contracts, there is increased recognition of the critical impact CCM has on economic and financial performance – overall operational cost, value retention and opportunities for revenue growth. The historic focus on audit and compliance is taking a back seat and speed, while remaining important, must be fully aligned with value. And the benefits? Analysis of comparative performance suggests potential margin improvements of 5-7%.

The WorldCC benchmark report was published on January 13th, 2022 and results were also presented in a webinar, conducted in partnership with leading technology provider Icertis. This is the first in a series of 10 industry reports that will be published over the next 10 weeks; #2 in the series will address Healthcare & Pharma and is due for release on January 24th.

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