Top 10 issues for Contracts & Commercial
Author: Tim Cummins
As we enter 2019, what are the key focus areas for improving contract and commercial management? IACCM gathered data from approximately 750 organizations to discover their plans and priorities.
Number one on the list, being tackled by 61%, is contract management tools and systems. Many have yet to take the plunge on meaningful automation and others are back in the market either to replace or augment existing systems. But the range of tools now being considered is also becoming more diverse, as some organizations look at deploying 'apps', 'bots' and other enabling devices, such as dynamic playbooks and clause libraries, or more specialist applications, such as machine-based negotiation.
In second place, scoring 59%, is the development of new terms and updated contract standards. This traditional housekeeping task is becoming much more frequent; the speed of change in markets means that some corporations are undertaking review as often as every quarter to ensure competitiveness. Others are recognizing the need to innovate their commercial offerings or to develop new contract templates, for example for cloud services or to support performance-based agreements.
Coming third, at 49%, is contract simplification. There are several potential drivers and the perception of 'simplification' can take several forms. For some it is may be about greater standardization. For others it may be increased alignment of contracts with RPA (robotic process automation) initiatives. But for the leaders, it is potentially much more than this; it is about fundamental re-assessment and re-design of the way their contracts are structured and worded. For these organizations, there is recognition that contracts should be designed for users because this reduces risk, cuts cycle times and increases ease of doing business.
Given the changes that these focus areas indicate, it is perhaps not surprising that almost 50% highlight a priority for skills development. Contract and commercial management have tended to be overlooked areas for training investment and senior management is awakening to the issues this creates, both for their dedicated CCM staff and more broadly for those across the business with a need for greater commercial awareness.
Looking down the list, it is interesting to note that 40% are seeing an expansion of their role (reinforcing IACCM's view that automation is actually increasing the relevance and demand for contracting and commercial skills). For almost a third, this is accompanied by a change in reporting line – though interestingly there is no great consistency in the shift being made (IACCM has issued a more detailed report on this topic).
- CM_Tools - 61.1
- New Terms_Contract Standards - 59.0
- Contract Simplification - 49.1
- Skills Development - 48.5
- Contract Analytics - 47.2
- Risk Mgmt_Corporate Governance - 44.0
- Role Expanded - 40.5
- Reporting Line Change - 31.4
- Knowledge Mgmt System - 27.1
- External Benchmarking_Research - 25.5
Overall, the list illustrates the growing focus on raising contract and commercial competence and business contribution. While technology is an enabler of these improvements, there is increasing demand for talented individuals who can lead change and interpret trends and opportunities. This is why topics such as analytics and benchmarking now appear on the list – they were not in the top ten 5 years ago. It also indicates that the role is becoming steadily less transactional and more strategic.
Over coming weeks, IACCM will be releasing more detailed data on the state of contract and commercial management, and continuing its work with members to assist them on this important journey.
W.W. Grainger, Inc.
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