Contract Management Automation: Making Progress?
Author: Tim Cummins
Back in 2017, IACCM published a report on the state of contract management software. Since then, its findings have been much cited by analysts and consultants. This is what we said:
'A March 2017 survey by IACCM revealed that levels of satisfaction with current contract management automation systems is low, with a rating of just 4.2 out of 10. Organizations have struggled to gain adoption and for many, integration with other systems is proving problematic. As a result, functionality is generally limited - for most, the repository functions of accessing and having visibility into agreements is the primary benefit.'
Have things improved?
Our latest polling of IACCM members does indeed reveal growing levels of satisfaction – a significant increase to a score of 5.1. But is that because the value of the systems is improving, or that expectations are changing? The answer seems to be a little of both.
Certainly the technology being deployed is now in some cases more mature and vendors are becoming more realistic in setting expectations. Functionality is also improving as digital technologies and early forms of artificial intelligence are incorporated. In addition, both customers and suppliers are learning from past mistakes. Increasingly, they understand the weaknesses highlighted in our 2017 report and are more likely to address the issues around process fragmentation, integration and disrupted data flows.
Reduced expectations are a threat
In lowering their expectations, the buyers of contract management technology are becoming more pragmatic. But there is a real risk that they will lose sight of the bigger picture and, as a result, invest in systems that deliver only short-term benefit. This is indicated by analysis of those who have been using the IACCM Contract Automation Comparison Tool.
In more than 3,000 searches over the last 3 months, the primary functionalities being sought are for repositories, approval flows and drafting. These core capabilities are of course essential 'plumbing' for any contract management tool, but they are not the things that generate real market value over time. Analytics, portfolio management, obligation management and inter-firm collaboration are examples of the things that offer potential for competitive advantage – and in almost 50% of cases are being ignored.
Plan for the future
Given the history of contract management software and the many false starts, it is understandable that the ambitions of buyers have reduced. They are right to focus on the basics and ensure a practical, working system. But they should not lose sight of the longer term and the functionalities that, within 2 to 3 years, will become the norm. By narrowing their search, buyers could focus their choice onto a group of rather basic suppliers, who may lack the resources or broader understanding needed for long-term survival. The winners here will be those who develop a clear vision of the potential value from streamlined and intelligent contract management – not those who continue to see the challenge purely in terms of administrative efficiency.
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